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Aon reports Canadian employers explore new ways to deliver better retirement outcomes to employees

Report shows many employers appear to be conservative in the adoption of innovations

Aon plc (NYSE:AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, today released its 2020 Canadian Capital Accumulation Plans Employer Survey Report (CAP Employer Survey).

The report shows employers want to deliver greater value and a better employee outcome for retirement, but they struggle to engage employees—a critical drawback in plans that rely on employee involvement to deliver their full value.

“The survey reveals that Canadian employers are focused on supporting workers to plan for a comfortable retirement,” said Rosalind Gilbert, senior actuary and associate partner for Retirement Solutions at Aon. “Employers recognize the need to better engage employees to maximize retirement benefits. Although many employers express interest in exploring new ways to improve value, many are relatively conservative in their adoption of recent innovations.”

Four keys to plan success

Almost 9 employers out of 10 chose one of the following as their top key to DC plan success:

  1. Improve employee financial IQ (31%)
  2. Increase overall savings for better retirement outcomes (24%)
  3. Provide flexibility for emerging retirement patterns (24%)
  4. Offer better retirement outcome options (13%)

“Workplace capital accumulation plans are an important solution to provide retirement security for more employees,” Gilbert added. But to realize a workplace plan’s full potential, employers need to be bold in adopting innovation, engaging their employees and expanding support for total financial wellbeing.

Other key highlights

The survey gauges the adoption of measures employers could implement to achieve their retirement plan objectives. Highlights of the survey findings include:

Role of employers: When it comes to educating employees about financial topics, most employers provide education on “saving for retirement” (62%) and financial planning (42%). This is exactly what employees are looking for from their employer1. However, more than two-thirds (70%) of employers pointed to concerns about employees not engaging with the plan or not using it effectively; employees not accessing available resources (38%) and other employees not joining the plan at all (20%).

Automation and inertia: A CAP with an underlying smart design promotes member engagement and leverages automation and inertia. Almost 70% of responding employers offer a variety of plan types so that employees can choose the best option(s) to meet their savings goals and retirement income needs. More than half have plans with some automatic features, such as automatic enrollment to encourage early participation, and two-thirds of employers equip their employees with modeling tools to help determine their optimal savings and amount needed to retire. Roughly half of employers are making their communications more engaging by providing personalized content or customized messages based on demographics.

Smart investment structures: Uncertainty about how to invest is a huge obstacle to employee engagement. To overcome this barrier, many employers offer default investment options, with a majority (68%) of CAPs now offering target date funds as the default investment option.

Decumulation options: There are opportunities for employers to help employees manage their post-retirement risks and costs. Many respondents were interested in using an external pooled arrangement for post-retirement decumulation. More than half (57%) appreciate the scale and lower costs for employees while 40% would consider this approach to release their financial commitment and facilitate delegation of administrative responsibility.

Managing risks: Effective governance is a key ingredient for the success of any workplace retirement savings plan, including CAPs. Many employers have already taken steps to manage or mitigate their fiduciary liability by delegating responsibility for various functions or even decision making to third party service providers with specialized expertise. The survey findings show that 57% of sponsors are delegating at least some of the responsibility for investment selection and management, while another 31% are engaging the services of an independent consultant to support their decision making.

1 Read Aon’s Living the dream report to know more about the role of employers in Canada.


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