Cadillac Fairview aims for 60% replacement with DC pension rebuild

Cadillac Fairview is known for building things, so when the real estate and development firm discovered its plan members weren’t on track with their retirement savings goals, it decided to change its defined contribution pension plan to create one that would resonate with employees and encourage them to save more.

“The role for Cadillac Fairview [is] to assist employees to plan for retirement,” Louie DiNunzio, senior vice-president, strategic asset management with Cadillac Fairview, told attendees at Benefits Canada’s 2016 Benefits and Pensions Summit in Toronto on March 31. “We want to create a competitive benefit package.”

The company started the journey in 2014, quizzing staff extensively on what they needed to ensure adequate retirement income. What emerged was a lack of understanding about investment decisions, adequate savings amounts and how the pension plan worked.

Read: 56% of employers with DC plans think staff are saving enough

After much dialogue, the company decided to adopt a formal communications policy that removed complex legal and financial terminology and spelled out how the plan worked clearly and effectively.

It also decided to redesign the plan, which had been designed to replace 45 per cent of employees’ pre-retirement income. The plan had also allowed employees to contribute any amount from four to six per cent into the plan, with Cadillac Fairview matching that “dollar for dollar.”

The redesign aimed to replace 60 per cent of pre-retirement income. The default contribution level is now six per cent for all employees, and the company matches 150 per cent if the employee contributes six per cent. About 80% of employees are now contributing 6%, up from 59% prior to the plan and communications redesign.

Following the changes, the average employee is now saving an extra $1,200 to $1,500 a year in the pension plan.

“These small changes created significant value for our company,” said DiNunzio. “It impacted almost 90 per cent of our plan members.”

Read: Employee benefit plan design: 5 reasons for change

Cadillac Fairview also realized it needed a new way to reach out to its employees. “It was clear the way we were communicating with them wasn’t very effective,” he said.

It introduced education seminars, which are run by outside advisors, as well as specialty programs aimed at the different age groups of its employees. Messaging to plan members was frequent and continues to be to ensure retirement savings is top of mind, according to DiNunzio.

The new communications plan has led to increased engagement, yet the cost to the firm was small. “We haven’t changed the aggregate dollars that we need to spend by any material amount,” he said. “We’ve really just shuffled things around.”

Read: 45% of Canadians have a low level of financial wellness: survey

Cadillac Fairview is just one of many employers struggling to engage employees with their retirement savings. Speaking in the same session at the 2016 Benefits and Pension Summit, Ofelia Isabel, global account director at Willis Towers Watson, said only six per cent of employees who responded to a recent survey know what they’re going to need in retirement.

Isabel pointed out that many plan members simply don’t know where to start when it comes to their retirement savings. With busy jobs, mortgages and other competing priorities, there’s little time for anything, let alone retirement planning.

She said employers need to take a long look at how well their retirement plan is working. “We need to step back and say, ‘Is it actually doing its job?’”

Read: Tackling the retirement readiness challenge

Editor’s note: Story updated April 6 to reflect an error in the original version. The original version referred to a 70-per-cent replacement rate when the number should in fact have been 60 per cent.