Our industry has been successful in developing investment solutions that make it easier for Canadians to save for retirement. But when it comes to decumulation, we have yet to deliver universally accepted solutions that offer the features that Canadians need to meet their diverse needs.

In particular, target date funds (TDFs) have been instrumental in helping simplify the savings phase for plan members by leaving the complex investment decisions to the experts. However, when a plan member reaches retirement—or age 71 when their savings are required to begin transitioning to income—there has been no parallel, automated solution.

As leaders in TDFs, Sun Life Global Investments simplifies investment decisions for Canadians saving for retirement. Plan members make one important decision (the year they plan to retire) and the investment experts take care of the rest. With close to 40% of capital accumulation plan assets in TDFs¹, and with TDFs increasingly becoming the default option, we recognize the importance of providing a similar experience for plan members in retirement.

That’s why we, Sun Life Global Investments, collaborated with Sun Life Group Retirement Solutions (GRS) to design a revolutionary “target age” solution.

Designed with plan members’ needs at the forefront

With a growing aging population and the evolution of capital accumulation plans, it is important to support and empower Canadians to feel confident in planning for their retirement. The first step is to understand their needs, and determine what Canadians are looking for in retirement income solutions. Sun Life has learned a lot from Canadians approaching retirement:

The top three features that Canadians are looking for in a retirement income solution are predictable income for life, flexibility to withdraw savings, and ability to continue to grow their savings³.

Recognizing a gap in the decumulation spectrum

There are limited options for plan members in group plans at retirement. Generally, they have the option to choose between an annuity or a do-it-yourself decumulation from their LIFs, RRIFs, TFSA and non-registered accounts.

An annuity provides guaranteed income for their lifetime, addressing Canadians desire for reliable income that lasts, so they won’t outlive their savings. But the savings are locked in, so if plan members need to access savings for an emergency, they can’t.

The manual do-it-yourself option provides more flexibility, allowing access to withdraw savings when needed. But it leaves the retirement income and investment decisions with the plan member, who may not be equipped to make these decisions. The plan member must:

• determine how much to withdraw each year, taking into account all regulatory minimums and maximums where applicable (and we know that 43% have no idea how to determine the right amount),
• decide where to invest the savings, and
• reassess their savings, withdrawal amount and investments each year.

And there is no assurance that the savings will last through retirement.

Until now, there has been no solution that meets the most important needs of Canadians transitioning their savings to retirement income.

Defining a new category in decumulation: target age solutions

Introducing Sun Life MyRetirement Income: a fully automated target age solution that fills a gap in the decumulation solution spectrum. This solution simplifies retirement income decisions by asking plan members to make only one important decision, just like with target date funds. Plan members decide what age they want their money to last until, and the retirement income and investment decisions are taken care of by the experts.

Finally, a retirement solution that offers:

Available exclusively to Sun Life GRS plan members, this solution makes it easier to transition savings to income—and ensure it lasts as long as plan members need it to.

Flexibility to adapt with life changes

Sun Life MyRetirement Income offers the flexibility to adapt to life events and changes in physical and mental health. For example, a plan member may choose to move from Sun Life MyRetirement Income to an annuity partway through retirement to lock in a guaranteed income amount that aligns with an increase in their fixed expenses. Or they can select a closer maturity age if they face a health issue that shortens their life expectancy.

Simplifies the complex estate transfer process

Sun Life MyRetirement Income has attractive estate planning benefits that make it easier for plan members to leave money for loved ones. If a plan member passes away before their target age, the full remaining value will transfer to their designated beneficiary, bypassing probate and saving time (as assets will not have to pass through the lengthy estate settlement process that applies for most other investment products).

Finally, a solution that helps Canadians live the retirement they can afford.

Retirees are afraid of running out of money, and therefore consistently underspend in retirement—at an increasing rate as they age⁴. This solution helps retirees to finally live the retirement they can actually afford, giving them a steady budget to know how much they can spend each year. It minimizes the risk that (a) they will withdraw too much early in retirement or during meaningful market volatility, and run out of money (overspending) and (b) they will limit their spending (and lifestyle) for fear of running out too soon.

Defining a new era of decumulation

This is our first step in defining a new era of decumulation for the industry—and for retirees. As we expand the decumulation spectrum with Sun Life MyRetirement Income, we know we cannot stop here.

• It’s not just about product. We know that decumulation solutions will not resolve the decumulation challenge on their own. Retirement planning with useful tools and advice, along with education on decumulation solutions and longevity risk are key.
• No one solution can solve the decumulation challenge alone. We need to offer a combination of guaranteed and non-guaranteed options with varying features in order to meet members’ diverse needs.
• We hope to see other target age solutions enter the industry. This non-guaranteed solution simplifies retirement income and provides a spending budget so retirees can live the retirement they can actually afford. We hope to see target age solutions become a universal non-guaranteed solutions across the Canadian retirement industry.

Together, we can solve the decumulation challenge and ensure Canadians live their best retirement.