2014 CAP Member Survey: Engaged versus unengaged employees

This is Part 3 of our annual survey of CAP members.

The 2014 CAP Member Survey highlights—once again—that employee engagement remains a challenge for plan sponsors. And, with plan sponsors included in the survey this year, the results reveal a significant gap between how employees and sponsors view various aspects of their retirement savings plans.

Asked about their biggest obstacles for getting employees to enrol in their DC plan or group RRSP, sponsors’ top response was “general lack of interest in retirement planning” (54%), followed by “lack of understanding of plan benefits” (37%), “employee cost constraints” (34%) and “low awareness of the plan” (9%). By contrast, only 12% of employees who don’t participate in their company CAP say they weren’t interested. The bigger excuse was affordability: 20% prefer to pay down debts first and 19% cite financial constraints—up from 8% in 2013.

Anna Pagliuca, associate vice-president, customer relationship and member education, with Standard Life, suggests that sponsors address the survey’s results on members’ lack of interest and lack of understanding through mandatory enrollment and frequent communications to help members understand the importance of retirement planning, improve their knowledge and promote engagement. “The survey indicates that, for employees concerned about paying down debt, sponsors should look into helping them understand how to split their focus between debt and planning for the future,” she says.

Although nearly all (97%) plan sponsors agree that employees are responsible for taking an active role in their CAP to ensure they can retire successfully, the survey results describe only 36% of plan members as “active” participants. Within the past year, a small minority of members maximized the company match (19%), increased their contribution amount (19%), changed their investment options, rebalanced their investment mix (16%) or used information provided by their employer to make investment decisions (10%).

About one-third (38%) of plan members self-report having an excellent or very good understanding of their employee retirement plan, while 40% claim a somewhat good understanding. A minority of members claim an excellent or very good understanding of specific aspects such as asset allocation (31%), risk tolerance (40%), the amount needed to contribute to their retirement plan to retire with the amount of money needed (30%) and their plan statements (37%). Meanwhile, plan sponsors express even less confidence in members’ understanding of key elements of saving for retirement.

“I wonder if members really need to understand the intricacies and complexities of asset allocation of investments and inflationary risks, when the majority of members select a lifecycle path,” says Karrina Dusablon, national director of education and training with Desjardins Insurance. “Are we putting too much emphasis on trying to make our members know everything? I don’t think making them investment specialists and/or retirement specialists is the way to go. More than half (54%) of members say they aren’t knowledgeable. We need to focus more on basic concepts that can be easily understood and build on that. The key is getting them enticed and getting them to take action before we can go further.”

While 83% of plan sponsors are satisfied with the tools and support that service providers offer to assess the retirement readiness of employees, fewer (77%) members plan report that their employers provide a range of services and tools around their employee retirement savings plan. And not many take advantage of what’s offered. Only 35% reviewed all retirement statements—a big drop from 72% in 2008. About one-third (32%) went to a website to review their account balance or transactions, 23% went to a website to look at retirement plan information, 19% consulted their personal financial advisor regarding their employer-sponsored retirement plan, 15% used online or hard-copy retirement planning calculators or tools to make investment decisions, and 14% attended education sessions on their retirement investment options.

“We need to dig deeper with our individual members and our employee groups to understand why there is inertia among certain groups,” says Colleen Falco, director of HR services for Niagara Casinos. “The pension plan is a beautiful platform to use for engaging employees in all the other things that you might be trying to achieve as a company. You need to not only remind your employees about a very basic component of their compensation package but, more importantly, help them through a number of engagement strategies— whether it’s online tools, engaging them with iPads, giving them education opportunities or building their financial literacy.”

Get a PDF of the full report.