Shifting demographics have always driven Canadian pension plan design, and the growth of the millennial generation as the largest portion of the workplace is no exception, according to Morneau Shepell Ltd.’s Joseph De Dominicis.
“To me, shifting demographics are the key catalyst driving large global trends that in turn influence how we design pension programs, benefits programs and HR programs,” said De Dominicis, the organization’s vice-president and Toronto retirement practice leader, speaking at an Association of Canadian Pension Management event in Toronto on Wednesday.
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He described how defined benefit plans took root in the 1940s in response to demographic changes, when noticeable labour shortages were prompting employers to come up with new ways to attract and retain talent. But this evolved as baby boomers became the main segment of the workforce, and DB plans became more expensive to maintain, thanks to increasingly lower interest rates and rising longevity, said De Dominicis.
Today, the landscape is even more complex and just as difficult, he added, noting there are currently five different generations in the workforce, with millennials making up the largest portion. In this new landscape, the lead issues are customization, user experience, as well as building appealing platforms and creative solutions for employers looking to continue to provide retirement benefits.
One macro trend corresponding with more millennials in the workforce is the gig economy, a phenomenon that’s fundamentally changing how employers perceive their employees’ needs, said De Dominicis. It’s expected that 50 per cent of workers in Canada will be freelance by 2020, untying some of the past connections and loyalty between pension plan members and a specific employer.
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“It’s less about the benefits you provide than how you provide them,” he said, noting employers are also looking to achieve mass customization. When people go online to platforms like Amazon.com Inc. and Netflix, their experience is 95 per cent the same as everyone else, but the remaining five per cent is tweaked to reflect individual preferences. That five per cent is extremely important in providing a personalized experience for a plan member, said De Dominicis.
One way for members to experience that customization in their pension plan is by adding tools that allow them to have greater control over their finances, he added. As an example, he said one defined contribution plan implemented an option for members to direct their employer’s contribution to another major life expense, such as mortgage or credit card debt.
According to De Dominicis, his employer clients have been telling him: “We don’t want to provide the best level of benefits, we just want to provide the best possible user experience.”
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