Only 29% of Canadians are confident they will retire at their desired age, according to a report from the Colleges of Applied Arts and Technology Pension Plan, which also found a widening pension coverage gap between generations.
The CAAT Pension Plan report, which drew from a Canadian Public Pension Leadership Council report released earlier this year, found that Canadians’ confidence in retiring well has declined due to significant financial and retirement planning stressors.
“With more than 20% of working-age Canadians nearing retirement and a forecasted shortage of talent, this demand for better retirement plans poses an opportunity for employers,” the report stated. “Personal financial stressors have real impacts on productivity in the workplace and turnover.”
According to the report, workers in Generation X (born from 1965 through 1980) face a “dismal retirement outlook,” which can be attributed to the fact that the shift to defined contribution plans from defined benefit plans occurred as they were entering the labor market.
“Further differentiating generational retirement outcomes, low levels of inflation and strong markets in the decades prior to the pandemic created a favorable saving environment for current Baby Boomer retiree,” according to the report. “Many were able to live comfortably without significantly drawing down on their savings, and many were employed when DB pensions were common to workplaces in both private and public sectors.”
The report also found that, in addition to doubts about when they will be able to retire, an average of one out of three survey respondents reported confidence that they will be able to maintain their standard of living when they retire. Additionally, most respondents said a valuable workplace pension plan and retirement income security are important factors when making career moves.
“In today’s highly digital work environment where top performers and young workers with adaptive skills are in demand, employers need modern solutions,” the report stated. “Organizations that offer total rewards with valuable retirement plans to support the short- and long-term financial wellness of employees can gain a competitive edge.”
The report also sought to answer the question of why defined benefit pensions are slow to return to private Canadian companies.
“Experts point to historic changes in accounting rules, pension regulations, and globalization of trade,” the report stated. “Business leaders suggest a need for simplicity in benefits administration that traditional single-employer DB pension plans did not meet.”
The report cited the fact that traditional defined benefit pension plans require specialized knowledge and dedicated management, which drives employer demand for defined contribution plans and outsourced administration.
“Many current employees do not have experience with DB plans due to the prevalence of self-directed plans like [group registered retirement savings plans] and DC pension plans,” the report stated, adding that, “despite employees’ lack of experience with DB plans,” the survey “shows that if they could define their ideal retirement plan and its essential features, they would choose a predictable, secure lifetime retirement income. In other words, a DB plan.”
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Tags: CAAT Pension Plan, Canada, Canadian Public Pension Leadership Council, Retirement