Canadian DC Participants Not Looking Forward to Funded Retirement

A study commissioned by SEI Investments Canada found that only about a third (28%) of employees feel they will be able to retire when they want. The average age at which employees plan to retire is 61, or five years older than they desire.  A similar 2003 plan sponsor survey found that employers believe nearly four out of 10 (38%) of employees will have enough on which to retire, but only 6% of employees felt they would qualify for that category.

The 2004 participant study also reveals that employees have limited knowledge of investing and of their DC plan in particular. Less than one in six employees (15%) consider themselves to be “very knowledgeable” about retirement planning and about one-third (34%) indicated that they did not feel knowledgeable at all.

Employees confess to not being clear about many DC plan features. For example, 75% of employees surveyed believe they can make their own contribution to their pension plan, when only 51% of organizations allow them to do so. In addition, only 39% of employees correctly knew that their pension plan is compulsory. In reality, 71% of members are in compulsory plans.

“Employees told us they know little about investing and their own pension plans. As it turns out, when tested, their actual knowledge was even lower.” Patrick Walsh, President and Chief Executive Officer of SEI Investments Canada, said in an announcement. “In addition, many employees are not taking advantage of educational opportunities provided by their employer. When they do, this education isn’t working and many are using outside investment advice.”

According to the survey:

• Employees expect only a third of their retirement income will come from their pension plan, while employers believe that employees can expect just over half of their retirement income to come from their pension plan.
• Less than one-third (30%) of employees consider themselves to be “actively involved” in their retirement planning decision making.
• While 58% of employees indicated that they have time to learn, half of the workers admit they do not use the educational support provided to them by their employer.

Some 79% of employees surveyed want advice about their specific pension plan. While 42% of employees indicated that they make investment decisions on their own, 54% of workers are currently receiving outside investment advice, most often from a financial planner, independent investment advisor, or their banker.

The study of over 2,000 members from 17 Canadian-based DC plans was conducted in March 2004.  More survey information is at  www.seic.ca .