The Great Recession

Working Canadians with great expectations for a secure—perhaps even early—retirement are still shaken by last year’s precipitous drop in capital markets. Hopes and dreams are now firmly grounded in a new reality.

According to Sun Life Financial’s Unretirement Index, 45% of Canadians expect to work longer than they had originally expected, and 44% believe their retirement won’t be as nice as they originally thought.

While the two most common reasons for delaying retirement were “to stay mentally active” (91%) and “I enjoy my job or career” (86%), other reasons included “to earn enough money to live well” (79%) and “to earn enough money to pay basic living expenses” (68%).

Yet challenging times often present opportunities. Plan sponsors can adapt their pension and benefits plans to address employees’ anxieties head on. In particular, employers can look to three best practices to help their employees in the face of economic uncertainty: in-plan financial advice, portable voluntary benefits and an improved level of service for transitioning employees.

In-plan Financial Advice

According to the Unretirement Index, Canadians who use a financial advisor for their retirement planning are more confident about the retirement that awaits them. Eighty-seven percent of respondents said they are making better financial decisions than they think they would have made without an advisor. Eighty-six percent said they expect to have a better retirement, and 83% are more confident about their finances. Despite these findings, however, only 37% of respondents have a written financial plan.

Introducing financial advice as a benefit may help more employees to create such plans. As plan members become more anxious about their personal and employer-funded retirement savings, access to advice may be the kick-start they need to put them on the road to financial security.

Portable Voluntary Benefits

Voluntary benefits such as critical illness and retiree benefits are available to employees through the employer. They are optional and, therefore, funded by the plan member.

Most employees recognize that an employer’s decision to discontinue certain traditionally funded benefits in this environment is not ideal. But from an employee’s perspective, it’s better to receive this news along with an option to obtain coverage voluntarily, at favourable rates, than to have to go to market for the same coverage. Furthermore, employees who are concerned about job security will highly value these benefits.

Transition Services

For those employees transitioning out of an organization, the rollover of retirement plan assets and the conversion of insurance coverage should be as stress-free as possible. Here again, access to advice adds real value.

For example, members can roll over their assets from the group plan to a comparable group plan offered by a financial institution. They will benefit from low investment management fees, access to the same funds they held in the employer plan and preserved guaranteed funds, in which interest rates and maturity dates from the employer plan are maintained. They can also benefit from convenient features such as automatic deductions of plan contributions from their chequing accounts.

Members converting out of an employer-sponsored plan can also maintain life, critical illness, extended healthcare and dental insurance without the need for a medical examination. This is affordable for the member and easy for the plan sponsor to arrange. These practical solutions will resonate with Canadian employees—even long after The Great Recession has come to an end.

Tom Reid is senior vice-president, direct distribution, with Sun Life Financial in Toronto.

tom.reid@sunlife.com

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© Copyright 2009 Rogers Publishing Ltd. This article first appeared in the March 2009 edition of BENEFITS CANADA magazine.