Canadian HR Reporter

CANADIAN HR REPORTER September 4, 2017 6 NEWS Retirement savings deficit worries HR It's time to get employees engaged, excited about planning, say experts BY SARAH DOBSON WE'VE HEARD the concerns before, but the numbers are still shocking — Canada's retirement savings deficit hit $2.7 trillion in 2015 and is expected to reach $13.4 trillion by 2050, according to a Mercer report released in July. It's one of the greatest crises of our time, according to Louis Gagnon, senior partner and CEO of Mercer Canada in Toronto. "We always think of Canada as a country with a strong defined ben- efit environment and a good social system but, even in our environ- ment, we're not seeing the savings behaviours we need to see." And while some might question why employers should care about employees once they've left the workplace, there are major im- pacts, he said. "If your employees are finan- cially stressed, there are studies that show their health will be im- pacted… their productivity will be impacted." ere's generally a sense on the part of sponsors that it's just the right thing to do as an employer, said Jamie Godfree, assistant vice- president of customer experience, group customers, at Great-West Life in London, Ont. "at's probably the overarch- ing theme — they care about their employees, it's an altruistic sense they can help them this way. But it's also enlightened self-interest — financial stress has real costs… employees obviously who feel their employer cares are just that much more likely to be productive and engaged." Offering support and guid- ance around retirement savings can also help on the recruitment side, he said, in addition to helping people transition into retirement. How an employer appears to employees really depends on how it manages population issues overall, said Paula Allen, vice- president of research and integra- tive solutions at Morneau Shepell in Toronto. "ere's a group of people who are going to be transitioning into retirement, pre-retirees, and even if you're a young person, how oth- ers are treated actually makes a dif- ference in your perception of the employer, so it's something that contributes to corporate identity." Retirees also go out into the community, which can impact a company's brand and reputation, she said, and some retirees may return to the workplace. "(Employers) might need to bring them back on a contract basis or ask for their skills and services, so maintaining that re- lationship is actually quite good. So how well you support people in that transition can have an impact on all three of those levels." Why are people so ill-prepared? ere are numerous factors con- tributing to the retirement savings deficit in Canada, according to Mercer — including longer lives combined with lower birth rates, a lack of easy access to pensions and savings products, a lack of trust in financial markets and products, a low-growth environment, gender imbalance in long-term savings, the trend towards self-employ- ment, and fewer private sector workers covered by defined pen- sion plans. e average household saving rate was just 4.3 per cent, accord- ing to a 2017 report from Statistics Canada, said Gagnon. "at's clearly short," he said. "We're not saving as much as we need to do, we don't know how much to save, and… we don't know what we need to prepare for. Who can predict when we will die, what needs we'll have in terms of expenses?" People also just don't pay atten- tion to, or they postpone, retire- ment planning, said Allen. ey have busy lives and avoid the edu- cation until it's too late. And of course previous generations had secure pensions, which are now being closed or replaced, she said. "ere's a lot more onus on the employee to take responsibility and know what they will and won't get, but also make some decisions for themselves. So it's a bit newer of a risk than it was in the past." However, in a lot of the ways, many Canadians are prepared, said Godfrey, citing a 2014 study by McKinsey that found about 83 per cent are on track to maintain their standard of living in retire- ment. But that leaves a sizeable number who are not prepared, he said. "A lack of plan or personal sav- ings participation is obviously the key overall theme, but the underlying reasons for that can be varied. We believe sometimes certainly there's competing priori- ties, people have things they need to do, they need housing, they may potentially get married, they need all sorts of things in their lives and retirement is one among many goals that folks have." Often, people are unaware of important information, such as group plan details, eligibility lev- els or how a small change in their savings behaviour can create sig- nificant outcomes down the road, said Godfree. ere is also the "complexity and friction" of savings and re- tirement planning in general, with people trying to navigate their plan design forms, fund choices or contacts, he said. "Even if you get beyond all that, there's really critical things you need to think about, like how do you integrate all these disparate LACK > pg. 7 "If employees are financially stressed, studies show their health and their productivity will be impacted."

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