2015 DC Plan Summit videos

There are two impediments to moving forward with decumulation. One is structural: plan sponsors are reluctant to take on additional fiduciary responsibility. The second is behavioural: in DC, less than 5% of plan members annuitize their savings, in part or in whole.

On the road to retirement, members must overcome five major risks: market, timing, inflation, shortfall and longevity.

A global multi-sector fixed income strategy can offer a wide range of opportunities beyond the domestic market, said Terry Moore, portfolio specialist, global multi-sector and fixed income solutions strategies, with T. Rowe Price, so it’s something more DC investors need to be aware of.

Most plan sponsors agree on the importance of providing some form of qualified advice to plan members, which reflects a shift in risk appetite. Sponsors are realizing not providing any options for members to obtain qualified advice might actually be a bigger risk.

The main deterrent for some employers is the increased costs that would result. Another reason is, employers prefer not to force enrollment on employees who don’t want to commit a set amount of their salary to a retirement plan.

To successfully transition a member to retirement from a DC plan requires four pillars: people, platform, product and price. Any transition should make people a priority.

Canadian plan sponsors aren’t yet ready to offer financial wellness programs and don’t believe there’s a need for them. They also don’t want to be responsible for giving debt management and financial advice to their employees.

When DC plan sponsors use behavioural economics, it can create better outcomes for DC plan members.

Investing in stocks has historically provided the potential growth investors need when accumulating assets as they prepare for retirement. In times of market volatility, however, an account’s drop in value can result in investors selling stocks at near-low levels and then buying them back at higher ones when markets recover.

While most DC plan sponsors view retirement as the end of their relationship with their employees, some plan sponsors are taking an alternate approach by extending their DC retirement program to include a decumulation option.

Canada has the fourth largest equity market in the world but accounts for just 4% of world equity markets, as measured by market capitalization within the MSCI World Index. So for Canadian investors, it makes sense to look abroad