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Benefits and Pensions Monitor
Sparking Employees’ Interest In Retirement Savings Plans
By: Cam MacNeish
Keeping employees focused on their retirement savings is a tall order for any pension plan sponsor. However, for smaller organizations with limited HR resources, the task can be even more difficult, says Cam MacNeish, of Corporate Benefit Analysts, Inc.
In today’s busy corporate world, it is increasingly difficult for a company’s HR department to keep abreast of all issues that affect its employees. Within smaller organizations, with less than 500 employees, this daunting task is even more difficult as proportionately less HR resources are expected to cover all bases. The list is endless and includes increased governance focus, CAP Guidelines, Sarbanes-Oxley Act, WSIB changes, privacy legislation, never-ending cost-containment initiatives….
For employers who sponsor a pension or retirement savings plan that permits members to participate and make investment decisions, there also continues to be a widespread concern about keeping employees focused on their retirement savings. Companies, together with their service providers, typically make every effort to ensure that educational materials, web-based tools, and customized presentations are available to employees.
Embracing Retirement Planning
Are employees actually embracing retirement planning tools and education materials? Are they spending enough time defining their future lifestyle and retirement income goals? Some may be, but past studies and plan sponsor experiences are indicating they are not setting retirement planning as a core life priority soon enough, if at all. Of course, it is not surprising given an individual’s commitment to meeting more immediate career and personal needs.
So what are employers to do? How do employers, with the help of their service providers, motivate their employees to:
- Define personal future retirement lifestyle goals
- Estimate future retirement income goals and determine what monthly contribution and modest investment returns are required to reach them
- Understand investment basics such as asset classes including stocks, bonds, interest bearing vehicles, unitized mutual or pooled funds and how they work, risk-reward across asset classes, time/value of money, dollar cost-averaging
- Update their personal investment risk profile on an annual basis and confirm their current investment mix is appropriate
- Understand how CPP and OAS fit into their future income goals
Retirement Planning Education – How Soon Should We Start?
Many educational theorists believe that creating awareness about the importance of investment and retirement planning should start at an early age. Although it is refreshing to see an increase in this subject in elementary school curricula, there is a strong need to include financial planning within core programming.
A simple analogy is fitting. Some of us may remember how we were reminded by our parents to fasten our car seat belts at a young age. Nowadays, most youngsters automatically ‘buckle up’ without being reminded to do so. With increased retirement planning education, we hope that this next generation will exhibit a similar natural response by frequently forecasting one’s retirement income needs and adjusting savings habits without having to be reminded.
In addition, pension programs continue to transition from Defined Benefit to Defined Contribution schemes, a trend that clearly continues within the Canadian private sector. As this trend continues, individuals will be increasingly accepting the need to take responsibility for managing their personal retirement savings. It may be an intergenerational transition, but one that, we hope, will be embraced at a younger age.
What Can We Do Now?
In the meantime, what practical techniques can be applied now to ensure current employee groups, at all ages, drill into the personnel retirement income planning process? There are many different methods and experiences that have been tested in the past. The following are some that may be suitable, depending on the particular circumstances surrounding the employee group:
- Deliver annual or semi-annual education sessions that take no longer than 60 minutes to deliver and include an engaging presentation that focuses on two or three key retirement and investment savings themes. Periodically invite outside guest speakers to diversify the content and format. To save time, engage consultants and retirement savings plan service providers as much as possible.
- Ensure the education sessions engage the audience as much as possible without losing the importance of the session’s key themes.
- Although on-site sessions will likely be better attended if they occur during work hours, mandatory attendance at education sessions held during core work hours is ideal.
- If attendance is optional, promoting attendance well in advance and through the best medium (eMail, company intranet, lunchroom posting) is key. Taking attendance at each session will help determine how well the employees value the sessions.
- Keep the group sessions large enough that resources are not wasted, but small enough that questions can be effectively answered and the employees are not too intimidated to ask questions. Group sizes between 25 and 30 employees are optimal.
- If there is not an ideal location onsite, arrangements can be made at a local community centre or hotel. Since there is an increased risk that attendance will drop if the sessions are held offsite, include some type of incentive to attend such as making food available or perhaps setting up a draw for a prize. This may appear ‘cheesy,’ but it also may spark interest.
- Invite spouses to the sessions, if possible. It has been proven that there is a higher employee attendance rate if spouses are invited as it is in their best interest to ensure retirement planning is taken more seriously.
- At one or more key company locations, set up computer kiosks at certain times every week or month. These kiosks would be operated by qualified HR or service provider representatives to help employees use the available technology to determine their future income needs and calculate how much they should save on a weekly or monthly basis. The hope is that this forum would develop a consistent retirement planning discipline.
- For employee groups that are more technology savvy, low-cost ‘what-if’ CDbased programs, that can provide some customized retirement income modelling, are increasingly available from consultants and service providers.
Educating employees about the fundamentals of retirement and investment planning and motivating them to take effective, repetitive action to meet future income goals is a tall order. But it is one that all stakeholders must attempt to fill. Employers, government services, investment firms, and service providers such as banks, insurance companies, consultants, and advisers all play a role in this important endeavour. It should make a difference later in life.
 Cam MacNeish is vice-president, group pension and retirement savings, at Corporate Benefit Analysts, Inc.
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