The need to boost financial literacy among Canadians continues to capture a growing measure of attention from government and the media, plus plan sponsors, providers and consultants in the retirement industry. Canadians clearly have ground to cover if they’re going to improve their understanding of, and the control they exert over, their finances.

Since 1990, the ratio of debt to household income has ballooned from just below 90% to well over 140%, according to Statistics Canada, fuelled in large part by a consumer population that finances its “wants” with credit. The figure is cause for concern, but in tandem with the low levels of savings Canadians amass (one of the lowest among the Organisation for Economic Co-operation and Development nations in a 2007 review), the picture grows more challenging—particularly in terms of helping those in their 40s and 50s prepare for retirement. If (or maybe when) rates rise, debt will be a hurdle in the way of retirement. In Benefits Canada’s 2010 CAP Member Survey, two-thirds of respondents already express concern about building sufficient savings for retirement.

Short- and long-term strategies are needed. The short-term effort must help the pre-retirement cohort, while a concurrent long-term initiative works to improve overall financial literacy, preventing future generations from facing the same predicament.

Auto options represent the shortest—and most effective—strategy for getting Canadians on a path to an improved retirement. Auto-enrollment, auto-escalation and a selection of suitable investment options can ensure that most Canadians don’t forfeit the opportunity to act in their own best interests. The federal government’s effort to expand access to group retirement options to include smaller employers and the self-employed will boost the proportion of the population that can be served by these options.

Delivering advice broadly is equally vital as it improves understanding and assurance. A recent Ipsos Reid survey confirmed that Canadians who work with an advisor are 33% more likely to express confidence about having enough to retire comfortably.

Longer term, a sustained educational effort—beginning in elementary and secondary schools, then continuing to workplace programs—will be necessary to help Canadians understand how to plan, budget and live within their means. As was the case with initiatives to introduce mandatory seat belt use and helmets for cyclists, programs will require the co-operation and commitment of participants from governments and industry.

Plan sponsors, their advisors and providers already have expertise working with employee populations that will be valuable in the effort to improve the choices of future generations. When the demand for financial planning advice parallels the frenzy for new consumer trends, we’ll know we’ve put the next generations on a better footing than their predecessors.

Brett Marchand is vice-president, sales, group retirement solutions, with Manulife Financial.

Get a PDF of this and other coverage from the DC Plan Summit.

Copyright © 2019 Transcontinental Media G.P. This article first appeared in Benefits Canada.

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