TODAY'S TOP RETIREMENT TRENDS - There's a lot of change happening in the pension industry today. We explore some of the trends that could impact ...
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2015
TODAY’S TOP
RETIREMENT
TRENDS
There's a lot of change happening
in the pension industry today.
We explore some of the trends that
could impact company plans.
On the surface, the pension plan industry may not seem like the Desjardins Insurance’s Eric Filion, vice-president of marketing and
most bustling sector. Many see their plans as a simple retirement investment strategies, is particularly interested in how Big Data
savings tool — members contribute to the plan and the administrator will impact contribution rates. By collecting data on members,
invests those funds in the market to help boost that employee’s sponsors will be able to tailor their financial education programs
retirement savings. Behind the scenes, though, the industry is filled so they can more effectively reach certain age groups or employee
with technological innovation, government lobbying, fascinating types to help them save.
debates around the future of retirement and more.
For Tom Reid, Sun Life Financial’s senior vice-president of group
Every year, new trends pop up that require quick thinking from retirement services, the ORPP is one of the most pressing issues
record keepers, who are constantly trying to find new ways to help facing companies today. In 2017, many businesses will be forced
members save more for retirement. In this year’s Retirement Trends to pay into this government-created savings plan — and even
report, we look at some of the biggest issues having an impact upon more will have to adopt it in 2020 — and that could dramatically
sponsors, members and the industry as a whole. alter the savings and labour landscape in this country.
Readers of this report will find insights into three of today’s most At Great-West Life, Amanda Fickling, the company’s marketing and
important trends: how to use Big Data properly, the introduction of communications manager, is thinking about how companies can
the Ontario Registered Pension Plan (ORPP), and how to get more “smarten up” their defined contribution plans. Not enough people
members to contribute to their plans and to save more than they are saving, so what can they do? Is auto-enrolment the answer?
do right now. Better investment options? Improved education?
To get at the heart of these issues, Benefits Canada spoke to leading We explore all of this and more in Benefits Canada’s 2015
experts from three of the country’s largest pension administrators Retirement Trends report.
— Sun Life Financial, Desjardins Insurance and Great-West Life.
q&a
ACCELERATE PLAN How does Desjardins’ “energy module” help sponsors?
ENGAGEMENT It sounds like a lot of buzzwords, but it’s based on a behavioural
engine that analyzes a large volume of data and then displays
the data to sponsors through a dashboard so they can get a
clear picture of where their participants stand with respect to
participant engagement and retirement readiness. We sort the
data into three categories. There’s demographic data—who you
are. There’s behavioural data—what you do. Then there’s financial
data—how much do you save regularly? We then take it all and
blend it together.
ÉRIC FILION Will you add more data sources in the future?
Vice-president, development, marketing Social media, perhaps?
Our challenge is always to create a link between the data and
and investment strategies, group retirement at
participant engagement. If we found that participants who go on
Desjardins Insurance Facebook are more likely to be engaged in their plan, then we
would include it. We’re always looking for new ways to evolve the
model and evolve our behavioural engine.
Desjardins has been a user of Big Data for
a while. How has your usage of it evolved over the What’s is the “dashboard” that sponsors get access to?
last 12 months? It’s an engagement dashboard that allows us to have a
We’ve come a long way since last year, but what’s important for conversation with the plan sponsor about engagement levels,
us (and it’s what everyone’s talking about) is engagement: having trends and the characteristics of their employees. We can break
engaged participants. For us, Big Data has been really about it down by various categories, such as age and sex. For instance,
being able to measure this engagement: to give plan sponsors a an employer can see on the dashboard that employees over 50
clear picture of their group and a clear set of actions. However, are not engaged, so they know they need to do something. It can
it’s less about the data and more about how we can deliver new help determine a company’s entire human resources strategy.
business insights—we say “from Big Data to big thinking.” We want The objective of the dashboard is to transform data into insight
to evolve a plan, or make a difference in participant engagement and transform insight into action.
and, ultimately, in the level of the members’ retirement readiness.
Can you rely on Big Data too much?
What does the data tell you about people? Shouldn’t instinct still play a part?
By aggregating the data, we can gauge participants’ levels of That is the biggest issue—following Big Data blindly. Big Data allows
interest, motivation and knowledge (around saving). We use as us to better target participants in, say, face-to-face meetings and
many as 13 different criteria to measure these things, based on be better prepared to make meetings more impactful to members.
Your way, plain and simple®’s demographic, behavioural and financial data. We can get a good But we know the best way to engage people is to sit down in front
E3 approach evolves. idea of the members’ level of engagement. Here’s something of them, build a relationship and talk to them about the challenges
specific that we found: we noticed that newer employees were of retirement. We’re working every day, so we don’t lose contact
Our new E3nergy Module more likely to react to peer pressure tactics. We observed that, with participants. Big Data is about having more information to
fast forwards employee engagement for every five years of service that an employee had under create a plan that resonates with people.
with their retirement plan. his belt, he was 5% less likely to take action. So that [kind of
information] allows us to target campaigns to different groups. What challenges still remain when it comes to
Entice • Encourage • Engage
Big Data?
It’s around how to give sponsors access to these amazing tools
To learn more, watch a short video without overwhelming them. We don’t just want to dump everything
at yourwayplainandsimple.com. proud partner of
on the plan sponsor’s plate. Again, it’s all about transforming data
into insight.
desjardins insurance refers to desjardins
financial security Life assurance Company.
retirement trends 201 5 3q&a
We work The Canada Revenue Agency allows Canadians to contribute
up to 18 per cent of their annual income, up to a maximum dollar
amount, and it would be great to see more employees reach the
maximum.
for the babysitters. How can the industry players encourage members
to invest more per paycheque?
Members tend to contribute up to the amount needed to trigger
The T-ball coaches. their employer’s maximum matching amount. So, one option to
consider is increasing the member contribution rate needed to
trigger the maximum employer matching contribution. Ideally,
The bedtime storytellers. members will recognize the opportunity their employer is offering
them to boost their savings with what is essentially a guaranteed
The tucker-inners. rate of return equivalent to the employer’s match.
The traditional industry recommendation is that members
AMANDA FICKLING save between 10 per cent and 14 per cent of their annual
The toddler chasers. Manager, Marketing & Communications income, which is typically a healthy savings rate to achieve. Plan
sponsors are encouraged to consider designing their employer
Great-West Life Group Retirement Services
matching program so it achieves the maximum savings target
The after-school tutors. when combined with the employee contribution. As a starting
point, the 2014 CAP Benchmark found that employers match
Why do companies need to “smarten up” their on average 5.2 per cent of salary for DC plans and members
We work for people who believe DC plans? contribute 4.3 per cent.
Some members may procrastinate in making an investment
T:10.75”
decision for fear of making a mistake. They may also select a Why is the act of saving more important than
in a custom-built retirement. contribution amount that is too low to achieve adequate income picking the “right” investment?
in retirement. It’s more important to start saving as early as possible and make
To help address these challenges, plans can be “smartened meaningful contributions than to try to pick the “best” investment,
We work for your company. up” – that is, plan sponsors can design their plans to default to because of the benefits of compounding savings over time.
pre-set selections when no other decisions are made by the Even if they pick the hypothetical “best fund” but only
employee. Two frequently cited options include choosing a contribute $20 a month, members will not save enough to retire.
We work target date fund as the default fund option, and setting a So, ideally, members will start saving as early as possible, and
meaningful default contribution rate for members, with auto- set a meaningful contribution rate so they can best position
escalation of contributions to coincide with salary increases or themselves to achieve retirement income adequacy.
for you. the enrolment anniversary.
How would mandatory enrolment work?
Is that a solution?
Yes, it is a key part of the solution. Mandatory enrolment helps
Is there a way for plan sponsors to “smarten up”
the investments themselves?
Yes. Move default funds away from money market funds and
into target date funds. Money market funds are best used as a
With more than 130 sales and service experts working in 12 offces ensure employees start saving as early as possible, so they can short-term investment option, as they don’t generate sufficient
across the country, we provide group retirement solutions benefit from long-term compound growth. Mandatory enrolment returns over the long run. If the members of these plans don’t
as diverse as you. can also keep members from missing out on the opportunity to choose an alternative investment, they likely aren’t maximizing
boost their savings with employer matching, if available. their savings potential. Although there has been a slow decrease,
Visit www.grsaccess.com to learn more. Mandatory plans encourage significantly higher participation it’s disappointing to see that 12 per cent of DC plans still offered
rates than voluntary plans: in 2014, the CAP Benchmark Report money market funds as the default in 2014.
found voluntary DC plans had participation rates of only 79 per Conversely, target date funds automatically adjust underlying
cent versus 98 per cent for mandatory DC plans. Those numbers investment options to suit the member’s chosen retirement date,
are even lower for group RRSPs, which tend to be voluntary. so the member only has to make two decisions: which year they
want to retire in, and how much they want to contribute.
RETIREMENT SOLUTIONS THAT NEVER STOP WORKING
What about auto-escalation? Fortunately, momentum appears to be on the side of target
Sponsors can work with payroll administrators to automatically date default funds, as the CAP Benchmark Report has seen these
escalate members’ contributions in lockstep with salary increases, options increase year-over-year, from 28 per cent in 2013 to 33
Great-West Life, the key design and “Retirement solutions that never stop working” are trademarks of The Great-West Life Assurance Company.
for example, or annually, on the anniversary date of enrolment. per cent in 2014.
retirement trends 201 5 5q&a
Simplify with How will the ORPP impact employers who have
Ontario workers?
If a company has employees in Ontario, then they’re impacted
SUN LIFE FINANCIAL by the ORPP. It will create imbalances among employees in
different provinces or covered under the same collective
bargaining agreements. Sponsors have indicated to us that
Sun Life Financial can help your workplace retirement and savings plan offer innovative solutions TOM REID shifting their sources of labour to other jurisdictions is a serious
tailored to the needs of your plan members, backed by exceptional governance practices. Senior vice-president of group retirement services, possibility. If the cost of labour inputs goes higher, then they
Sun Life Financial have to think about where they can get that same labour for less.
Our experienced team of investment professionals offers extensive governance support,
including our comprehensive investment monitoring program: Watch List and CAPsure™ – our Are plan sponsors planning to redesign their
Capital Accumulation Plan (CAP) Investment Diversification Warranty. How have sponsors reacted to the ORPP? existing plans to become exempt from the ORPP?
Almost half of our employers haven't figured out how they’re If you have a DC pension plan for at least some of your employees,
The Sun Life Financial Watch List: Our eyes on your plan investments
going to respond yet. Some plan sponsors have communicated then you don’t get phased into the ORPP until 2020. If you have
Our Core investment platform is subject to a rigorous governance program. The Watch List is an directly that they’re going to have to absorb the cost, some will a DC plan that has a contribution rate of 4% from the employee
extension of this program and can help you focus on the key issues impacting investment managers make voluntary plans mandatory and waive waiting periods while and 4% from the employer, then you never get phased in. So,
or funds as part of your ongoing governance process. others have said they will eliminate or reduce other benefits to stay DC plans that are at, say, 3% plus 3% have a choice. They
cost neutral and potentially hire fewer employees going forward. can increase their contributions to 4% plus 4% and become
CAPsure: Ensuring your fund lineup meets CAP guidelines Others are looking at whether or not increasing contributions comparable, or they can take money out of their contributions
The CAPsure warranty affirms that if the investment options you make available in your plan meet a number meets the comparability test. and place it into an ORPP and only contribute 1.9% and 1.9%
Some are bothered by the almost “one-size-fits-all” nature of to their DC pension plan. There are many permutations, too.
of established criteria, you will satisfy the Capital Accumulation Plan (CAP) diversification guidelines by
ORPP’s plan design. [They’re wondering] why the government It’s likely the vast majority of plan sponsors will divert money
providing sufficient investment diversification across asset classes, investment style and objectives. from other retirement savings plans to the ORPP because they
[would] care where contributions are coming from. Why not allow
Investment solutions for every group retirement plan a 6% employee contribution and a 3% employer contribution or simply cannot afford to increase their overall payroll costs.
any combination that gets us to 8+%? It’s only companies that have
Drawing on Canada’s largest universe of workplace savings plans, we offer access to the insight
at least a 4% and 4% match that don’t have to switch to the ORPP. What kind of communication challenges could this
and expertise of Sun Life Financial’s experienced investment professionals across Canada, our Core We have many clients with very thoughtful plan designs and create for employers and their employees?
investment platform managers, the International Investment Centre, and more. contribution formulas that won’t pass the 4% and 4% test. As a whole, our industry is regularly challenged with helping plan
members to understand their plan, the investment options, etc.
And that’s not all! Speak with your Sun Life Financial Group Retirement Services representative – and
What might the ORPP mean for existing plans? The ORPP will add another layer.
gain investment insight and top-notch governance support for your workplace investment program. One very likely response might be that they can’t afford to If cost neutrality is important to an employer, adjustments
contribute 3% if they also have to contribute to the ORPP, so to benefit costs for their employees will inevitably happen. This
INVESTMENT SOLUTIONS AND GOVERNANCE SUPPORT they will be forced to divert contributions from some of their own means that employers will be put in a potential position of having
plans to the government’s plan. Consequently, [their own] plans to reduce something (a benefit) the employees have today in order
GROUP BENEFITS | GROUP RETIREMENT SERVICES | INDIVIDUAL INSURANCE AND WEALTH
won’t get the same scale and asset growth. to fund an increased cost imposed on them by the government.
The ORPP [also] ignores group RRSPs and deferred profit This can certainly introduce many communication challenges,
sharing plans and, in particular, the ones where withdrawals are particularly when employees may perceive it to be a takeaway.
Life’s brighter under the sun not allowed, [which are] aimed at retirement. We have a lot of For large employers who have employees across the
www.sunlife.ca group RRSP sponsors and deferred profit-sharing plan sponsors country, plan design uniformity can be important to many. Should
that have fantastic plans creating great retirement outcomes, but they treat their Ontario employees differently and if they do,
Group Retirement Services are provided by Sun Life Assurance Company of Canada,
a member of the Sun Life Financial group of companies.
they’re being ignored and told that they have to start contributing does that present challenges with a mobile workforce within the
to an ORPP in 2017. same company?
retirement trends 201 5 7THANK YOU to our sponsors
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