- Improving Retirement Plan Savings - By duchessa
According to a May 2010 report released by the Association of Canadian Pension Management (ACPM), many employers are exploring new forms of financial education to encourage employees to save more and save more effectively for retirement.
In the Education Initiative Report, the ACPM:
- Documents comments on retirement plan communications elicited in employer focus groups held in several Canadian cities.
- Presents a series of case studies highlighting best practices in educating plan members about their retirement plans.
- Identifies best practices for plan sponsors who are looking to improve the general level of retirement planning awareness - and perhaps even the broader financial literacy - of their employees.
In a press release issued with the report, Marcia McDougall, Chair of the ACPM Strategic Communications Committee says, “Canadian employers want to ensure employees maximize the organization’s pension plan or retirement savings program. The challenge is that retirement seems a long way off for many employees, so it’s hard to get them interested in the company pension plan until they are at the end of their careers.”
Retirement Plan Communications Challenges
Employers participating in the focus groups were passionate about really wanting to help members make decisions that would result in adequate retirement savings. However, many round table attendees were extremely frustrated that they could not change employee behaviour, despite their best efforts.
“Changing behaviour” was as basic as convincing younger employees to join the retirement plan, through to persuading middle-aged individuals to increasing their contribution levels and helping older employees to make smarter investment decisions as they near retirement.
Potential legal liability if they crossed the line between financial education and advice was another key concern for plan sponsors (particularly in Montreal and Halifax). Yet many acknowledged that investment advice is actually what is needed by employees.
One emerging trend reported across the country was the provision of funds (generally $200-$300 on a one-time-only offer) for plan members to use the services of a financial advisor, generally of their own choosing.
Nevertheless, some Calgary employers noted that when employees showed up for their retirement planning sessions without having done their “homework” (detailing their assets and debts), the advice they received was of limited value.
Innovative Methods of Retirement Plan Communications
Despite the fact that some employers were discouraged by retirement plan member apathy, none was ready to throw in the towel completely. They were all interested in hearing about successes their peers were having in convincing plan members to save more for retirement.
Some “tried and true” methods for retirement plan communications discussed were repetition, live meetings and keeping the information basic and relevant - for example, by having different information for different age groups and/or job levels.
Other more innovative solutions identified were:
- A marketing approach to encourage plan membership with a campaign using a slogan, contests and key messages.
- Multi-disciplinary workshops, rather than sessions that address only retirement plan issues. In addition, inviting spouses/partners is encouraged.
- Provide an “income calculator” that outlines the values of interest and capital based on the number of years the retirement fund has been invested.
- Use rank and file employees who have a good understanding of the retirement plan as “ambassadors” to co-workers.
- Drive traffic to the website. One attendee created a program called “Financial Friday” which addressed a new financial education topic on the members’ site every week.
- Take personal account statements to a new level by communicating not just the amount in the member’s account, but what the member could have saved if he/she had taken better advantage of the company match.
“The ACPM round tables clearly demonstrated that employers are focused on having employees understand and appreciate the value of their retirement savings plans and are looking for effective ways to grab attention,”says McDougall. “Many of the techniques mentioned in the report have wide application."
Sheryl Smolkin - Sheryl Smolkin I am a lawyer with expertise in Canadian pension and benefits honed by over 20 years in the consulting industry. At ...
