Canadian HR Reporter

F E A T U R E S 24 www.hrreporter.com F O C U S O N : F I N A N C I A L W E L L N E S S 5 DRIVERS OF VALUE IN POOLED PENSIONS The COVID-19 pandemic has only amplified the fact that many Canadians are struggling with their financial savings, writes Sarah Dobson. Would a 'Canada model' pension plan lead to gains in productivity, attraction and retention for employers? FOR years, we've heard of the finan- cial challenges and stresses faced by many Canadians who lack appropriate savings, whether for day-to-day living or for their retirement years. Nearly one-half (43 per cent) live paycheque to paycheque, according to a 2019 survey by the Canadian Payroll Association, while a similar number (44 per cent) have less than $5,000 in emergency savings, according to a 2015 survey released by BMO. Further, nearly two in five Canadians have no retirement savings, according to a 2019 report by BDO Canada. Canadians think about their future and recognize that there's a need for more sustainable, adequate and accessible retirement income — regardless of the economic climate, says Ivana Zanardo, vice president of client services at the Healthcare of Ontario Pension Plan (HOOPP) in Toronto. COVID has provided an interesting lesson on the value of savings in illustrating the importance of having savings built up for unexpected events, along with the differences in certain segments of society, says Alex Mazer, founding partner of Common Wealth in Toronto. "People that are of higher income have found the opportunity to save more; people closer to the lower end, in some cases, have been even further stretched and are more likely to be unemployed or take on more debt. So, I think it really underlines the importance of helping [people], especially those that are of modest income, find ways to build savings to give them a cushion and some long-term financial security." Workplace plans offer hope The most effective ways for people to save is through workplace-based retire- ment plans as people with access to such plans are 15 times more likely to save, says Mazer. But in looking at savings rates and retirement readiness, it's an area where people continue to struggle. "This is just a really hard thing for people to do entirely on their own," he says. "You often have people that don't join the plan because of inertia; you sometimes have the problem of a very complicated set of investment choices that people have a hard time navigating; and you have problems of The dark cloud of COVID Not surprisingly, the COVID-19 virus has only worsened that dilemma as thousands of people have lost their jobs or seen major drops in working hours. Almost one-half (44 per cent) of Canadians say that the pandemic has impacted their levels of financial stress, according to a May 2020 survey by FP Canada. And almost one-third (29 per cent) say COVID-19 has had a moderate or major impact on their ability to meet financial needs such as rent, utilities and groceries, according to a Statistics Canada report in April. The pandemic has made more WORKPLACE PENSIONS POPULAR WITH CANADIANS 80% Percentage of Canadians who would rather have a better pension plan, or any pension plan, instead of a higher salary 80% Percentage of workers who want employers to contribute to a retirement plan instead of providing that money as salary 44% Percentage of Canadians who have access to a workplace pension 75% Percentage of Canadians who worry about saving enough for retirement people saving inadequate amounts for retirement." There's a lot of work to be done to make capital accumulation plans simpler, with better design, fewer investment choices and more automatic features such as auto enrolment and auto-escalation, says Mazer, while helping people better understand how much their savings will actually earn them in retirement income. " There's often a big disconnect between these plans… and actually helping people understand how much income you actually need," he says. Making the business case Why should this matter to employers? For one, they can avoid $15.8 billion in annual costs by addressing financial stress, according to a CPA report in 2019, as one-quarter of Canadians spend at least 30 minutes each day distracted by personal finance matters at work. In addition, 74 per cent say that they would rather have a slightly lower salary for any pension plan (or a better one) as opposed to a higher salary and no pension plan (or a lower-quality one), according to a 2020 survey released by HOOPP. Source: Healthcare of Ontario Pension Plan

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