Retirement Readiness – Where Employees Want to Go for Help
Summer 2010
If you are an employer in Canada today, your employees are looking to you for help in getting them ready for retirement.
The financial uncertainty of the past few years has unleashed a desire among Canadian workers for longer-term relationships with their employers. Job-hopping and charting your own course are out and career development and job security are in. At least these are the findings from Towers Watson Global Workforce Study 2010.* The study found that 43% of Canadians would like to work for just one employer over their career span and 34% would prefer no more than two or three different employers. Not surprisingly, retirement benefits figure prominently in this picture. According to Towers Watson, “… competitive retirement benefits are now one of the top five attraction drivers for prospective recruits. In fact, the lure of a better pension elsewhere is cited by employees as the second most important factor influencing their decision to leave an organization, after higher pay.”
Pension education key
With pensions nearing the top of employee’s wish lists, employers need to make sure employees know exactly what the company is providing. Furthermore, the study reveals that Canadian employees are looking for more support from their employers in preparing for retirement. A full 65% want regular communications about rewards and benefits and 62% seek a better understanding of how programs are designed and administered. Employers who partner with their employees in expanding their financial knowledge and understanding of their pension benefits will have an advantage in attracting and retaining employees.
What can employers be doing?
With employees motivated to take charge of their financial future and looking to their employers for help, what can employers be doing? According to Ismo Heikkila, National Director, Financial Education & Employer Services, employers have a timely opportunity. “One of the barriers to financial education in the workplace has been getting employees interested, especially among those who have no pressing need for the information. The Towers Watson study shows that the majority of Canadian employees are now ready to learn about preparing for their retirement.”
At a minimum, employers should be making sure employees understand and appreciate the value of their pension plan. Regular communications outlining and reinforcing the benefits of the company pension plan will help. But to be more effective, Ismo recommends employers assist employees with integrating this information in their personal financial planning.
“In my experience, one of the most effective ways to help employees make the most of their pension plan is through an educational group seminar on their retirement benefits followed up with one-on-one financial planning. If we can include their spouses, and partners, in this exercise – all the better,” states Ismo. He cautions, however, that this should not be a one-off event, but integrated with an ongoing strategy to advance financial literacy in the workplace and enhance retirement readiness among employees. In addition, Ismo recommends that if companies are going to make an investment in this type of program they should be measuring its effectiveness on an ongoing basis.
Education for good governance
An integrated employee financial education strategy is best when it is tailored to the needs of each workplace and the composition of the employee group. To be effective, it needs to include regular communications, ongoing financial education opportunities, individual financial counselling and the opportunity for ongoing reinforcement of financial concepts and planning opportunities. And as Ismo points out, “When employers provide this type of program, they are building ample evidence that their employees have been given the information and tools necessary to make sound financial decisions about the pension plan. This is becoming increasingly important, especially when the pension plan is a Defined Contribution plan where the employee is making investment decisions.” Under the Guidelines for Capital Accumulation Plans (which apply to Defined Contribution plans), employers have a fiduciary responsibility to provide adequate education around a plan participant’s investment options.
Maximizing pension plan value
But there’s another compelling reason for employers to step up and meet their employees’ call for greater understanding of their pension plan and better preparedness for retirement. Employees appear to be finally recognizing that pensions are an important part of their overall compensation. Representing as much as 10% of payroll costs, employers are making a significant investment in these plans and now have the opportunity to get more of a bang for their buck. “For whatever reason – changing demographics, the financial crisis or government interest in enhancing the Canada Pension Plan, pension benefits are top of mind these days and there’s never been a better time for employers to engage their employees in an appreciation of these benefits,” comments Ismo.
* The Towers Watson Global Workforce Study 2010 surveys more than 20,000 employees in 22 countries to assess employee views of the changing nature of employment.
This article was prepared for T.E. Wealth Strategies by T.E. Wealth Financial Education & Employer Services.
Spotlight on financial literacy
Earlier this year the Task Force on Financial Literacy concluded its consultation with Canadians and presented its findings to the federal Minister of Finance. The Task Force recommended urgent action on a national strategy to strengthen Canadians’ financial literacy. The final report can be found at www.financialliteracyincanada.com.
About T.E. Wealth Financial Education & Employer Services
We offer education solutions that benefit employees and employers alike. Financial education helps employees build greater financial security, while also assisting employers with meeting their obligations to employees. Our services include financial planning, web-based learning tools, and job site workshops and seminars.