While 84 per cent of employers with capital accumulation plans didn’t intend to make any changes in 2017, many anticipated increasing their provision of financial advice services after a couple of years of decline in that area, according to a new report from Great-West Life Assurance Co.
According to the 2017 Capital Accumulation Plan Benchmark report, very few respondents intended to increase the employer match in their plan (three per cent), change their default investment option (three per cent), modify their eligibility requirements (two per cent) or add a new type of plan (one per cent) last year.
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The report, conducted in partnership with the Canadian Institutional Investment Network, found 40 per cent of both group registered retirement savings and defined contribution pension plans offer financial advice. But that’s down from 57 per cent for defined contribution plans in 2016 and 63 per cent for group RRSPs in 2015. Among plan sponsors that don’t provide advice to members, however, 19 per cent said they would start doing so in the next year.
Financial education is much more prevalent, with 91 per cent of defined contribution plans and 81 per cent of group RRSPs providing it. Yet seven per cent of defined contribution plans and 14 per cent of group RRSPs offer neither advice nor education.
The survey also found an upward trend in group RRSPs providing financial advice services as members get closer to retirement, with 41 per cent doing so in 2017, compared to 38 per cent in 2016 and 16 per cent in 2015. Also, more (53 per cent) plan sponsors with group RRSPs said they had no restrictions on withdrawals in 2017 in comparison to survey results from 2016 (47 per cent) and 2015 (45 per cent).
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Helping employees transition to an income-generating plan continued to be uncommon in 2017, as 80 per cent of group RRSPs and 74 per cent of defined contribution plans reported they don’t offer an employer-sponsored retirement income or life income fund to retired members.
In terms of investment options, the survey found the availability of cash and equivalent funds has increased since 2014. That year, 52 per cent of defined contribution plans and 58 per cent of group RRSPs offered that option, compared to 73 per cent of both plan types in 2017.
The survey also found 67 per cent of defined contribution plans and 63 per cent of group RRSPs offered target-date funds in 2017, up from 27 per cent and 33 per cent, respectively, in 2014. Target-risk funds also saw a jump, offered by 31 per cent of defined contribution plans and 33 per cent of group RRSPs in 2017, compared to 16 per cent and 20 per cent, respectively, in 2014.
In terms of the most common default investment options, 54 per cent of defined contribution plans and 46 per cent of group RRSPs said they defaulted to target-date funds in 2017, up from 33 per cent and 30 per cent, respectively, in 2014. And seven per cent of defined contribution plans and 13 per cent of group RRSPs said they defaulted to cash or equivalent funds, money-market options or guaranteed investment certificates, according to the survey.
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The survey also found:
- 67 per cent of large employers offered immediate eligibility for joining group RRSPs, compared to 38 per cent of smaller employers;
- 53 per cent of large employers offered immediate eligibility for defined contribution plans, compared to 16 per cent of smaller employers;
- 71 per cent of defined contribution plans are mandatory, compared to 12 per cent of group RRSPs and 41 per cent of deferred profit-sharing plans; and
- 51 per cent of defined contribution plans had fixed contribution formula structures, compared to 28 per cent of group RRSPs and 54 per cent of deferred profit-sharing plans.
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