Canadian employers are listening to their employees’ concerns about achieving retirement income adequacy and are finding new and better ways to encourage retirement savings, according to a survey by Benefits Canada and the Canadian Institutional Investment Network, and sponsored by Great-West Life Assurance Company.
Employers are encouraging employees to streamline their investment options, build better default funds and embrace more sophisticated tools such as target date and target risk funds, says the report.
The 2011 Capital Accumulation Plan (CAP) Benchmark Report, entitled CAP Today is based on a survey of 353 organizations. Taken together with the results of the recent 2011 Benefits Canada Survey of CAP Members, sponsored in part by Great-West Life, a more educated view of the evolving CAP industry emerges.
“By comparing both the employer and employee survey results, we can share insights into what plan members are saying and how plan sponsors are responding, providing a clearer picture of what additional steps can help Canadians reach their retirement and savings goals,” said Jeff Aarssen, vice-president of group retirement services sales and marketing at Great-West Life.
“We find plan sponsors value this unique insight as it helps them to evaluate their plan design and make future decisions that can help their members save for retirement.”
Generally, the results of the plan member survey confirm that plan member engagement is an ongoing challenge, whether due to competing financial priorities, a lack of confidence or knowledge in making necessary investment decisions, or even—for some—an overly optimistic view of their anticipated retirement scenarios.
The benchmark survey found employers continue to make positive changes, making it easier for plan members to achieve retirement income adequacy by:
- Streamlining investment options, providing plan members with “one-stop” products so they don’t have to make asset allocation decisions. This has resulted in a decrease in the number of investments held by plan members: for DC pension plans, the average number of investments held declined to 3.0 in 2011 from 5.1 in 2008, and for group RRSPs, to 3.9 in 2011 from 8.5 for the same period.
- Providing advice, particularly on the group RRSP side, where 51% of employers provided plan member advice on how best to plan and invest in 2011, compared to 38% for both types of plans in 2010. Employers offering DC plans also provided more advice, with information exchanges increasing to 45% in the same period.
- Building better default funds, as more employers incorporate target date and target risk funds as default options—a more sophisticated approach than straight balanced funds. The number of employers incorporating these options jumped to 22% in 2011 from just 9% in 2010 for DC plans, and to 23% from 13% over the same period for group RRSPs.