When Phillip Kotanidis took over as chief human resources officer at Toronto’s Michael Garron Hospital in 2018, the financial well-being of staff wasn’t exactly high on his agenda.

In such a fast-paced and potentially stressful workplace, money matters naturally took a backseat to the physical and mental health of the hospital’s staff, who are members of the Healthcare of Ontario Pension Plan.

“The thought was that we have a strong defined benefit plan, competitive wages and access to sessions offered by HOOPP, and that should be enough,” says Kotanidis, who has since added the role of vice-president of people to his title.

However, his view changed after a 2019 survey of employees revealed high levels of both financial stress and curiosity in financial wellness offerings. “Having a fundamental understanding of debt management, retirement planning, investment planning, savings strategies and household budgeting were all things that we heard staff raise repeatedly. We weren’t anticipating the need that we saw. [In response] we decided to integrate financial wellness into our offering, as a complement to the physical and psychological components.”

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How the rising cost of living is impacting Canadians

• Nearly three-quarters (71%) of Canadian workers say the rising cost of living is increasing faster than their income, according to a recent survey by Scotiabank.

• Respondents noted they spend the most time worrying about paying for day-to-day expenses (44%), paying off debt (39%), and saving for emergencies (38%). Overall, a quarter (26%) of respondents said they’re so stressed about their finances that they’re losing sleep, with millennials, generations X and Z significantly more stressed about their finances than baby boomers. As well, women are more stressed about their finances than men (26% compared to 20%).

After starting out with a few lunch-and-learn sessions and intranet resources, the hospital’s financial wellness strategy has since expanded to include a 12-module series on financial literacy developed by Chartered Professional Accountants of Canada.

“Each one has a different theme to it and people can attend the ones that align to their employment timeline or their retirement timeline,” says Kotanidis, noting attendee feedback on the sessions has been overwhelmingly positive. He expects demand to remain high as employees deal with elevated levels of inflation, the cost of living and interest rates.

Michael Garron Hospital’s employees aren’t the only ones feeling the pinch. According to Statistics Canada’s debt tracker, by the end of 2023, average household liabilities stood at 178.7 per cent of their disposable income.

Meanwhile, the National Payroll Institute’s most recent annual survey of working Canadians found 37 per cent of respondents were financially stressed, a 20 per cent jump over the previous year. In addition, a significant proportion felt the effects of financial insecurity on their work performance: the survey found the average Canadian worker spends 33 minutes every day thinking about their finances while at work, equivalent to an estimated $45 billion in lost productivity every year.

While pension plan sponsors have traditionally taken a hands-off approach to the day-to-day money worries of their employees, many are now taking a more active role in an effort to mitigate the impact of poor financial health on the workplace, says Roland Chiwetelu, associate director of financial wellness at Eckler Ltd. “When employees are worried about money, they’re less focused on work [and] they’re taking time off for appointments for mental-health days and for physical-health challenges.”

Younger workers in particular may find their money problems are compounded as opportunities for career progression are stalled by the continued presence of older colleagues who are delaying retirement as a result of their own financial insecurity, he adds. “There is a greater understanding among employers that it’s really important to support their employees’ financial literacy, which, in turn, will lead to better financial wellness and overall well-being.”

Decumulation support

The worldwide shift from DB to defined contribution pension plans — particularly in the private sector — is another trend that’s driving the need for improved financial literacy, as plan members are forced to make more of their own decisions about investments and savings, according to Todd Saulnier, a principal at Mercer Canada and who served as president of the Association of Canadian Pension Management from 2022 to April 2024.

Read: How can DC plan sponsors solve the decumulation problem?

While plan sponsors have embraced plan designs that point members in the right direction, as far as retirement readiness goes, Saulnier says there’s only so much that solutions such as automatic enrolment, auto-escalation and target-date fund defaults can do on their own.

The stakes are even higher for DC plan members in the decumulation phase, where the consequences of poor spending or investment decisions are potentially catastrophic. Without a guaranteed lifetime income to fall back on, retirees face the very real possibility of exhausting their funds.

“There’s an alphabet soup of vehicles that you can choose from and a lot of people will need help to figure out how to put that puzzle together,” says Saulnier, noting there’s never a shortage of new products in the decumulation market from companies hoping to solve the pension sector’s “nastiest, hardest problem.”

In addition to in-plan and retail options, DC members can also access products such as advanced life deferred annuities — allowing registered retirement account holders to allocate some of their savings towards an annuity deferred until age 85, rather than forcing them to start at age 71 — and variable payment life annuities, which provide varying payments depending on the performance of an underlying annuities fund.

“My puzzle and your puzzle will look different, according to our own financial needs and resources, which is where financial planning assistance — ideally as independent and unbiased as possible — can be helpful,” he adds. “Employers can provide resources, tools and referrals to help individuals who are finding it a challenge.”

Challenges for DB plan members

The relative financial certainty that comes with a DB pension is no excuse for complacency.

At the Ontario Pension Board, members have long had access to an online portal offering tools such as a retirement planner, pension estimator and buyback calculator.

The OPB has also built a program of interactive retirement planning workshops, as well as regular education sessions geared to employees’ stage of seniority or member association, says Mila Babic, the OPB’s senior vice-president of client and advisory services.

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“We make sure the content is tailored towards individuals in that space and that segment of our population, and the advisors and education officers will sit at the table and explore what’s of interest to clients. Often, they leverage what they hear from another client who is in the same position, and then you can have a really good dialogue.”

In addition, major career landmarks — such as leaves of absence, job changes and termination — can trigger proactive outreaches from members of Babic’s team. “What we really want them to do is to come back with us and have that personalized conversation, which we think is really important because really no two clients are the same,” she says.

At the HOOPP, specialists from within the pension plan and the broader financial industry offer plan members advice on topics including retirement planning, personal tax strategies and household budgeting to help them figure out how their pension will fit into their wider financial picture after retirement, says Ivana Zanardo, the HOOPP’s head of plan services.

In the last few years, the plan has also partnered with the Canadian Institute of Financial Planning to train up members of its own staff as registered retirement consultants and registered retirement analysts.

“Our sole focus is on delivering the pension promise to our members,” she says. “That’s our mandate and we are laser-focused on it. But part of fulfilling that promise is ensuring that we offer comprehensive pension education and guidance. When members are aware of their retirement and financial planning options, they can make informed decisions that really are best for their personal situations.”

The OPSEU Pension Trust’s People for Pensions program performs a similar role for its members. The education program was launched as part of a revamp of member communications that has expanded the focus beyond the pure mechanics of the pension plan, with the aim of supporting members’ financial literacy.

As more Canadians live longer, plan members will need to think more carefully about financial decisions such as the best time to begin receiving Canadian Pension Plan benefits, as well as their long-term plans for housing and health care, says Jesusa Chow, the OPTrust’s senior vice-president of member experience and pension operations.

“We’re trying to have them think about retirement more broadly, but also give them that peace of mind that you have this reliable pension that you‘re going to have until you die.”

The plan’s communication makeover included a transformation in style, as well as substance, she says. For example, new members are linked to a three-part series of videos on plan basics, each lasting around two minutes.

Key Takeaways

• Employers are taking action to improve their employees’ financial literacy and financial wellness as rising interest rates, inflation and personal debt levels combine to increase workers’ financial stress.

• While DC pension plan members may have the most to gain from improved financial literacy because of the active role they must take in their investment decisions, DB plan sponsors shouldn’t let their members get complacent about financial wellness.

• Targeted and tailored communications are key to ensuring employee engagement on money matters.

“It’s kind of a Tik Tok, social media world. Attention spans are different and people are inundated with so much information . . . so we really have to find ways to be short, succinct and engage in a different way. Nobody is going to read a five-page article on their pension. They need just the right amount of information at the right time.”

Tailored communications are critical for plan sponsors who want to maximize employee engagement with their financial wellness resources, says Eric Monteiro, senior vice-president of group retirement services at Sun Life Financial Inc. For instance, discussions about retirement are unlikely to resonate with younger employees who may be wondering if they’ll ever be able to stop working.

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“That message will not compute,” he says. “So instead of talking about retirement, let’s talk about [their] financial future and financial security, such as saving for a house or for emergencies. It makes it more meaningful for them.”

Gender is another important factor to consider when tailoring a financial literacy message, he says, noting aspirational content focused on financial goals and financial security tends to generate more female engagement. Among members who are enrolled in retirement savings accounts that are administered by Sun Life, the average female plan member’s balance stands at just $69,000, compared to roughly $92,000 for the average male.

“That’s a major gap and it’s been [shrinking] over the years, but I would say not fast enough. We’ve seen research that suggests return-based messaging doesn’t resonate as much with women.”

Still, there are some styles of communication that will work with any employee, regardless of which demographic group they fall into. “The less jargon, the better, and that is true for everyone,” Monteiro says. “Keep the language plain and simple.”

Michael McKiernan is a freelance writer.

Download a PDF of the 2024 Top 100 Pension Funds Report.