In both Canada and the US, DC plans are becoming the primary vehicle for retirement savings, trumping older-style pension plans such as defined benefit (DB) plans. However, Mercer warns that there are still a ways to go, for issues of participation, contribution levels, investment options, and conversion to pension income still persist.
The study did find that plan sponsors in both countries were increasingly offering a greater range of investment vehicles, most notably of which are ‘premixed’ funds that target risk through asset allocation and specific-year payouts through ‘lifecycle’ funds. Some 63% of US plan sponsors now offer these types of vehicles, up from 25% in 2000. Only 45% of Canadian plan sponsors offer pre-mixed funds.
“Employees bear the investment risk in a defined contribution plan, but it’s up to the plan sponsor to offer competitive investment options and communicate the plan effectively so that employees can take full advantage,” says Perry Williams, Atlanta-based senior consultant for Mercer IC and an author of the study, in a press release.
Mercer Investment Consulting conducted the survey in April, based on 434 responses. The report may be downloaded free of charge at www.merceric.com .