Millennials now make up the biggest share of the working-age population, accounting for 28 per cent of the workforce. At the same time, 1.2 to 1.4 million people moved to Canada in the past year. Plan sponsors who keep the unique needs of these two groups in mind when providing education around retirement plans, investments and financial planning will see higher rates of participation, says Brady Aarssen, Vice-President, Operations Strategy and Transformation Canada Operations, Canada Life.
Aarssen recently shared his recommendations on how plan sponsors can build a strategy to support employees’ financial health in a podcast hosted by Benefits Alliance. We share highlights here, plus additional insights from a follow-up conversation with Take 5 for Wellness.
A new mindset
While the defined benefit (DB) pension model still exists for many in the public sector, it is largely a thing of the past in the private sector. However, the traditional DB mindset of a “one-size-fits-all, monolithic plan structure” remains, observes Aarssen.
It’s time to shed that mindset to make room for a dynamic, modular type of plan that is more individualized to the plan member, he recommends. This plan could have elements for debt management, savings vehicles like a Registered Education Savings Plan, and a group Registered Retirement Savings Plan.
In other words, plan sponsors stand to capture more engagement if they stop focusing solely on retirement plans, says Aarssen. Recent immigrants, for example, will likely appreciate preliminary education that helps them understand how things work in Canada. “New Canadians probably don’t know anything about our products or our financial system in general.”
For millennials, some of whom are also new Canadians, financial education around home ownership is top of mind. “How are you supporting them to save that down payment for a home if they’ve got a group retirement plan, and they’ve got locked in money, particularly on the pension side?” he asks.
Millennials’ participation rates in retirement plans have dropped by 15 to 20 per cent from prior generations, notes Aarssen. While communicating the value of a group retirement plan is important, it needs to be part of a much bigger conversation. In addition to the topic of home ownership, straightforward discussions around savings strategies, education plans for children and debt management are key to engage millennials and build their financial literacy.
“Once this demographic has more peace of mind about their immediate financial concerns, they will be more receptive about enrolling in a group retirement plan—and appreciative of their employer’s matching contribution,” emphasizes Aarssen.
Plan sponsors and their insurance providers can also get creative with blended products, he continues. For example, every dollar for debt repayment is matched by the plan sponsor in a retirement vehicle. “The plan member is now concurrently paying down their debt and starting that journey on the retirement side, albeit on just the employer match initially.”
Such an offering also fosters strong savings habits that will carry over into their contributions into a retirement portfolio, he adds.
In the end, it’s all about offering education and a range of products that help plan members understand and achieve their personal goals. “We are offering solutions, not products. And for both these populations, we need to start with solutions for today before we can get buy-in for tomorrow,” says Aarssen.
This article is brought to you by Canada Life, a platinum preferred solutions provider for members of Benefits Alliance and their clients.