Retirement pensions top pay hikes on employees’ most wanted list

Victoria Wells: Canadians favour pension plans over a raise amid looming retirement income crisis

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Pay raises get much of the attention when it comes to things workers want most, but there’s another benefit many appear to value even more: a company pension plan.

Employees are becoming more vocal about wanting a good retirement pension as part of their benefits, research shows, and more than half of Canadian workers say they’d gladly take a pension over a raise, according to a new study from the Healthcare of Ontario Pension Plan (HOOPP). Indeed, employees have consistently chosen retirement benefits over a salary hike in five years of research, the pension provider said.

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Furthermore, the most recent mental health index survey from Telus Health Canada Ltd. said 74 per cent of workers believe employers should offer some kind of retirement savings option. Meanwhile, 65 per cent of employees say they’re unhappy with their current benefits packages — pension plans included — a survey from recruiter Morgan McKinley Canada found.

Yet at least one group of employers seems to be missing the message that workers favour retirement security instead of a pay raise. More than three-quarters of business leaders who don’t already provide pensions insist their workers want salary hikes over retirement plans, HOOPP’s survey said. They couldn’t be more wrong. “We’ve been doing this research for a number of years now, and we’ve found consistently about two-thirds of Canadians surveyed have said they prefer a pension over a pay increase,” Ivana Zanardo, head of Plan Services at HOOPP, said. “That just further reinforces the value that individuals place on retirement security.”

But even as people identify adequate retirement income as a top priority, data show that access to workplace pensions has decreased in recent years. The proportion of paid Canadian workers covered by a registered pension plan fell to 38 per cent in 2021 compared to 39.7 per cent in 2020, according to Statistics Canada. That comes as the rising cost of living, brought on by soaring inflation and interest rates, makes saving for retirement more difficult. Some workers now even feel they won’t be able to retire at all.

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“We know that to provide for our own retirement, we should be saving early, saving often. But as an individual, it’s hard, especially during high inflation,” Zanardo said. “By the time people are paying for the cost of housing (and) their food, there’s not a lot left to save for your retirement.”

That’s stoking fears the country will be plunged into a retirement income crisis in the years to come. Our rapidly aging population is living longer, but putting less money aside for retirement. In the worst-case scenario, people’s retirement funds dwindle to nothing, with governments, and ultimately taxpayers, having to foot the bill.

Providing that workplace retirement savings plan goes a long way in alleviating someone’s financial stress

Ivana Zanardo, HOOPP

Workplace pensions could be the solution, and employers overall recognize their importance. More than 80 per cent of those who do and don’t offer company pensions agree the plans are needed to avoid saddling taxpayers with seniors’ retirement burdens, while 79 per cent think they’re necessary to prevent economic pain, HOOPP’s survey said. “Something both workers and employers agree on is that … employers should be required to contribute in some way toward pensions for employees,” Zanardo said.

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Luckily for companies, offering a workplace pension is also good for business. For one thing, providing retirement benefits helps alleviate employees’ stress around money, which helps them become more present on the clock. Workers spend an average of 33 minutes every day thinking about their financial woes while on the job, the National Payroll Institute said in a recent report. Put another way, Canadian employers will bleed $45 billion from lost productivity this year, an increase from an estimated $40 billion in 2022 and $26.9 billion in 2021.

Zanardo said HOOPP’s research suggests offering a pension makes a difference. Of employers who added or improved their retirement benefits over the past year, 58 per cent said productivity increased. They also say pension benefits helped them keep and attract employees, no small matter at a time when skilled labour shortages persist across many industries. “Providing that workplace retirement savings plan goes a long way in alleviating someone’s financial stress,” she said. “If that’s being alleviated by their employer, then they’re more productive at work. They’re happier.”

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Pensions are also better for corporate balance sheets than simply handing out salary hikes, Zanardo said, with pension plans considered more cost effective. “It’s … a more inflation resilient way of rewarding employees when you’re comparing to a salary increase,” she said.

Recent headlines show employers might be paying attention. Retirement security was a key demand in Unifor talks with the Big Three automakers this fall and the union succeeded in securing pension-plan improvements, along with wage increases. The United Auto Workers in the United States also secured pension  improvements in their contracts with the automakers. Momentum appears to be building beyond the auto sector, too. More employers plan to add or improve their retirement offerings this year, HOOPP’s survey showed.

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“Having employers provide (retirement savings programs) through their compensation is so efficient,” Zanardo said. “It’s good for them, it’s good for employees, it’s good for the economy in the future. There are so many benefits from it.”

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A version of this story was first published in the FP Work newsletter, a curated look at the changing world of work. Sign up to receive it in your inbox every Tuesday.

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