The pension industry has mixed feelings about the language used around retirement and whether it still reflects the needs of today’s workforce.
“It’s always been retirement and always will be what we call it,” says Lois Brzak, payroll supervisor for the Agriculture Financial Services Corp.
But a conversation is beginning to permeate the industry, with others noting it may be time to modify the language of retirement and pensions, even suggesting the words be changed completely. “The language we use matters and, sometimes, repositioning can help,” says Alyssa Hodder, senior communications consultant at Eckler Ltd.
Read: Words to use and words to lose in retirement, pension communications
“Talking about ‘saving for the future’ or even ‘building future wealth’ instead of ‘pensions’ and ‘retirement savings’ might make these communications more accessible to certain segments of plan membership. Some plan sponsors prefer not to talk about retirement programs at all, positioning them instead as a means to ‘live the life you want, once you stop working.’”
Changing workplace
Missed connection
A disconnect exists between what plan sponsors say and what members hear, according to a 2019 Invesco study, which found:
When referring to their employer’s matching contribution, 39% of plan members preferred “the match is free money,” while 23% preferred “leaving money on the table” to describe not contributing enough to take full advantage of a company match.
56% of members preferred “with our company match, we can significantly increase the total amount you can put away,” compared to 44% who preferred “the company will match a portion of your contribution each year.”
When it comes to target-date funds, 61% of respondents preferred “stay on track to achieve my goals” versus “managing risk.”
Rosalind Gilbert, senior actuary and associate partner of retirement and investment consulting at Aon, agrees, noting retirement looks very different today than it did for previous generations. Ultimately, this means retirement plans should also look different, she says.
A global survey conducted by Aon in 2018 found 30 per cent of respondents believe they’ll never completely retire, with many planning to work full or part time for the rest of their lives, says Gilbert. With so many possible patterns of future work and conflicting priorities for money, there can’t be a one-size-fits-all solution, she adds.
Read: One-third of employees don’t expect to fully retire: survey
Even facing retirement, people may still want to stay engaged and work to some degree, “as well as the income supplement that enables them to hold off tapping into funds they’ve saved for retiring,” says Joy Begley, associate professor in the accounting and information systems division at the University of British Columbia’s Sauder School of Business.
But only 40 per cent of global respondents have a financial plan or savings goal, according to the Aon survey. “Over half of respondents are concerned about outliving their savings and/or not having enough money to retire when they want to, and almost three-quarters say they can’t afford to save as much as they’d like,” says Gilbert, noting employees are also looking to their employers to provide more support in various areas of financial wellness.
“One trend we’re seeing more often these days is targeting communications by life stage, not necessarily by age, to better reach different segments of a plan’s membership,” says Hodder. “For example, we’ve had clients that have produced three types of pension statements — for early-career, mid-career and late-career employees — changing the tone, messaging, imagery and even font size accordingly.”
Changing language
Changing the language that’s used to talk about pensions and retirement isn’t a new concept, says Hodder. “It’s part of an ongoing trend toward targeting communications based on the audience receiving them. We’ve seen it in the marketing world for many years — think Facebook or LinkedIn ads, for example — and we’re seeing it more often in the pension world now too.”
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But that doesn’t mean throwing out all the words with the old terminology bathwater. “I don’t agree the industry should stop using the term ‘retirement plans,’ nor that companies should stop providing vehicles that support employees with tax-efficient, low-cost ways to save for retirement,” says Gilbert. Simply changing the language without altering the structure, governance and communication around these programs can create more issues and potential risks for employers, she adds. “I would prefer that changing workforce demographics and shifting employee priorities are seen by employers and the industry as an opportunity to get more creative with workplace savings plans.”
Brady Aarssen, assistant vice-president of business development strategy at Canada Life Financial Corp., also believes it’s time to change the language around retirement. “It’s an exciting time, but a different one and change is good,” he says.
“Do we need to change the word retirement itself? I would say it depends,” says Mike Tuira, Invesco Ltd.’s vice-president of defined contribution. “What we’ve found is that how we communicate every day to investors and plan members is that we don’t always speak to them in terms that resonate. In our studies over the last 15 years in the words research area, it comes down to four universal principles in terms of how you want to communicate and what you want to filter everything through: Is it plain language, is it plausible, is it positive and is it personal?”
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Rob Kochel, vice-president at Invesco, also agrees it’s time to change specific words. “It really isn’t so much fundamentally about changing the course as it is about becoming more precise in our language.”
It’s also important to consider “that one word doesn’t necessarily fit all, because not all plans want to accomplish the same thing,” adds Tuira, suggesting plan sponsors first determine their main goal and then find words that will back that up. So the correct terminology may be “retirement” based on what the plan is looking to accomplish, or it may be a different word, he says.
Looking to the future, Aarssen says group retirement plans need to evolve to wealth journey plans. “Or in our world at Canada Life, health and wealth journey plans that better capture the goals and purposes of an employer-sponsored plan that seeks to support employees from their early 20s through to their 80s, and adequately support the diverse needs each individual will have along the way.”
Alethea Spiridon is managing editor of Benefits Canada.