Great West Life: Canadian employers are finding more ways to help their employees save towards achieving retirement income adequacy

WINNIPEG, March 21, 2012 – Canadian employers are listening to their employees’ concerns about achieving retirement income adequacy and are finding new and better ways to encourage retirement savings by streamlining investment options, building better default funds and embracing more sophisticated tools such as target date and target risk funds, according to a new report sponsored exclusively by The Great-West Life Assurance Company.

The 2011 Capital Accumulation Plan (CAP) Benchmark Report, entitled CAP Today is based on a survey of 353 organizations conducted by Benefits Canada and the Canadian Institutional Investment Network. Taken together with the results of the recent 2011 Benefits Canada Survey of CAP Members, sponsored in part by Great-West Life, a more educated view of the evolving CAP industry emerges.

“By comparing both the employer and employee survey results, we can share insights into what plan members are saying and how plan sponsors are responding, providing a clearer picture of what additional steps can help Canadians reach their retirement and savings goals,” says Jeff Aarssen, Vice-President of Group Retirement Services Sales and Marketing at Great-West Life. “We find plan sponsors value this unique insight as it helps them to evaluate their plan design and make future decisions that can help their members save for retirement.”

Generally, the results of the plan member survey confirm that plan member engagement is an ongoing challenge, whether due to competing financial priorities, a lack of confidence or knowledge in making necessary investment decisions, or even – for some – an overly optimistic view of their anticipated retirement scenarios.

The benchmark survey found employers continue to make positive changes, making it easier for plan members to achieve retirement income adequacy by:

  • Streamlining investment options, providing plan members with “one-stop” products so they don’t have to make asset allocation decisions. This has resulted in a decrease in the number of investments held by plan members: for defined contribution (DC) pension plans, the average number of investments held declined to 3.0 in 2011 from 5.1 in 2008, and for group RRSPs, to 3.9 in 2011 from 8.5 for the same period.
  • Providing advice, particularly on the group RRSP side, where 51 per cent of employers provided plan member advice on how best to plan and invest in 2011, compared to 38 per cent for both types of plans in 2010. Employers offering DC plans also provided more advice, with information exchanges increasing to 45 per cent in the same period.
  • Building better default funds, as more employers incorporate target date and target risk funds as default options – a more sophisticated approach than straight balanced funds – up to 22 per cent in 2011 from just nine per cent in 2010 for DC plans; rising to 23 per cent from 13 per cent over the same period for group RRSPs.

“Great-West Life is pleased to share these findings from the CAP Benchmark Report, now in its seventh year,” says Aarssen. “We believe the CAP Benchmark Report is an essential tool for monitoring the health of Canadian CAP plans, including DC pension plans and group RRSPs, which play a growing role in Canada’s retirement landscape.”

Read the full report here.

About Great-West Life

Great-West Life administers over 17,000 group retirement plans and over 1.2 million member accounts, representing nearly 30 per cent of capital accumulation plans (CAPs) in Canada. In the United States, Great-West is the fourth-largest group retirement plan recordkeeper based on total participants and Putnam Investments adds to the organization’s North American presence in this market.