Canadians can no longer disregard their concerns about saving for retirement.
In the Leadership Council on Pension Reform report, Benefits Canada, BMO Group Retirement Services Inc., Manulife Financial, Morneau Shepell, and Sun Life Financial along with plan sponsors discussed the need for pension reform in Canada and greater retirement income adequacy for plan members.
While many topics were covered in the report, this extra online Q&A shares additional insights from the attendees on challenges to engaging employees, target date funds and PRPPs.
Participant Q&A
BC: What is one barrier that employers face in getting employees engaged in their retirement plans?
Sue Reibel, senior vice-president & general manager, group retirement solutions, Manulife Financial: I think there’s still an entitlement issue for employees. They believe that somebody is going to take care of them, and it’s somebody else’s responsibility to make sure that they’re prepared for retirement. This is changing a bit as DB plans decline, but historically, for employees, somebody else was there making sure they had a plan and was contributing significantly on their behalf. As this shifts away, employees are going to have to change and understand how much they have to save.
BC: What’s one challenge to engaging employees?
Rico Gambale, plant controller, Republic Steel: I know that when we hire new employees and we give them benefit packets, they come to us and say they want us to tell them what their investment choices should be. We say, ‘We can’t really advise you,’ but they do look to us to guide them. So we can tell them that the resources are there for you to call your financial advisor or financial institution, but there seems to be reluctance. They have all this literature, but still, they don’t want to make the decisions. They want to have their hands held and be told what to invest in. This creates some difficulty, because employers want to help them but there are barriers there, in terms of what can be done.
BC: Do employees stay in target date funds because it’s the right choice or because it’s an easy choice?
Jamie Farrell, senior manager, benefit & investment programs, HR, Rogers Communications: I really think it’s the latter, because I think somebody would look and say, ‘I’m forty years old; I’ve got 25 years until I’m 65, so of course I should be in the target date fund that’s 25 years from now.’ It’s easy to say to groups of employees that they should be in a certain fund based on their age. But I think a lot of people are just staying in those funds because it’s the easy choice. We’re not really engaging people around what the different options are, because that’s very challenging to do. I don’t know if we’re doing enough to explain what the risks and options are for employeer. From an engagement perspective, I think that’s part of the problem as well.
BC: How will PRPPs benefit employers?
Blair Richards, CEO, Halifax Port ILA/HEA Pension Plan: The PPRPs are beautiful in my mind, because you fix the cost and allow a different entity to deliver on the promise. If, for any reason, an employer doesn’t wish to be in the pension game, that doesn’t mean the employees have to do without a pension. For employers who do want to set up a PRPP, the structure should allow the employer to make the contributions, whether the employee does or not, and provide good governance. I don’t think there should be a connection back to the employer after that contribution has been made, which will reduce liabilities for the employer. The pension promise will be between the employee and the PRPP—not the employer.
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