In this post, we provide a quick overview of the findings from a recent Bright Paper by Sun Life.
In a recent Bright Paper, Sun Life highlighted eight trends that could impact workplace savings plans:
Life expectancy is defined as the age at which 50% of the population has passed away. For women, that age is 84, while for men, it’s almost 80. That means that if someone retires at age 65, they have at least 20 more years.
There is a real risk that plan members could outlive their savings.
Diverse and Low-growth Workforce
Those aged about 38 and younger now make up a large percentage of the workforce, but their numbers can’t keep up with labour force needs (particularly when you consider the huge impact that the baby boomer population will have as they move into retirement.
Attracting and retaining employees will take an even greater urgency as they work to develop expertise in their industry. Offering an attractive value proposition to younger generations to younger generations – and building incentives to keep older workers in the workplace – will be critical.
Increased Debt Levels
According to the Canada Mortgage and Housing Corporation, the average Canadian owes approximately $1.70 for every dollar they earn to service their debt. 52% of Canadians have just enough to cover living costs, and 74% of Canadians live under the burden of debt.
If Canadians are burdened by debt levels, it becomes very difficult to focus on retirement planning.
The growth of the gig economy, where a large section of the workforce is dedicated to temporary, freelance or contract economy means that retirement readiness has suffered. 11% of gig workers worry about retirement savings and 41% say they don’t know if they will ever be able to retire.
If you need to retain gig talent, a workplace plan can present a competitive advantage in attracting and retaining those individuals.
Connection Between Financial and Mental Health
Stress as a result of financial stress is impacting both mental and physical health. Temporary absences, disability claims and loss of productivity are all consequences of this trend.
94% of Canadians say they are more likely to work for an employer that cares about their overall health and wellbeing. A workplace savings plan can be a component of that culture of caring.
Plan Design Considerations
Remember to review and update investment solutions and your group savings plan regularly. Plan design enhancements can contribute to savings success. Can you simplify the plan design to make it easier for plan members to participate and save?
Impact of Digital Consumerism
Digital interactions are becoming more common, and more and more plan members judge their experience based on the digital experience.
Artificial intelligence backed by data and analytics will play and increasingly important role. Personalized nudges can be used to encourage plan members to take action and improve retirement savings outcomes.
Evolving Approach to Investments
Sun life has seen a marked shift to simplified investment solutions like target date funds, which now represent 80 – 90% of monthly cashflows. 77% of plan sponsors now use target date funds as their default funds.
According to Sun Life’s analysis, investors who use only target date funds are outperforming those who build their own investment portfolio. That means that plan sponsors can spend more time getting plan members engaged and improving savings rates.
If you would like to review your existing plan or explore how a workplace savings plan could work for your organization, please contact us. We’d love to hear from you.