For years, the retirement industry has worried that CAP members don’t understand their employee retirement plans as well as they should, despite the wide availability of tools and support. And that troubling trend continues, according to this year’s CAP Member Survey.
Just over half (51%) of plan participants said they didn’t seek out specific information prior to joining their employer-sponsored retirement plan. Among those who did, 20% looked for information about performance, while 16% wanted to know about investments and 13% wanted plan details.
“It concerns me that only half are seeking information—and, when they do, they only seek out return on investments,” says Karrina Dusablon, director, education and communication services, with Desjardins Financial Security. “We all know that investments are just one ingredient in our overall strategy, but that needs to be tied in with the overall objective of their retirement plan. When we look at all the time and money invested in various communication tools and see that the usage has gone down again, maybe we need to do a better job at personalizing the right tool with the right audience. After all, it’s not about overloading the plan participants with too much information but providing multi touch points so they can connect with us in a way that they are comfortable with.”
Those touch points may include social media. A growing proportion of members (31%, versus 25% in 2012) say they’d be likely to access information regarding their CAP if it were available on social media such as LinkedIn, Facebook, YouTube and Twitter.
“Social media is a natural venue for people to share their stories, so it offers a fantastic opportunity to learn about the importance of saving for retirement through real conversations being shared by real people,” says Jennifer Mayrhofer, manager, marketing and communications, group retirement services, with Great-West Life. “Whether it’s coming from plan administrators, plan sponsors or other plan members, people are going to pick up on authentic stories told through social media about retirement income adequacy. This is a great avenue for us to listen and to share, and to help foster financial literacy online.”
More plan members claim an excellent or very good understanding of their retirement plans (37%), asset allocation (31%), risk tolerance (40%), plan statements (38%) and the amount they need to contribute to their retirement plan in order to retire with what they need (29%). Nearly half (46%) report an excellent or very good understanding of their company matching policy, but only 28% report a high level of understanding of longevity risk and 27% of inflationary risk.
“When you look at the overall formula that determines what comes out at retirement––time, contributions and investment growth––we really need to focus on the time and contributions parts,” says Mark Dowdell, senior vice-president with Pal Benefits. “It’s alarming to see an increasing trend for more people to have a poor or no understanding of how much they need to contribute. A lot of participants do not have a good appreciation of how long they are going to live or how long they may have to live off this money. Plan sponsors need to help members focus on the adequacy of their retirement savings and not just the investment return.”
In fact, members may be expecting this kind of help and support from CAP sponsors. Two-thirds (67%) say they trust that the default investment chosen by their employer will provide them with adequate funds for their retirement.
“Defined benefit plans may be in decline, but plan members’ assumptions that their employers will ensure they achieve retirement income adequacy remains strong,” says Mayrhofer. “With this in mind, employers may need to revisit their default investment options to ensure they are appropriate long-term investment options for plan members who do not actively make investment decisions.”
Get a PDF of the entire report.