Working folks would prefer better pensions to a raise – but do employers get that?

An interesting schism has been discovered between employers and employees when it comes to pensions.

A study prepared for the Healthcare of Ontario Pension Plan (HOOPP) by the Angus Reid Group found that employers who think pay raises are a better way to attract and retain talent than offering or improving pension benefits may “be at odds with what Canadian workers want.”

The research is summarized in a recent HOOPP media release.

There was some good news, the release notes – some employers seem to be getting the message about workplace retirement programs. “A growing number of employers are turning to benefits, including pensions, to address a challenging labour market and improve employee retention and productivity,” the release points out.

So, what was the key finding of this research?

“The annual survey of 754 Canadian business owners and senior leaders with 20+ employees found employers who don’t offer retirement benefits may not be fully aware of their employees’ views on pensions, as 77 per cent believe their employees would choose a higher salary over a pension. In fact, previous HOOPP research has found that almost two-thirds (61 per cent) of Canadian workers would prefer a pension over a pay hike,” the release reports.

Let’s run that one by a second time. More than three quarters of employers think their teams want higher salaries versus pensions. But 61 per cent of employees prefer pensions over wage hikes!

“Workers may want pensions even more than their employers know,” said Ivana Zanardo, Head of Plan Services, HOOPP, states in the release. “Employers want to remain competitive in a difficult labour market and it’s easier to stay ahead if you understand, and can offer, what the workers you’re trying to attract and retain are looking for in terms of compensation.”

Attracting new employees and keeping them after they are hired is tougher these days, with unemployment running relatively low, the study notes.

“A significant majority of employers expressed concern about the negative impact of greater competition for hiring (77 per cent), a labour shortage (75 per cent) and employee burnout (73 per cent) on their organizations,” the release explains.

But those who offer retirement programs to their teams report different findings, the release continues:

• “58 per cent of employers who added or improved retirement benefits in the last year report higher than usual productivity, compared to just 34 per cent of employers who don’t offer them.”
• “Employers offering retirement benefits are two times more likely to say their employees can retire at or by age 65 (80 per cent) than those who don’t offer them (42 per cent).”
• “Employers who offer retirement benefits consistently rank retention (64 per cent) and recruitment (59 per cent) as the top benefits of doing so.”

Zanardo concludes the release by noting “the hope is that dialogue between businesses, government, the retirement industry and workers will help employers overcome obstacles to offering retirement benefits.”

We know that the Saskatchewan Pension Plan offers individual retirement savers the chance to have their hard-saved dollars professionally invested at a low cost. But a growing number of employers have found that they can set up a workplace pension plan easily using SPP, with the vast majority of administration work (statements, tax slips, and so on) handled by the team in Kindersley. If you’re interested in offering SPP as a benefit to your employees, contact SPP today!

SPP’s Variable Benefit option is now available to all members – it’s borderless! Find out how this flexible retirement income option can work for you.

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Offering pension plans for Americans who don’t have them at work seen as way to deliver retirement security: TIME

Creating more pension plans for U.S. workers who lack them at work is seen as one of four key measures that can be taken to improve retirement security there, reports Time magazine.

Writer Thasunda Brown Duckett begins her article by suggesting that “a financially secure retirement should not be a dream but a right. Yet, 40 per cent of Americans are projected to run short of money in retirement.”

The system in place in past years, she continues, where most people had workplace pensions and Social Security as reliable sources of retirement income, has changed. “For most workers today, those reliable sources no longer exist or aren’t enough,” she contends.

“Even among those already in retirement, many have encountered financial challenges, especially amid recent high inflation, necessitating a return to work and a pause on their retirement dreams. Still others reach retirement age only to realize they have not saved enough to make ends meet,” she writes.

Further, she notes, “Our current retirement system focuses almost entirely on helping workers save for retirement; it does little to help retirees turn their savings into the income they need, or make sure that income will last as long as they live.”

So what can be done to help fix this situation, and to deliver better retirement security? Duckett offers up four solutions.

The first step is to increase worker access to pension plans.

“Almost half of private-sector workers—more than 55 million—do not have the option of an employer-sponsored retirement plan. That figure is even more alarming for small-business workers:  78 per cent of those who work for companies with less than 10 employees—roughly 20 million Americans—don’t have a workplace retirement plan option. The federal government and more states should create individual retirement accounts (IRA) for workers without employer plans available to them. To date, 19 states have enacted such IRA-for-all plans for private-sector workers, which would require employers that don’t offer retirement plans to allow their workers to be automatically enrolled in plans facilitated by their state.”

Step two, she continues, is automatically enrolling workers in pension plans.

“More employers should adopt auto-enrolment policies for their retirement savings plan to jump-start their employees’ retirement savings and make sure workers are participating in this essential benefit. They should also include measures that enable workers to grow their savings as they advance in their careers and allow them to seamlessly take those savings with them if they change jobs,” she writes.

The third step, Duckett continues, is to boost financial literacy when it comes to retirement savings.

“Every worker should also be provided with clear, simple information to compare savings and income options and make informed choices in order to reach their retirement goals. Employers should implement workplace financial education programs so that employees continue to learn and take action. When we know better, we do better,” she writes.

The final step is helping people with the tricky “decumulation” phase, where retirement savings is turned to retirement income. The goal is to draw down the savings without running out of money while you are still alive.

“We need to adjust our focus from simply helping people save to also making sure those savings last. Every worker should have access to low-cost investment options that provide ample retirement income,” she concludes.

This is a great article. Here in Canada, the Saskatchewan Pension Plan is an example of a pension plan that’s available for those who don’t have a pension at work. Other organizations, such as the College of Applied Arts & Technology Pension Plan, OPTrust, and Common Wealth, are now offering pension coverage to previously uncovered workers.

The idea of auto-enrolment – where you are automatically signed up for the company plan, with the right to opt out – seems preferable to waiting for people to opt in. This idea has been tried out in the U.K. and has boosted pension coverage, so maybe it needs to be seriously considered here.

Financial literacy, particularly around retirement savings, is very important. It is very hard, while working, to visualize how the money might work when you are retired. More information for pre-retirees can only help.

As for decumulation, again, our retirement system seems better at the accumulation phase than at the drawdown stage. People aren’t given guidelines on how to make their money last, and are left to their own devices on how to get there.

So, if you aren’t covered by a workplace plan, consider SPP, an open, voluntary defined contribution plan that currently delivers retirement security to more than 30,000 Canadians. Any Canadian with available registered retirement savings plan room can sign up.

Worried about running out of money in retirement? SPP allows you – without taking money out of the plan – to convert some or all of your savings into a lifetime monthly annuity payment. You will get a payment on the first of every month for the rest of your life.

Great news! SPP’s flexible Variable Benefit option is no longer limited to those members living within the borders of Saskatchewan. Now all retiring SPP members across the country can take advantage of this provision, which puts you in control of how much income you want to withdraw, and when you want to withdraw it. You can also transfer in additional savings from other unlocked registered sources. For full details see SaskPension.com.

Check out SPP today!

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