• DC plan members will have a single investment account for their short- and long-term savings needs.
• Lifecycle funds will dominate the marketplace and the variations on these funds will increase.
• Alternative assets will be mainstream offerings in DC plans—primarily offered through balanced and lifecycle funds rather than as direct fund offerings in the DC plan.
Plan design
• Plan sponsors will become more paternalistic: autopilot features, such as auto-enrollment, auto-escalate and target-date default funds will prevail.
• Plan sponsors will embrace the new Tax-Free Savings Account introduced in the last federal budget and offer it to their employees as an alternative savings vehicle.
• DC plan sponsors will make it easier for members to transition from accumulation to retirement: enhanced payout options, such as a guaranteed minimum withdrawal benefit, will be introduced in DC plans, and more employers will offer their members a Group Registered Retirement Income Fund.
• Given the transient nature of the workforce, most plans will: eliminate the eligibility waiting period, and introduce mandatory participation and immediate vesting.
• In an effort to increase member contributions, plan sponsors will introduce more aggressive matching formulas.
• More plans will allow members to move credits from their flex benefits plan into the DC plan.
Education and Communication
• Plan sponsors will provide members with continuing education throughout their careers, repeating and enforcing key savings and investment messages, so that the information members need will be there for them when they are ready to make decisions.
• Plan sponsors will introduce incentive education whereby employees are rewarded for demonstrated learning in retirement savings and investment concepts.
• Communication and education will be increasingly targeted to specific age groups.
• Plan sponsors will make greater use of interactive technologies—webcasts, videoconferencing, etc.—to provide education and communication.
• Plan sponsors will provide members education for life that extends beyond retirement: Retired members will receive information on topics such as budgeting and investing.
Regulation and Legislation
• A second wave of pension reform will take place to address the fact that more and more employee retirement plans are DC plans, or group RRSPs and deferred profit sharing plans.
• Pension legislation will be harmonized across Canada.
• Some form of safe harbour will be introduced, eliminating liability exposure for plan sponsors who implement qualified auto-pilot features.
• Large multi-employer DC plans, similar to those established in Australia, will be created.
• The Guidelines for Capital Accumulation Plans will be adopted as legislation.
• Prescriptive rules will be introduced for selecting investment options for the plan, as well as for plan member communication and education.
Advice
• Many more plan sponsors will subsidize or cover the full cost of financial planning advice for their members.
• Legislation will be introduced to provide legal protection to plan sponsors who provide their members with financial advice from qualified providers.
• New technologies—MP3, video conferencing, the Web and electronic asset allocation tools—will be used to provide members with advice and targeted financial messages and alerts.
• Plan members will have access to a financial coach to provide them with advice on a range of issues, such as debt management, investing and retirement planning.
• More plan sponsors will provide their members with embedded investment advice in the form of auto-pilot features and target-date funds.
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