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of room for innovation in increasing
employee engagement and making
CAPs more effective. Aon's survey
confirms that there is room for fresh
ideas when it comes to decumulation —
the process of drawing down assets in
retirement — and for employers to help
employees manage their post-retirement
risks and costs.
Many respondents were interested in
using an external pooled arrangement
for CAP decumulation, with more than
half saying they appreciate the scale
and lower costs for employees, and 40
per cent see the value of this approach
in releasing their own financial
commitment and facilitating delegation
of administrative responsibility.
Finally, managing risk through
effective governance is a key ingredient
for the success of any workplace
retirement savings program, including
CAPs. Many employers told us they
have already taken steps to manage
or mitigate their fiduciary liability by
delegating responsibility for various
functions — and in some cases partially
or completely outsourcing decision-
their plans have automatic features,
such as automatic enrolment to
encourage early participation, and two-
thirds of employers equip employees
with modeling tools to help determine
their optimal savings and a targeted
amount needed to retire.
Roughly half of employers are making
their communications more engaging
by providing personalized content
or customized messages based on
demographics.
Uncertainty about how to invest is a
huge obstacle to employee engagement
with CAPs. Smar ter investment
structures can help address that
challenge, and many employers are at
least offering default investment options
to simplify employees' decision-making
journeys. Most CAP sponsors (68 per
cent) now offer target date funds as the
default investment option, according to
the Aon survey.
Plenty of room
for innovation
In our view, these are significant and
welcome trends. But there is still plenty
making — to third-party service
providers with specialized expertise.
The survey findings show that 57 per
cent of sponsors are delegating at least
some of the responsibility for investment
selection and management, while
another 31 per cent are engaging the
services of an independent consultant to
support their decision-making.
Capital accumulation plans are an
increasingly important part of the
Canadian retirement landscape. As
the Aon 2020 CAP Employer Survey
shows, Canadian employers recognize
the value of CAPs to their business
and their workforce, as well as the
need to take an active role in helping
employees understand and participate
There is room for fresh ideas when
it comes to decumulation and for
employers to help employees manage
their post-retirement risks and costs.
in them.
But for these plans to fully live up to
their promise of supporting workers'
post-retirement financial security, more
needs to be done. No doubt, this is a
significant challenge, but it can also
be an opportunity for employers that
respond dynamically and proactively,
with a commitment to ongoing
innovation.
CHRR
Rosalind Gilbert is an
associate partner in
retirement solutions at Aon
in Vancouver. She can be
reached at rosalind.
gilbert@aon.com.
