The Observer

ARTICLES OF INTEREST

Can workplace pension plans impact productivity?

by Derek Dobson, CEO and Plan Manager, CAAT Pension Plan

Employees with financial worries are likely to be distracted and less productive at work, making their financial stress their employer’s concern. Recent research suggests an employer’s workplace pension plan may not only play a part in attraction and retention, it may also boost productivity by reducing employee stress.

Forty-seven percent of Canadians report high stress about running out of money after retirement. In addition, 51% of Canadians report retirement-planning stress has a medium to high impact on their work. All generations share these concerns. These results are from a 2016 online survey of over 1,000 working Canadians commissioned by the Canadian Public Pension Leadership Council (CPPLC) to understand Canadians’ retirement expectations, desires and strategies.

An American study published this summer by Willis Towers Watson echoes the CPPLC’s findings. It examines employer benefit costs over a 15-year period at 500 employers with at least 200 employees. It also analyzes employees’ concerns, expectations and desires for benefits.
[1] It found employees are worried about their present and future finances and about “half say they often worry about their financial future.”[2] This stress affects workers in the present, “employees bring their anxieties and distractions to work each day, where their worries impair performance, trigger lost days, raise stress levels and ultimately drag down productivity.”[3]
While it is understandable to think older workers feel stressed about retirement, after all they will be making a life-changing decision soon, the research shows that Canadians and Americans across generations are concerned about retirement planning.

The CPPLC survey found a surprising willingness among the majority of Canadians’ to contribute more of their annual income to receive features like a lifetime retirement income. Most surprising, younger Canadians are also very willing to contribute meaningfully to their retirement. Fifty-three percent of Canadians aged 18-24 said they would pay 10% or more of their annual income to pension and retirement savings so they can retire and maintain the same standard of living.
[4]

Their willingness to contribute to a predictable, secure lifetime pension makes sense in the context of addressing their concerns about their financial future. The Willis Towers Watson survey found that Millennials (about 17-36) are the most worried about their financial future, with 55% reporting they often worry about their future financial state. Other generations also have concerns, 49% of Gen X (about 37-52) employees and 43% of Boomers (about 53-71) report that the often worry about their future financial state. Similar to the CPPLC study, the Willis Tower Watson survey found employees are willing to forego their income in exchange for more generous and guaranteed retirement benefits. This is the case across generations. Millennials (59%) “are almost as willing to pay more out of their paycheck for a more secure retirement benefit as baby boomers (66%) or Gen Xers (63%).”[5]

About half of employees in the U.S. and Canada are worried about their financial future and this stress is affecting their productivity.

In his report on the CPPLC survey results, Bob Baldwin observes that defined benefit (DB) plan members have greater confidence than both defined contribution (DC) plan and Group RRSP members about their ability to meet their retirement objectives.
[6] Most importantly for employers, DB plan members “express less concern than group RRSP members about the impact of retirement planning on their health and work lives.”[7]

The CPPLC survey did not delve into the reasons for lower reported stress levels but plan design appears to be an important factor. DB plans provide a guaranteed lifetime pension calculated at retirement, so members know what their annual income will be and can plan their expenses accordingly. Both surveys show that employees highly value security and are willing to pay for it.

These insights into employees’ financial stress suggest employers may be able to harness their workplace pension as a productivity booster. The first step is to understand whether your workplace pension plan meets your employees’ needs. In this process, you may learn that your employees, of all ages, are willing to increase their own contributions in exchange for more secure features. Enabling these features to be added without affecting the cost of the program. In return, your company will benefit from employee attraction, retention and the increased productivity from reduced financial stress.
[8] 

These benefits suggest employers should take a second look at their design and type of plan when calculating the cost/benefit analysis of their workplace pension program. Employers without a workplace pension should consider whether offering a pension or retirement savings plan could increase their workplace productivity and improve attraction and retention. One of several options worth exploring is joining a modern multi-employer DB plan, such as the CAAT Plan. This will provide employees with a secure pension and employers with stable costs. These plan designs offer the best features of traditional DB and DC plans, while minimizing risks to employers and employees. They are also the most efficient way of delivering the greatest pension income per dollar of contribution. This design model produces the least amount of stress for both members and employers – and that will reduce health benefit costs and boost employee engagement and productivity.

Providing a secure and meaningful pension can be part of reducing a major source of stress to employees that will deliver productivity gains and other benefits. It is a great investment and will pay dividends for years to come.

[1] Brendan McFarland and Steve Nyce, “Shifts in benefit allocations among U.S. employers: How can employers better deliver the benefits their employees want?,” Willis Towers Watson Insider, July 14, 2017, https://www.towerswatson.com/en-us/Insights/Newsletters/Americas/insider/2017/07/shifts-in-benefit-allocations-among-us-employers.
[2] McFarland and Nyce.
[3] McFarland and Nyce.
[4] Derek Dobson, ”Designing retirement schemes Canadians want: observations from a Modern DB Pension Plan,” April 13, 2017, 6, https://www.caatpension.on.ca/sites/default/files/2017-05-11_final_cpplc_report_0.pdf.
[5] McFarland and Nyce.
[6] Bob Baldwin, “The Pensions Canadians Want: The Results of a National Survey,” April 13, 2017, 23, https://cpplc.files.wordpress.com/2017/05/2017-034_cpplc-report_the-pensions-canadians-want_20170501.pdf.
[7] Baldwin, 23.
[8] I am most familiar with the CAAT Pension Plan. We conduct annual member surveys and typically, 80 % of respondents report that the pension was a key factor in their decision to join their employer. In a world of constrained wages, having good workplace pension can make a fundamental difference for employers looking to attract and retain top talent. And it’s not just members who see value, CFOs and CHROs from our participating employers rate the Plan’s value for the cost at 8.4 out of 10. In short, workplace pensions can be of great benefit to both members and employers. 

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  Derek Dobson
  Chief Executive Officer and Plan Manager
  CAAT Pension Plan




Derek Dobson joined the CAAT Plan as the CEO in April 2009.  He brings deep expertise in funding, risk management, strategic planning, governance, and stakeholder relations. In addition to leading the organization, he also serves as Co-Chair of the Canadian Public Pension Leadership Council (CPPLC), and is on the Board of Directors for the Association of Canadian Pension Management (ACPM). Derek’s thoughtful and balanced views are frequently sought by various groups of stakeholders across Canada, U.S., and Europe, including unions, employers, boards, policy makers, and industry professionals. He is a frequent speaker and author on a variety of topics, including the need and design for national aging and retirement strategies. Derek is an Associate of the Canadian Institute of Actuaries (CIA) with a degree in mathematics from the University of Waterloo and has 25 years of experience in the pension industry.