Canadians unable to afford retirement are working longer, employers can help them better prepare
Toronto, February 20, 2014 – According to a new survey by global professional services company Towers Watson (NYSE, NASDAQ: TW), while Canadian workers feel their financial situation has improved in the last two years, financial security is still a top concern. In fact, according to the Towers Watson Global Benefits Attitude Survey, half of the respondents under the age of 50 are worried about their current and future financial state.
“The survey results suggest there are multiple sources contributing to this financial anxiety. Among them is the lack of confidence in financial support from public benefits. Less than one-third of the survey respondents believe that Old Age Security and the Canada/Quebec Pension Plans will continue to provide the same level of benefits in the future as they do today, and more than 70% of respondents believe we will see diminished coverage under provincial health care benefits,” said Karen Burnett, a Senior Towers Watson Retirement Consultant.
Canadian workers also continue to struggle with the corporate cut-backs of the past five years. According to the survey, 76% of Canadian workers have endured cuts in salary increases and benefits, or have lived through significant organizational change. “Employers and employees alike have experienced a significant period of change and we are now living in a new reality,” said Burnett. “While corporate profitability has improved and rising stock prices have boosted retirement accounts, slow economic growth and stagnant wages continue to weigh on public confidence and contribute to a continued fear about a retirement crisis in Canada.”
The survey results show that Canadians are tackling their concerns about financial security head-on — by deferring expenditures, paying down debt and living more modest lifestyles. They are also saving more for retirement. In fact, close to two-thirds of survey respondents 40 or older rank saving for retirement as their number one priority.
Employers Will Share in the Retirement Crisis
While saving for retirement may be the top financial priority for Canadians, the survey results demonstrate that many are not saving enough. According to the survey, three-quarters of Canadians are saving below their ideal target and only half of the survey respondents believe they will be able to improve their financial prospects. For many Canadians, this means a delayed retirement. According to Dan Morrison, a leader of Towers Watson’s Defined Contribution consulting group, “the survey shows that many employees anticipate longer careers and will delay their retirement by 3 or more years. It is no surprise that those planning to delay their retirement tend to save less. However, the profile of those delaying retirement also tends toward employees who are less healthy, more stressed and are less engaged. Increasingly, this reality will be a challenge that employers will need to address in order to maintain efficient workforce management and productivity.”
In light of growing retirement pressures for both employers and employees, there are a number of actions that Canadian organizations can take in order to assess the effectiveness of their retirement programs and help employees plan for retirement. According to Burnett, “a key need is to better integrate employee retirement communication and education with organizational workforce planning. The technology and tools exist to close gaps in employee understanding about how much retirement will cost, and to provide employers with the analytics to determine if their retirement programs will support a structure that aligns with their workforce needs.”
Ultimately, the Towers Watson survey suggests that economic and social pressures will continue to drive increased discussion about the role that employers should play in ensuring retirement income sufficiency for Canadian workers.
About the Survey
Towers Watson’s Global Benefits Attitudes Survey examines employees' attitudes toward their health and retirement benefits. Conducted in 12 countries between July and September 2013, the survey was completed by 22,347 employees including 1,708 full-time Canadian workers, representing all job levels and major industry sectors. Results are weighted by age, gender and household income to the national average of workers. Margin of error for the total sample is +/- 2.4%.
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has more than 14,000 associates around the world and is located on the web at