TORONTO, May 2, 2013 /CNW/ - Canada's pension plan sponsors are focusing
on their communications with participants, particularly about
retirement income adequacy, according to the Canadian Retirement Trends
Survey 2012 by Aon Hewitt, the global human resource solutions business
of Aon plc (NYSE: AON).
Among employers surveyed, 95% were somewhat or very confident in the
competitive position of their plans, which is a key tool in attracting
and retaining employees. However, only 16% were very confident
their members understand the details of future retirement benefits, and
only 12% are confident members are taking accountability for their own
future. As a result, 83% of those sponsors surveyed plan to review
their communications with their members. By comparison, 59% are likely
to assess the design of their plans in 2013.
"Demographic changes in the coming decades will result in waves of
retiring baby boomers, with fewer workers available to support the
retirement system," said Will da Silva, Senior Partner, Retirement
Consulting at Aon Hewitt. "However, shorter- term financial pressures
and regulatory requirements appear to be discouraging plan sponsors
from addressing long-term sustainability strategies. "
Aon Hewitt's Canadian Retirement Trends Survey polled Canadian employers
to assess their views and likely actions over the next year regarding
the design, management, and delivery of capital accumulation or defined
contribution (DC) plans, defined benefit (DB) plans, and retiree
medical plans for their active, salaried, Canadian-based employees.
Responses from more than 200 employers provide a preview of the changes
likely to take place in retirement programs over the coming months.
"Improving communications can help ensure employees are better informed
and can maximize the opportunities available to them. That way,
employers could achieve a more positive return on investment and
minimize the liability risks associated with inadequate communication
efforts and materials," said da Silva. "Other key areas of concern are
governance of plans and, as always, cost control."
DB plan design changes are coming - but not this year
The absolute cost and cost volatility of DB plans remain the main
incentives for those sponsors looking at changes. The number of closed
or frozen DB plans operated by survey respondents in Canada has
continued to rise and has reached 50%. Despite the signal this sends
that near-term action is needed, 77% of DB plan sponsors made no
changes to their plans in 2012 and 68% expect to maintain the status
quo this year as well. In addition, 69% are unlikely to evaluate phased
retirement alternatives and 61% are unlikely to analyze aging workforce
issues. Only 2% have opted for a so-called "hard freeze" for DB plans
in Canada, far lower than in the United States.
Capital Accumulation Plans look for web-based education and new features
Capital Accumulation Plans (CAP) include Defined Contribution Plans,
Group RRSPs, Tax Free Savings Plans, Deferred Profit Sharing and Stock
Plans. For these, increased communication appears to be a clear focus,
with 84% of CAP sponsors planning to communicate with members about
their plans, according to the survey. Investment advisory services and
financial education figure prominently in plan sponsors planning
efforts. While many organizations continue to provide in-person
services, with traditional call centres for example, there is also a
strong tendency toward online activities or Web-based interactive
communication that provide personalized financial education sessions.
"Three quarters of CAP plan sponsors will focus on communicating general
investment education messages to their plan members," said da Silva.
"To do so, about a third of the sponsors use Webcasts/Webinars
to deliver financial education and another 35% intend to do so in
Some changes to Retiree Health and Benefits
Although a majority of respondents are unlikely to make changes to their
retiree health program in 2013, due to the legal complexity of such
changes, almost one-third are likely to increase contribution levels
for future retirees. As well, 25% of plans will increase contribution
rates for current and future retirees and the same percentage plan to
reduce benefits for the future retirees or reduce or eliminate benefit
"It is apparent that many employers continue to make downward changes
for futures retirees with 20% offering no retiree medical coverage,"
said Greg Durant, Chief Actuary, Health & Benefits Practice
at Aon Hewitt. "We also observe an emerging trend where 10% are likely
to move toward a Defined Contribution medical plan."
Copies of the report on the Canadian retirement Trends Survey 2012 are
available at http://www.aon.ca/surveys/retirement/AH_RT2012_Highlights_en.pdf
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About Aon Hewitt
Aon Hewitt empowers organizations and individuals to secure a better
future through innovative talent, retirement and health solutions. We
advise, design and execute a wide range of solutions that enable
clients to cultivate talent to drive organizational and personal
performance and growth, navigate retirement risk while providing new
levels of financial security, and redefine health solutions for greater
choice, affordability and wellness. Aon Hewitt is the global leader in
human resource solutions, with over 30,000 professionals
in 90 countries serving more than 20,000 clients worldwide. For more
information on Aon Hewitt, please visit www.aonhewitt.com.
Aon plc NYSE: AON is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 65,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical
expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives
manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United.
SOURCE: AON Hewitt
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