“We had a strong defined benefit plan, competitive wages and access to HOOPP-sponsored sessions, and that was considered enough,” says Kotanidis, who has since taken on the role of vice president of human resources.
But his thinking changed after a 2019 employee survey revealed high levels of financial stress and interest in financial wellness services. “Having a basic understanding of debt management, retirement planning, investment planning, savings strategies and personal finances were things employees repeatedly mentioned. We hadn’t anticipated these needs. [In response] We decided to incorporate financial wellness into our services as a complement to the physical and psychological components.”
Read: RBC educates employees and reduces stigma around money through financial wellness hub
How rising cost of living affects Canadians
• Nearly three-quarters (71%) A recent Scotiabank survey found that 70% of Canadian workers say the cost of living is rising faster than their incomes are increasing.
• Respondents indicated they spend the most time worrying about paying for everyday expenses. (44%)Pay off your debt (39%)and emergency savings (38%)Overall, the quarter (26%) 70% of respondents said financial stress is so bad that it keeps them up at night, with Millennials, Gen X, and Gen Z experiencing significantly more financial stress than Baby Boomers, and women experiencing more financial stress than men. (26% compared to 20%).
What began with a few lunch-and-learn sessions and intranet resources has since expanded to include a 12-module series on financial literacy developed by the Canadian Institute of Chartered Accountants.
“Each session will have a different theme, so people can attend the one that fits their career or retirement timeline,” Kotanidis said, noting that attendee feedback on the sessions has been overwhelmingly positive. He expects demand to remain high as employees deal with rising inflation, the cost of living and interest rates.
Michael Garron Hospital employees aren’t the only ones feeling the pinch: According to Statistics Canada’s debt tracker, the average household will be left with 178.7% of disposable income by the end of 2023.
Meanwhile, the National Payroll Institute’s latest annual survey of Canadian workers revealed that 37% of respondents are feeling financial stress, up 20% from the previous year. Furthermore, a significant percentage of respondents feel that financial anxiety is affecting their job performance. The survey found that the average Canadian worker spends 33 minutes each day at work thinking about their money, equating to an estimated $45 billion in lost productivity per year.
While pension plan sponsors have traditionally taken a hands-off approach to employees’ day-to-day financial worries, many are now taking an active role in mitigating the impact of poor financial health in the workplace, says Roland Chiwetel, associate director of financial wellness at Eckler Inc. “When employees are worried about money, it makes it hard for them to focus on their work. [and] They are taking time off to take mental health days or to book appointments for physical health issues.”
Younger workers in particular may find their opportunities for career progression hindered by older colleagues who are delaying retirement due to their own financial worries, and their money problems may be exacerbated, he added. “There’s a growing recognition among employers that supporting the financial literacy of their employees is really important, which in turn leads to better financial health and overall wellbeing.”
Withdrawal support
The global shift from DB pension plans to defined contribution plans, particularly in the private sector, is another trend driving the need for improved financial literacy as plan participants are forced to make more of their own decisions about investments and savings, according to Todd Saulnier, principal at Mercer Canada and president of the Canadian Association of Pension Managers from 2022 to April 2024.
Read: How can DC plan sponsors solve the drawdown problem?
Plan sponsors are employing plan designs to guide members in the right direction, but when it comes to retirement preparation, solutions like auto-enrollment, auto-escalation and target-date fund defaults can only do so much, Saulnier said.
The risks are even greater for DC plan participants in the drawdown phase, where the consequences of poor spending and investment decisions can be disastrous. With no guaranteed lifetime income to fall back on, retirees are far more likely to outspend their funds.
“There’s a whole host of products to choose from and a lot of people are going to need help figuring out how to put the puzzle together,” Saulnier said, noting that there’s no shortage of new products in the withdrawal market from companies hoping to solve the pension sector’s “thorniest, toughest problems.”
In addition to in-plan and retail options, DC members also have access to products such as advanced life deferred annuities (which allow registered retirement account holders to allocate a portion of their savings to a deferred annuity until age 85, rather than starting at age 71) and variable payment life annuities, which make payments that vary depending on the performance of the underlying pension fund.
“Every me and you puzzle is different depending on each person’s financial needs and resources, which is where financial planning assistance (ideally as independent and impartial as possible) can help,” he adds. “Employers can provide resources, tools and referrals to help individuals who are struggling.”
Issues faced by DB plan subscribers
The relative financial certainty that comes with a DB pension is no excuse for complacency.
For many years, the Ontario Pension Board has allowed members to access an online portal that offers tools such as a retirement planner, pension estimator and buy-back calculator.
Mira Babic, OPB’s senior vice president of client and advisory services, said OPB has also built a program of interactive retirement planning workshops, in addition to regular educational sessions tailored to employees’ years of service and member organizations.
Read: How PepsiCo Canada’s savings programs help employees achieve financial security at every stage of life
“We make sure the content is tailored to individuals in that field and that segment of the population, and we bring advisors and educators to the table and go over what their clients care about. Oftentimes, they can leverage what they’ve heard from another client who’s in the same position and have a really good conversation.”
What’s more, major career milestones like a leave of absence, a job change, or even being laid off can also spark proactive outreach from Babic’s team members. “What we really want is for them to come back to us and have a personal conversation, and we think that’s really important because no two clients are the same,” she says.
At HOOPP, experts from within the pension system and across the financial industry advise plan participants on retirement planning, personal tax planning and household budgeting, helping them understand how their pension fits into their broader financial picture after retirement, said Ivana Zanardo, head of plan services at HOOPP.
Over the past few years, the plan has partnered with the Canadian Financial Planning Association to train its own staff as Registered Retirement Consultants and Registered Retirement Analysts.
“Our sole focus is delivering on the pension promise to our members,” she says. “That is our mission and we are committed to it. But providing comprehensive pension education and guidance is essential to delivering on that promise. If members are aware of their retirement and financial planning options, they can make the most informed decisions that are truly best for their circumstances.”
The OPSEU Pension Trust’s People for Pensions programme plays a similar role for its members. The education programme was launched as part of a revamp of its member communications that broadened its focus beyond the pure mechanics of the pension scheme, with the aim of supporting members’ financial literacy.
As Canadians live longer, plan participants need to think more carefully about financial decisions, such as when to start receiving Canada Pension Plan benefits and long-term planning for housing and healthcare, says Iesa Chou, senior vice-president of member experience and pension operations at OPTrust.
“We want to encourage people to think more broadly about retirement, while also giving them the peace of mind that comes with knowing they have a pension that will be there for them until they die.”
The plan’s revamped communications include a change in style as well as content, she says: For example, new members will be given a link to a three-part video series on the basics of the plan, each about two minutes long.
Key Takeaways
• As rising interest rates, inflation and growing personal debt create more financial stress for workers, employers are taking steps to improve the financial literacy and financial wellbeing of their employees.
• DC pension plan participants may stand to benefit most from improved financial literacy because they are required to take an active role in investment decisions, but DB plan sponsors need to ensure participants do not become complacent about their financial health.
• Targeted, customized communications are key to ensuring employee engagement on financial issues.
“It’s like the Tik Tok and social media world – attention spans are different and people are overwhelmed with a lot of information, so you have to find ways to engage in different ways, be short and concise. Nobody’s going to read a five-page article about pensions. They just want the right amount of information at the right time.”
Customized communications are crucial for plan sponsors who want to maximize employee engagement with financial wellness resources, said Eric Monteiro, senior vice president of group retirement services at Sun Life Financial Inc. For example, a discussion about retirement is unlikely to resonate with a younger employee who is wondering if they can leave their job.
Read: Lululemon Wins Award for Using Video and Social Media in Employee Benefits Communications
“That message doesn’t work,” he says. “So instead of talking about retirement, [their] “It’s about their financial future and financial security, like saving for a home and an emergency preparedness. It makes more sense to them.”
Gender is another important factor to consider when customizing financial literacy messaging, she said, noting that motivational content focused on financial goals and financial stability tends to engage more women. Among members in Sun Life-managed retirement savings accounts, the average balance for female plan members is just $69,000, compared with about $92,000 for men.
“This is a big gap. [shrinking] “We’ve been trying for years, but it’s still not enough. Research shows that return-based messaging doesn’t resonate as well with women.”
Still, there are some communication styles that will work for every employee, regardless of what demographic group they fall into. “The less jargon, the better. This applies to everyone,” Monteiro says. “Keep your language plain and simple.”
Michael McKiernan is a freelance writer.
Download a PDF of the 2024 Top 100 Pension Funds Report.
