A recent online event, COVID-19 and Canada’s Workforce: A Crisis of Financial Security, suggests the pandemic has thrown a wrench into the retirement plans of Canadians.

The event, hosted by the Healthcare of Ontario Pension Plan (HOOPP) and Common Wealth, took a look at how the pandemic is impacting our finances.

Common Wealth’s founding partner, Alex Mazer, noted that even before COVID-19, 43 per cent of Canadians were living cheque to cheque. Forty-four per cent had less than $5,000 in emergency savings, and 21 per cent had less than $1,000, Mazer says.

On the retirement savings front, Mazer says, things are even bleaker. “The median retirement savings of near-retirement households is only $3,000,” he notes. Four of 10 Canadians have no retirement savings at all, and 10 million lack any kind of workplace pension program.

With the pandemic now impacting work and income, many Canadians “don’t feel they have the capacity to save… and that is a real problem for our society,” he warns.

Citing recent research from FP Canada, Mazer noted that worries about money impact our performance at work. That research found 44 per cent of Canadians are “stressed” about their finances, and research from the Canadian Payroll Association found we are spending “30 minutes a day worrying” about money.

“If you are worried about your finances, it’s hard to bring your full self to work,” Mazer notes.

He noted that the lack of workplace pensions, long considered a pillar of Canada’s retirement system along with government pension benefits and individual savings, is having a negative impact.

“The greatest weakness in the Canada’s retirement system is the lack of workplace pensions,” he says. Coverage levels today are at about half of what they were in the 1970s.

Mazer is a proponent of giving more Canadians access to pension programs; he says the most efficient types are “large scale pooled plans, or large Canada model (defined benefit) plans.” Both types feature retirement saving at low fees, professional investing, and risk pooling, he explains.

Elizabeth Mulholland, CEO of Prosper Canada, says 47 per cent of people working in the non-profit sector work freelance or part time, and face lower pay. “Insecurity is a way of life for our sector,” she says.

She notes that 28 per cent of Canadians have raided their registered retirement savings plans or Tax Free Savings Accounts due to the pandemic. “They have depleted their already inadequate retirement savings, and are now further behind due to COVID,” Mulholland says, adding that the pandemic has been “a wakeup call for the financial vulnerability of Canadians.”

Pension plans should consider automatic enrolment – an “opt out” feature rather than “opt in” – and need to be flexible for part-time workers. She says support for workers with general financial literacy would help them make the most of their retirement benefits.

Bell Canada Vice-President, Pension & Benefits and Assistant Treasurer Eleanor Marshall says her company’s pension plan is appreciated by employees. “Eighty per cent strongly value the pension plan,” she explains.

When COVID hit, she says, “there were a couple of responses from our employees.” Top priority, she says, was health and safety and social distancing. Next was job security. But the third concern was their pension plan and its investments.

Marshall says there needs to be more emphasis on individuals building emergency savings for situations – such as during the pandemic – when they need to “bridge the gap” for a period of job loss.

Pension plans, she adds, are important “for attracting and retention.” While younger employees don’t worry much or think about their pensions, they “will eventually appreciate having a pension plan” once they get older.

In general, Marshall said, there’s a link between financial wellness and mental wellness, and delivering a retirement system for employees is a positive measure on both fronts.

Renee Legare, Executive Vice-President and Chief Human Resources Officer at The Ottawa Hospital, says that during the pandemic, the worry for hospital workers wasn’t so much job security but definitely “their health and wellness.” She says healthcare workers feel lucky to have a good workplace pension.

She says portability – the ability to continue with the pension when you move from one job to another – is a solid feature of the plan. “It’s a major benefit for healthcare workers; they can move from one employer to another without losing their (pension) investment,” she explains.

The event was chaired by Ivana Zanardo, Vice President of Client Services at HOOPP. Save with SPP would like to thank James Guezebroek of HOOPP for directing us to the presentation.

If you’re among the many millions of Canadians who don’t have a workplace pension plan, the Saskatchewan Pension Plan may be the savings program for you. It features low-cost, professional investing and pooling, and since it is a member-directed savings program you can continue to belong to SPP even if you change jobs. SPP can also be offered as a workplace pension. Why not check out it today!

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FP Canada recently released their annual 2020 Financial Stress Index. Save with SPP reached out to FP Canada’s consumer advocate Kelley Keehn, a noted financial author and educator, by email to find out about the survey’s results.

Q. Research shows money is number one worry, and that people worry about saving for retirement and debt. Is there a relationship between the two – like, if you are paying down debt you can’t save for retirement, and vice-versa? And maybe also did you find out what people think the consequences are of not having enough for retirement (working forever, a less exciting retirement, etc.)

Yes, money still is the #1 worry. FP Canada’s Financial Stress Index found yet again that people worry more about money than health, relationships or work.

The survey didn’t go into your exact questions, but I can anecdotally state that without a clear financial plan, it’s nearly impossible to figure out complex scenarios like paying down your debt vs. saving for an RRSP (or using the tax deduction to pay down on your debt), etc.  And you’re correct, that the consequences for not having saved enough for retirement means either living with less or working longer.  

Consistent with previous years, in 2020 money is the number one cause of stress for Canadians by a large margin. Money (38 per cent) outranks personal health (25 per cent), work (21 per cent) and relationships (16 per cent) as the top source of stress in Canadians’ lives. This is particularly significant given multitude of non-financial stresses related to the COVID-19 global pandemic.

The 2020 Financial Stress Index also reveals that as Canadians age, they feel less stressed about money – with 44 per cent of 18-to-34-year-olds listing money as their leading concern compared to one-in-four (25 per cent) of those aged 65+.

Q. Putting money aside for an emergency fund is a great idea – we would like to hear a bit more about this, if possible. Are people basically realizing they need to create one for the first time? Or are they moving from having a sort of contingency credit line to having actual savings? We guess it’s because of the pandemic that this is being considered more?

Before the crisis, many stats revealed that 50 per cent of Canadians were just $200 away from insolvency.  I don’t know the current numbers, but one could suggest that it’s much worse now.  And, many people don’t realize that the time to get a line of credit is when you don’t need it (i.e. not after you’ve lost your job). 

A recent Canadian Payroll Association survey revealed that it’s not the amount of income that you earn that reduces stress, it’s the financial buffer that you have.  The problem for younger Canadians is that they haven’t been in their career long enough to save (i.e. student loan debt, getting into a home). 

Q. The financial regrets part is fabulous. We wondered whether “having a better job” might refer to having a job with better benefits (or maybe just better money). We retirees sure wish we had had the brains to try and find a job with a good workplace pension earlier (this writer got such a job in his mid-30s). That sort of thing.

The survey didn’t dig deeper unfortunately.  But people really should think of their career as their fourth asset class. If you’re in a high-risk career like an entrepreneur, your investments should perhaps be less risky.  On the flip side, a professor with tenure likely takes less risk with their investments, but possibly should. It’s essential that your career is part of your financial plan (do you have a pension or not, benefits, etc.)

Q. The number one takeaway from the research – what results surprised you the most, and why?

That Canadians are still not reaching out for help and thus suffering sleepless nights.  We wouldn’t self-diagnose when it comes to our health, nor would we go on a new road trip without the help of Google maps on our phone.  Why do so many Canadians still not reach out to a financial pro like a Certified Financial Planner (CFP)?

We thank Kelley Keehn for taking the time to answer our questions, and her colleague Emma Ninham for setting things up.

Is the Saskatchewan Pension Plan part of your own financial plan? The SPP could serve as your personal defined contribution pension plan, a workplace pension or can supplement any workplace or government pension plans to which you belong. It’s a plan with a long history of successful investing returns at a very low management cost, and has averaged returns of more than eight per cent since inception. Consider checking out SPP as a way to help take the stress out of retirement saving.

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A look at the best of the Internet, from an SPP point of view

Boomer pension crisis is “here, and it’s real,” says survey
Saving for retirement is a lot like eating your beets. You know they are good for you, all the literature talks up their benefits, and many say you’ll be sorry later in life if you don’t eat them now. But they are not everyone’s cup of tea, and many of us choose to ignore and avoid them.

Unfortunately, retirement is a bigger problem than not eating a beet.

A recent Canadian Payroll Association survey found that 69 per cent of working people surveyed in British Columbia save less than 10 per cent of their earnings, “well below recommended savings levels.” The CPA survey is covered by this ABC Channel 7 news article.

The article goes on to say that 40 per cent of Canadians surveyed are “overwhelmed by debt,” an increase from 35 per cent last year. Debt, the article says, is clearly a factor restricting the average person’s ability to save for retirement.

Research from Royal Bank of Canada that found that 60 per cent of Canadians were concerned “about outliving their savings,” and only 45 per cent of them are confident they’ll have the same standard of living when they retire. This research was covered in an article in Benefits Canada.

So, eat your beets – contribute to a Saskatchewan Pension Plan account and if you are already doing that, consider increasing your contributions each year. You’ll be glad you did down the line.

Many savers using the wrong long-term approach
Let’s face it – whether it’s hanging a new door on the shed, patching a hole in the drywall or growing our own vegetables, many of us prefer to do things ourselves rather than depending on others.

However, when it comes to retirement savings, there are “DIY” mistakes that people tend to make, warns The Motley Fool.

First, the article notes, people tend to avoid riskier investments, like stocks. But over the long term, bonds and fixed income assets “are unlikely to provide a sizeable nest egg in older age,” the article says. The stock market is a good long-term investment, the article notes.

You need bigger long-term returns to outpace inflation, The Motley Fool advises.

Finally, it is important to avoid “short-term” investment thinking; retirement investing is for the long term, the article concludes.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

 

A survey released last month in support of Financial Literacy Month (#FLM2017) by the Canadian Payroll Association reveals that Canadian workers would be very pleased if their employers decided to offer or enhance financial education programs this holiday season.

In fact employees have a strong appetite for employer-provided financial education programs, with an astonishing 82% indicating they would be interested if employers offered financial information at work. But, busy workers have timing expectation — 54% would prefer that employers offered lunch and learns but only 8% would be interested if information was offered after work hours.

Currently, 38% of Canadians rely on financial advisors and banks for financial and retirement planning advice. A further 27% of people surveyed lean on friends, family and the internet for this important information.

Employees’ appetite for financial education at work is not surprising, considering results of the CPA’s National Payroll Week Employee Survey revealing that nearly half (47%) of working Canadians are living pay cheque to pay cheque. Survey results also illustrate that many Canadians are challenged by debt, are worried about their local economy and are not saving enough for retirement.

In addition, the more recent November 2017 survey results show that working Canadians are experiencing a high level of financial stress, and that too few are keeping a close eye on their finances. Half of employees feel that financial stress is impacting their work performance. What’s more, just 52% say they budget frequently; with an astounding 31% of this group saying that they keep their budget in their head. Of those who do budget, 52% say they usually or always stick to their budget.

“We know that many working Canadians are struggling to make ends meet financially and they need help,” says Janice MacLellan, Vice President of Operations at the CPA. “While many Canadians are well-intentioned, our survey results show that they are not making enough progress towards financial health, and ultimately, this is impacting their work and their lives.”

The CPA continues to champion its key message “Pay Yourself First” to prepare for a healthy financial future. Currently 61% of Canadian employers offer a “Pay Yourself First” option through payroll which enables employees to set up automatic payroll deductions to direct a portion of their net pay into a separate retirement or savings account. Of those employers that do not currently offer this option, an additional one-third are considering making it available.

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Members of the Saskatchewan Pension Plan can pay themselves first by having contributions withdrawn directly from their bank account using the PAC system on the 1st or 15th of the month. Other methods of contribution to SPP include: using a contribution form to contribute at your financial institution; using your VISA or MasterCard; through online banking; or by mail to the Plan office in Kindersley.

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Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

By Sheryl Smolkin

For many working Canadians and for those in Saskatchewan, the road to a comfortable retirement is becoming longer and more difficult.  A large portion of the working population is living pay cheque to pay cheque, unable to save, and worried about their local economy, according to the Canadian Payroll Association’s recently released eighth annual Research Survey of Employed Canadians

The survey reveals that only 36% of working Canadians and 37% of those in Saskatchewan expect the economy in their city or town to improve in the coming year.

Many working Canadians are cash-strapped and barely making ends meet. Nationally, and in Saskatchewan, almost half (48%) report it would be difficult to meet their financial obligations if their pay cheque was delayed by even a single week.

“A significant percentage of working Canadians carry debt, have a gloomy view of their local economy and are fearful of rising interest rates, inflation, and costs of living,” says Patrick Culhane, the Canadian Payroll Association’s President and CEO. “In this time of uncertainty, people need to take control of their finances by saving more. ‘Paying yourself first’ (by automatically directing at least 10% of net pay into a separate savings account or retirement plan) enables employees to exercise some control over their financial future.”

Incomes flat, saving capacity drained by spending and debt

“Survey data suggests that household income growth has stalled, as respondents reporting household income above $100K has hardly increased in five years,” says Alec Milne, Principal at research provider Framework Partners. “In fact, real incomes have actually declined when inflation is taken into account.”

While pay has remained largely unchanged, employees’ spending and debt levels have affected their ability to save. Nationally, and in Saskatchewan, 40% of employees say they spend all of or more than their net pay

Despite employees’ challenging financial situations, only 28% of respondents across the country cite higher wages as a top priority.  Instead, an overwhelming 48% nationally, are most interested in better work-life balance and a healthy work environment. In Saskatchewan only 25% prioritize higher wages, while 45% are most interested in better work-life balance and a healthy work environment.

“Clearly, many Canadians are concerned about their financial situation,” says Lucy Zambon, the Canadian Payroll Association’s Board Chair.  “But better work-life balance does not have to mean reduced financial security if you spend within your means.”

Over one-third (39%) of working Canadians feel overwhelmed by their level of debt, an increase from the three-year average of 36%. Debt levels have risen over the past year for 31% of respondents. In Saskatchewan, 35% feel overwhelmed by debt and 35% say their debt level has increased this year. Unfortunately, 11% nationally and 9% in Saskatchewan (among the lowest nationwide) do not think they will ever be debt free.

Similar to prior years, 93% of respondents nationally carry debt (96% in Saskatchewan). Over half of respondents nationally (58%) said that debt and the economy are the biggest impediments to saving for retirement.

Retirement savings fall short, retirement pushed back

Half of Canadians and 59% of Saskatchewan respondents think they will need a retirement nest-egg of at least $1 million.

Unable to save adequately, the vast majority of working Canadians have fallen far behind their retirement goals, with 76% nationally and 74% in Saskatchewan saying they have saved only one-quarter or less of what they feel they will need.

Nearly one-half of employees nationally (45%) now expect they’ll have to work longer than they had originally planned five years ago, primarily because they have not saved enough. Nationally, respondents’ average target retirement has risen to 62, whereas these same respondents’ target retirement age five years ago was 60, before reality set in.

Saskatchewan Pension Plan makes retirement savings easy

The Saskatchewan Pension Plan makes saving for retirement easy by offering all Canadians between the ages of 18 and 71 a flexible series of contribution options that can be modified at any time. Plan members can contribute up to $2,500/year:

• Directly from their bank account or credit card using the PAC system on the 1st or 15th of the month using a semi-monthly, monthly, semiannual, or annual schedule.
• Using VISA® or MasterCard® online at SaskPension.com or by calling toll free, 1-800-667-7153.
• At financial institutions, in branch or online
• By mailing directly to the SPP office in Kindersley

Members can also transfer up to $10,000/year from another RRSP into their SPP account.

By Sheryl Smolkin

A National payroll survey conducted in September 2015 by the Canadian Payroll Association finds three-quarters of working Canadians have saved just 25% or less of their retirement goal, and many expect to work longer. In Saskatchewan, many employees are living pay cheque to pay cheque, most are not saving enough and economic pessimism is high.

The study reveals that the vast majority of employees are nowhere near reaching their retirement savings goals, and more than one-third (35%) expect to work longer than they had originally planned five years ago, with their average target retirement age rising from 58 to 63 over that period.

Nearly one-quarter (21%) say they’ll now need to work an additional four years or more. “I am not saving enough money” was the top reason for delayed retirement.

Far behind retirement goals

Nationally, three-quarters (76%) of working Canadians say they have put aside a quarter or less of what they will need in retirement (up from an average of 74% over the past three years). In Saskatchewan, the number is 71%. And even among those closer to retirement (50 and older), a disturbing 48% are still less than a quarter of the way to their retirement savings goal.

Not only are employed Canadians finding it difficult to save for their retirement, many think they will need a big nest-egg. Half nationally (and 61% in Saskatchewan) think they will need more than $1 million in savings when they exit the workforce.

Most Canadian employees do not expect their financial situation to get better any time soon. Just 33% nationally and 36% in Saskatchewan expect the economy to improve over the next year. That’s down an average of 8% nationally, and down a noteworthy 24% in Saskatchewan, over the past three years.

Living pay cheque to pay cheque

Nationally, a large proportion (48%) report that it would be difficult to meet their financial obligations if their pay cheque was delayed by a single week. In Saskatchewan, 43% say they are living pay cheque to pay cheque.

Illustrating just how strapped some employees are, 24% nationally and 17% in Saskatchewan report that they probably could not come up with $2,000 if an emergency arose within the next month.

While more employees nationally say they are trying to save more (71% now, up from 66% over the previous three years), fewer are actually able to do so, with 62% succeeding in their savings efforts (down from an average of 66% over the past three years). In Saskatchewan, just 56% are succeeding in their savings efforts (the lowest of all the provinces/regions).

And savings rates continue to be meagre. About half (47%) of employed Canadians are putting away just 5% or less of their pay. In Saskatchewan, the number is 53% (the top province for number of employees who are under-saving for retirement). Financial planning experts generally recommend a retirement savings rate of at least 10% of net pay.

Nationally, 36% of employees (and 38% in Saskatchewan) say they feel overwhelmed by their level of debt.

“Canadians are saying they are having a difficult time making ends meet, and they are not putting enough aside to reach their own retirement goals,” notes Canadian Payroll Association President and CEO, Patrick Culhane. Edna Stack, Canadian Payroll Association Board Chair, explains: “Payroll professionals can help by setting up automatic deductions from an employee’s pay cheque to a savings plan or retirement program. This is the most effective way for an employee to save, so they can get on the path to a more secure financial future.”

The Saskatchewan Pension Plan allows Canadians with sufficient RRSP contribution room to save up to $2,500/year and transfer in an additional $10,000/year from another RRSP. Members can contribute online using a Visa or MasterCard. SPP contributions can also be made automatically from a member’s bank account.

By Sheryl Smolkin

More working Canadians and Saskatchewan residents are living pay cheque to pay cheque, As a result they are saving less and falling further behind in meeting their retirement goals according to the sixth annual National Payroll Week Research Survey, conducted by the Canadian Payroll Association (CPA). 

Nationally, more than half of employees (51%) report that it would be difficult to meet their financial obligations if their pay cheque was delayed by a single week. In Saskatchewan, the percentage is even higher – 56% say they are living pay cheque to pay cheque, up from an average of 52% over the previous three years.

Another finding confirms that more than a quarter of those surveyed are living very close to the edge. A total of 26% say they probably could not pull together $2,000 over the next month if an emergency expense arose. In Saskatchewan, 28% would be hard pressed to come up with the funds.

The low savings rate has become even more prevalent this year. Half of all employees nationally (57% in Saskatchewan) are putting away just 5% or less of their pay, up from an average of 47% of employees over the past three years (41% in Saskatchewan). Financial planning experts generally recommend a retirement savings rate of 10% of net pay.

Part of the reason for low savings is that 44% of employees nationally, and 54% of employees in Saskatchewan, are spending all, or more than, their net pay. Among the top reasons for increased spending, the survey identifies: children, home renovations and education.

“Those who are trying to save but finding it hard to succeed should consider directing a portion of net pay into a separate savings account and/or a retirement savings program,” says CPA President and CEO, Patrick Culhane. “They can speak to their organization’s payroll practitioner to arrange this.” 

Retiring older and needing more retirement savings 

Fully 79% of Canadian employees and 75% of Saskatchewan employees expect to delay retirement until age 60 or older – up from 70% and 57% respectively over the past three years. The number one reason cited for retiring later in life is that employees are not able to save enough money.

Employees continue to raise the bar in terms of what they think they will need to retire comfortably:

• Fewer now feel that savings under $500,000 will be sufficient (10% in Saskatchewan, down from an average of 11% over the past three years; 18% nationally, down from an average of 21% over the past three years).
• Many think between $500,000 and $2 million will be required (71% in Saskatchewan, down 1 % from an average of 72% over the past three years; 68% nationally, up from an average of 60% over the past three years).

Yet despite upward adjustments in perceptions of what constitutes an adequate nest-egg, the vast majority of employees are nowhere near reaching their goals – 75% nationally and 74% in Saskatchewan say they have put aside less than a quarter of what they will need in retirement (up from an average of 73% and 70% respectively over the past three years). And even among employees closer to retirement (50 and older), a disturbing 47% of employees nationally (and 43% of employees provincially) are still less than a quarter of the way there, indicating a significant retirement savings gap, according to Culhane.

Debt overwhelms many

Over one-third of employees (39% nationally and 34% in Saskatchewan) say they feel overwhelmed by their level of debt (up from an average of 32% and 29% respectively over the past two years). Nationally, 1 % of respondents this year indicate they do not think they will ever be debt free, and one-third say their debt has increased from last year.

The number one step that employees believe they can take to improve their financial situation is to earn more (27%), while spending less dropped to second place from last year and decreasing debt remained flat. “Earning more is not always feasible,” says Culhane. The CPA suggests that automatic savings through payroll is the best strategy for financial well-being.

The Saskatchewan Pension Plan allows members to contribute up to $2,500/year to their SPP account using a credit card online, through online banking, automatic debit from their bank account or credit card or by sending a cheque. Up to $10,000/year can also be transferred to SPP from a personal RRSP.

Companies can also set up SPP in the workplace and employee contributions can be made by payroll deduction.