Knowledge Gap and Unrealistic Expectations

The need for CAP Guidelines compliance

CAP Guidelines

Employers who sponsor a group RRSP or other types of retirement savings arrangement are expected to comply with the Capital Accumulations Guidelines approved by the Canadian Association of Pension Supervisory Authorities (CAPSA). An important part of these guidelines is the plan sponsor’s requirement to provide education to their members, investment information and decision-making tools.

It’s no surprise that regulators pushed to have these guidelines: a large proportion of pension plan members are ill-equipped to make the many important decisions that will have a determining impact on their retirement security. Here are a few decisions that members are confronted with:

How much to contribute
How much to save
How to allocate investments among the different funds offered
How to change their asset allocation over time
How to use the money at retirement
What to do when changing jobs

Low Expectations

Plan sponsors have low expectations of their members’ ability to retire when they want to, and of members’ knowledge and involvement in their retirement planning. Consider the following statistics revealed by the landmark studies published by the firm SEI Investments Canada in 2004 (see links on the left menu of this page) from which this report draws extensively:

Only 26% of members are actively involved in decision-making for their retirement planning
Only 38% of members will have enough money on which to retire

The SEI studies also confirm an important knowledge gap in pension plan members:

Less than one-quarter (23%) of members are very knowledgeable about retirement planning.
Members don’t understand their plan: 55% don’t know if they can make their own contribution to the plan, 28% don’t know if their employer is contributing to the plan

The stark consequence is that many baby boomers are retiring with no source of guaranteed lifetime income, little personal savings, reduced options with respect to working past retirement and helpless vulnerability to a market decline or crash.

Fiduciary Responsibility

One of the SEI studies mentioned above concludes that “[m]any Canadians fear finding themselves with insufficient income at retirement. DC plan sponsors fear they will be blamed and have to face litigation. Sponsors believe one of the most effective methods to prevent such a scenario is by offering effective education programs that help employees plan for retirement and make the right investment decisions. Presently, most sponsors are failing in this effort.”

Many plan sponsors believe that educating members is the first priority in protecting their organizations against potential litigation.

Aligning Individual Goals with Organizational Goals

By following the CAP Guidelines requirement of providing information and decision-making tools, a pension plan sponsor can achieve much more than compliance and protection against litigation. If a company helps employees have a clear vision of their future by setting their individual goals and working toward achieving them, they will understand that these are intimately tied to achieving their goals as employees. Thus, a company can align these individual goals with the goals of the organization – productivity improvement, profitability and shareholder value.

The key is not to make the education about the pension plan but about the members. By adopting the larger context of retirement planning, employees gain an increased knowledge and understanding of how their pension plan fits within a bigger picture that also includes Government pensions and personal savings.

A better understanding of basic investment principles reinforced regularly can lead to better investment decisions and better returns.
Increased appreciation and understanding leads to greater satisfaction and lower stress. This translates into greater productivity and loyalty, and lower turnover.

Pension Plan Sponsor Resources

These documents and links provide useful information on the challenges facing pension plan sponsors.

FREE offer: test-drive the RetireWare Education Program and judge for yourself!
Contact us at info@retireware.com.

About the RetireWare Education Program

The RetireWare Education Program is a cost-effective web-based retirement education program with optional live seminars. With this program comes engaging financial and retirement planning tools and resources and Web-based and desktop retirement planning software. The program is designed to meet the Guidelines for Capital Accumulation Plans (CAP) approved by the Canadian Association of Pension Supervisory Authorities.

Completely independent and unbiased, and delivered as a high impact low cost benefit, it complements web-based services with ongoing email communications, seminars for a rich and engaging user experience. Regular usage statistics reports to human resources or the pension committee document CAP Guidelines compliance.

Employees access their resources via a hosted branded site for maximum impact by displaying the company name, logo and custom messaging. The outcome of this program is for employees to get a clear vision of their future by creating a personal financial plan, and take control of future by implementing and monitoring their plan.

Here is what you get with the RetireWare Education Program:

Hosted solution for no infrastructure costs, rapid implementation and maximum cost-effectiveness
Easy set-up and ongoing access: one common access code for all employees to the resources, no log in password management and maintenance required
24/7 Website availability, privacy and security, ability to restrict access during work hours
Glossary, retirement planning primer, information on how to apply for Government pensions
Comprehensive online retirement planner with data saving capability
Sophisticated desktop software with easy-to-use Wizards, report, help and PDF manual
Paper-based worksheets and information, or CD ROM for those with no Internet or computer access
Emails at launch and every quarter to keep the program in front of users
Monthly webinars
Contests designed to increase usage and enthusiasm
Unlimited email support with use of resources and preparation of action plan
Flexible media mix to reach everyone and cater to all levels
Fully bilingual

Seminars

As a complement to this program, we offer optional live seminars during or outside work hours. Our popular lunch-and-learn seminars provide information on the sponsor’s pension arrangement, Government benefits, planning for retirement, using the software and navigating the resources on the Website.

Customization

We can provide more customization to your branded site by adding custom pages dealing with your specific issues and document downloads. We can also customize our retirement planning software by creating an add-in that reflects the exact provisions of your pension plan, making it possible to integrate the plan with maximum ease and accuracy with other assets, savings and future income.

About Apeiron Software

Apeiron Software Limited creates the best resources and technology to help individuals make informed financial and retirement planning decisions for the future. [More information]