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Joe Hornyak
Former editor of Benefits and Pensions Monitor and founder of Joe Hornyak Communications
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?Dynamic Pensions Improve Retirement Saving
Dynamic pension pools are urgently needed to make retirement income security possible for millions of Canadian seniors, says a report published by the National Institute on Ageing (NIA) and the Global Risk Institute (GRI). ‘Affordable Lifetime Pension Income for a Better Tomorrow: How We Can Address the $1.5-trillion Decumulation Disconnect in the Canadian Retirement Income System with Dynamic Pension Pools’ says with 10 million baby boomers now entering retirement ? with longer life expectancies and a greater dependency on private savings to sustain them ? it’s more important than ever to find solutions that will help retiring Canadians turn their accumulated savings into low-cost lifetime pension income. Dr. Bonnie-Jeanne MacDonald, director of financial security research at the NIA and lead author of the report, says “Financial markets, inflation, and health expenses are just some of the big unknowns that retirees will need to face over 10, 20, 30, or even 40 years.” DP pools have the potential to transform the Canadian retirement landscape. Their goal is simple: to help people optimize their expected lifetime retirement income while ensuring they never run out of money. While protecting a single individual from outliving their savings (i.e., longevity risk) is often prohibitively expensive, the same protection becomes affordable when spread across a large group. Pooling longevity risk allows retirees to spend their savings more confidently while they are alive, says the report. In a DP pool, pension amounts are not guaranteed; they may fluctuate from year to year. This means retirees can stay invested in capital markets and benefit from the higher expected returns.
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‘Retirement First’ Improves Attraction
A “retirement first” approach to workplace benefits may be the key to businesses’ ability to attract and retain talent, and improve productivity, says a research report?from the Healthcare of Ontario Pension Plan (HOOPP) and Common Wealth. ‘The Value of a Good Pension: The business case for good workplace retirement plans’ looks at how businesses can better serve both their employees and their own bottom lines by offering retirement savings plans. “There has been talk recently about whether Canada will see a ‘Great Resignation’ of employees leaving their jobs in pursuit of better benefits and pay,” says Steven McCormick, senior vice-president, plan operations at HOOPP. “Many employers may be asking what will set them apart in recruiting valuable talent. Our research suggests retirement savings plans can provide that competitive advantage.” Many of the employers interviewed said retirement benefits differentiate them as an employer and if they didn’t offer them, they would be significantly less attractive to prospective hires. The latest report builds on the 2018 report from HOOPP and Common Wealth ? ‘The Value of a Good Pension: How to improve the efficiency of retirement savings in Canada’ ? which found there are five value drivers that make it easier and more efficient for individuals to save for retirement: saving, fees and costs, investment discipline, fiduciary governance, and risk pooling. The more value drivers included in a retirement plan contribute to greater compensation efficiency. For employers to consider when looking at improving retirement outcomes for employees, it suggests taking a ‘retirement first’ approach to employee benefits and focusing on value for money.
For details on these stories, visit www.bpmmagazine.com