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HUB International 2022 Outlook

Retirement Industry

 

Stability, Creativity and Growth

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Employee Retirement Takes Centre Stage

The COVID-19 pandemic has changed employees’ saving habits. Retirement plans may never be the same.

Retirement plans become essential to recruiting and retention

Employers will need to improve retirement plans, offering enhanced support and education.

After Canadian employees saved record amounts in 2020 and early 2021, workers are seeing the importance of retirement planning and asking their employers to help.

Only 37% of Canadians saved for retirement from mid-2020 to April 2021; two-thirds felt Canada is facing a retirement crisis

In 2020, credit card debt declined more than 18% and non-mortgage debt reached a 20-year low,1 indicating Canadians were improving their money management during the pandemic.

And as Canadians were reducing personal debt, incomes increased, partially because of government support.

Despite the positive signs on savings, it’s not all good news: Only 37% of Canadians saved for retirement from mid-2020 to April 2021, and two-thirds felt that the country is facing a retirement crisis, according to one survey.2

Perhaps more telling, the same survey indicated that 48% of respondents were concerned about having enough money for retirement — and 77% said employers are responsible for offering a pension plan to help fund retirement.

In 2022, employers need to determine how they can help workers best reach their retirement goals, through offering or improving sponsored plans while offering financial wellness advice. Doing so will make employees happier with their jobs and more productive, helping hiring and retention in 2022 as the country still grapples with a labour shortage.

1 Statistics Canada, Trends in household non‑mortgage loans: The evolution of Canadian household debt before and during COVID‑19, August 23, 2021.
2 Healthcare of Ontario Pension Plan and Abacus Data, 2021 Canadian Retirement Survey, May 2021.

Here’s what to expect for plan sponsors in 2022:

Canadians paid down debt during worst of the COVID-19 pandemic but didn’t save much for retirement

To reduce retirement anxiety, employers need to improve communications and offer targeted financial education

1. The global pandemic will make employers improve retirement plans and education

With COVID-19 related shutdowns and more time at home than ever, employee spending behaviour has changed dramatically. In fact, Canadians saved an average of more than $5,000 each in 2020, as the COVID-19 pandemic limited their spending choices.3

That money largely went towards paying down debt.

Now employees are turning to retirement. They have specific priorities, including living in their own home near family and friends. In some cases, they may be delaying retirement to save more money; 88% report they are uncertain about the amount of money they’ll need in retirement.4

No matter how close to retirement individuals are, stress over finances affects employees, diminishing their productivity and engagement. Employers can help their workforce overcome retirement anxiety through improved communications and financial education content that’s targeted to individuals.

Improved communication increases financial literacy, helping employees with retirement planning. Virtual meetings and seminars have become effective — if not vital — vehicles for financial literacy.

And the educational content needs to address the needs of all employees, not all of whom are thinking about retirement and may need remedial financial education instead.

3 CBC, “After a year of pandemic prudence, Canadians likely eager to spend the billions saved,” June 21, 2021.
4 IG Wealth Management, “COVID Causing Canadians to Rethink Their Plans for Retirement,” February 18, 2021.

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In the face of a labour shortage, more than 70% of Canadians would forego a raise in favour of a workplace retirement plan

2. Retirement plans will prove vital for recruitment and retention

Only about one-third of Canadians are saving money specifically for retirement. While some are living paycheque to paycheque, others don’t know how to save for retirement or aren’t taking advantage of retirement resources available to them at work.

But that doesn’t mean employees don’t want to save for retirement or aren’t looking for retirement help from employers: In fact, more than 70% of say they’d forego a raise in favour of a workplace pension plan.2

That means even in a labour shortage — Canadian employers reported a 5% vacancy rate in June 20215 and 64% of businesses say the labour shortage is inhibiting business growth6 — a well-managed retirement plan can be an attractive benefit for prospective employees, not to mention a strong reason for current ones to stay on the job.

5 Statistics Canada, “Job vacancies and job vacancy rate, unadjusted for seasonality,” August 8, 2021.
6 CTV, “These Canadian industries are currently facing the biggest labour shortages,” October 5, 2021.

Resilient: Insights from HUB's Employee Benefits & Retirement Practice Leaders

Explore how to reinvigorate your workforce by examining your total rewards strategy, retirement plan offerings and employee health and financial wellbeing.

Employees want socially responsible investment options for retirement plans — employers will need to offer them

3. “Socially responsible” investing will surge

Socially conscious investors are changing the face of Canadian investing: Half of Canadian asset managers have integrated responsible investing principles into their portfolios.7

As a result, approximately $3.2 trillion in assets were said to be “responsibly invested” at the start of 2020, a 49% increase since 2017.8 Investors often equate responsible investing with environmental issues that have become more prevalent in recent years, such as wildfires, hurricanes and floods.

This isn’t just a shift in the way Canadians invest, but a complete change. With Millennials and others looking for those investment options, it’s critical to include them. Organizations need to offer socially responsibly investment options for their workplace pension plans and other savings plans.

7 EY Canada, “The Rise of ESG Investing,” March 31, 2021.
8 Responsible Investment Association, 2020 Canadian Responsible Investment Trend Report, November 2020.

Offering or improving retirement plans can increase employee engagement with their jobs and employers

4. Retirement plans will help employee engagement

With vacancy rates high and many employees considering leaving the workforce, employee engagement has become a high priority for employers. That’s why it’s important for employers to offer greater support for retirement savings and financial literacy.

Employers can consult with employees in need of extra support. With greater access to digital tools, it’s no longer a challenge to meet with an advisor to review an employee’s specific circumstances, such as savings rate, having beneficiary designations in place and testing retirement readiness.

Another way to increase engagement is when the organization itself focuses on its own business operations and communicates those values effectively. Many include an open commitment to diversity, equity and inclusion principles (DEI) in those values.

Finally, when a company’s retirement plan has good governance, employees will feel more confident in and have greater engagement with the plan. Careful governance demonstrates care and attention on the part of the company. This sends the message that employees should pay attention as well.

Read our 2022 Employee Benefits Outlook and learn how benefits can support recruitment and retention.

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Moving forward in 2022

Workers are unsure of their future and want their employer to support them on their financial journey. There’s a lot at stake for employers and employees alike.

Taking just a few steps can go a long way toward driving engagement and participation. Whether it’s taking care of their retirement plan’s structure and governance, providing investment options that energize employees or communicating to employees how to maximize retirement benefits, organizations must focus on what they can offer their employees to drive participation, increase engagement and reduce turnover.

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