The most effective way to counter the lack of pension coverage in Canada would be to create more employer-sponsored defined contribution (DC) pension plans, according to a report.

The Financial Advisors Association of Canada’s (Advocis) latest report, Encouraging Small and Medium Sized Firms To Participate in Pension Plans, concludes that there must be more opportunities for Canadians to participate in pension plans.

Advertisement

"We are in the middle of a perfect storm,” says Greg Pollock, president and CEO of Advocis. “Only one-third of Canadian employees are in a pension plan, and participation is declining. Canadians' retirement savings will inadequately finance their retirement at a time when life expectancy is increasing. Yet there are many immediate steps that governments can take to make employer-sponsored defined contribution plans more attractive to small and medium-size businesses and ultimately more accessible to their employees."

The report explains that, due to the slow decrease in defined benefit plan coverage, DC plans are a more viable option for both employers and employees. DC plans are:

• affordable, and costs can be controlled;
• not contingent on the accumulation of years of service with an employer;
• portable and do not deter job mobility; and
• flexible and can accommodate non-standard work arrangements and postponed or phased-in retirement.

As to how policy-makers can create incentives for more employers to sponsor DC plans, the report recommends:

• improving the regulatory environment for DC plans;
• harmonizing regulations, particularly around locking-in rules,
between provinces and federally to reduce complexities and costs for employers and employees;
• mandatory enrollment for employees, with opting-out provisions, as the default;
• fostering simplicity and transparency in DC plans; and
• tax changes including:

• increasing the age limit for contributions from 71 to 73;
• determining contributions to RRSPs based on a
lifetime average, to take into account fluctuating incomes; and
• allowing past-service contributions, up to the limit of the employee's unused RRSP contribution room, to make up for years with interrupted employment histories.

• • •

Workplace communication skills deteriorating

According to a survey by Connie Dieken, a leadership communication coach and journalist, the major consequences of shrinking verbal skills are:

• limited success in winning or increasing business (82%);
• weak relationships with colleagues and peers (72%); and
• diminished ability to manage and motivate direct reports (69%).

“Interpersonal skills are plummeting at an alarming rate,” says Dieken. “There's been a dramatic decline in how people are relating to one another and, as a result, people are tuning one another out, ruining relationships, bombing job interviews and tanking presentations.”

Respondents identified the leading cause of today’s declining skills: multi-tasking, such as checking emails or texting during face-to-face communications (93%), followed by confused messages due to an overwhelming clutter of information (54%).

• • •

10 practical steps to reconnect employees

To regain their footing, companies need to reconnect employees to the business. Watson Wyatt suggests the following 10 practical steps:
1. Create an organization structure and job architecture that is clear, effective and efficient so that everyone understands his or her role and how he or she contributes to the organization’s success.

2. Articulate and be honest about your employment deal, even in today's tough high unemployment market. This is the key to effective attraction, retention and engagement of key talent.

3. Review executive compensation to achieve the optimum balance on alignment with shareholders and driving value in the business, including risk effectiveness, performance and retention.

4. Review sales compensation regularly to ensure that the plans are aligned with new business priorities and drive optimum performance at optimum cost.

5. Review how performance is managed to ensure it accurately reflects the new corporate reality and is motivating your key talent.

6. Identify the talent you have in order to ensure you continue to retain those employees who will contribute most to your business in the long term.

7. Ensure you reward employees for exceptional performance and not the norm. Make this a reality now and it will ensure you are able to manage whatever the economic situation.

8. Ensure you have excellent management information and let the systems take the strain. Base decisions on facts and analysis, not emotion and rhetoric.

9. Ensure you understand where critical roles and skills sit. In times of retrenchment, businesses may have looked to keep good people rather than those in key roles that will drive future performance.

10. Continue to keep leadership visible and communication open. Let staffers know where the business is heading, what they need to do and how they will be rewarded.

“The business imperative to make significant changes quickly has knocked many organization and employee reward structures out of shape,” said Chantal Free, U.K. head of Watson Wyatt’s human capital group. “But those companies able to reconnect their employees and move their organization structures and processes back on track will be the ones best positioned to take advantage as, and when, the business climate improves.”

• • •

CPPIB chief calls for expanded CPP

The Canadian system "is not broken, but the design is not [ensuring] that we have sufficient retirement savings that will carry people through their non-working years," said David Denison, president and CEO of CPPIB, speaking on Wednesday at the International Conference of Social Security Actuaries and Statisticians in Ottawa.

He explained that an expanded mandatory CPP that would sit on top of the existing one is the best solution, run by either the current CPPIB team or another organization in the public or private sector.

Denison pointed out that the question of sufficiency is particularly relevant only because people haven't saved enough for retirement because "private sector pension benefits are in decline as plan sponsors have cut back on defined benefit plans and markets have cut into defined contribution plans."

He also made a case for uniformity of federal and provincial pension regulation to increase participation rates and contribution levels for defined contribution plans and individual RRSPs.

• • •

Pension management professorship established

Established with the support of the Canada Pension Plan Investment Board, the Hospitals of Ontario Pension Plan, the Ontario Teachers’ Pension Plan and the Ontario Municipal Employees’ Retirement System, the first inaugural holder of the ICPM Professorship in Pension Management at the Rotman International Centre for Pension Management (ICPM) at the University of Toronto will be Prof. Alexander Dyck.

Dyck will undertake research in various aspects of pension management, including governance, organization design and the drivers of organizational performance.