Taking responsibility – Saving for retirement in a DC world



I have been so busy writing about government fantasies that I have fallen behind on writing about the pension arrangements that now cover most private sector workers these days – the much maligned ‘capital accumulation plan’ also known as the ‘defined contribution plan’ or the ‘we wish you the best of luck plan’.

Yesterday, Benefits Canada published an article addressing the disconnect between the expectations of employers and employees when it comes to saving for retirement using a defined contribution (DC) plan.

Benefits Canada tells us that the vast majority of employers want their employees to retire with ‘adequate retirement income’ but at the same time, these employers think that their role is to provide ‘tools and resources to help them (employees) make sound decisions’ and that ‘it is their employees’ responsibility to take an active role in their capital accumulation plans to ensure they retire successfully’.  Interestingly, 50% of employees ‘believe that, ultimately, their employer is responsible for ensuring they retire with enough funds to live on’.

Frankly, after 20 years working with defined contribution plans I continue to be shocked that employers don’t want to take a major role in making sure retirement benefits are adequate and at the same time I am shocked that individuals aren’t also wanting to be 100% responsible for the final outcome.  My dad expected all of his children to take full responsibility for their economic security and I am happy to report that my sisters and I have all done that.  I didn’t realize growing up that every other kid around the world wasn’t getting the same message.

Without taking sides, I want to make some simple observations:

If no one is taking responsibility for ensuring the adequacy of retirement income for workers because everyone thinks it isn’t their job, I have a suspicion that the job isn’t going to get done.

If workers don’t have adequate retirement income, they may not be able to retire at a reasonable age or at all – this can’t be good for employers, and definitely isn’t good for workers.

Consultants to the rescue

When I tell clients that the combined employee and employer rate of contribution in their DC plan probably needs to be increased if the goal is adequate retirement income — I am generally told that there is no money to increase the bucket of ‘total rewards’.  It is hard for me to argue with clients that they should spend more on payroll and provide business owners with lower profits.  That isn’t my decision to make for those businesses.

What I do wonder is perhaps if employers should rebalance the basket of total rewards, lowering salary increases (current pay) and increasing DC plan contributions (deferred pay)?  In the end, I have learned two things:  First, many (maybe most) DC plan participants are not saving enough for retirement.  Second, those participants want help.  The fact that we spent two years talking about the ORPP and also that we now have an expanded CPP is evidence that these things are true.

I think it is time for employers to move past providing ‘information’ and take things to the next level where the plans that they sponsor have enough money going into these programs to get the job done.  In the end, total pay is a decision for every employer.  I think as an industry we need to start to help employers think harder about the balance between cash and deferred pay.  The alternative is to give future governments the motivation to tinker further with our social programs — something I don’t think we should make the mistake of doing a second time.



Joe Nunes
Joe Nunes
Joseph Nunes, Co-founder and Executive Chairman of Actuarial Solutions Inc., has practiced in the area of pensions and retiree health plans for over 30 years. He has experience with many types of plans including single-employer, multi-employer, private sector, government, unionized, non-unionized, as well as registered and non-registered executive plans.


  1. Hello Joe

    Thank you for sharing your views.

    With limited resources and the complexity of saving for retirement, it is difficult to build consensus. That is why we have social initiatives such as CPP to bridge the gap.

    There is no amount of education that will assist the majority of employees to make the right choices among alternatives given the complexity and budget constraints. And I think that it is an error to take your personal circumstances (and mine as well) and project them out for society as a whole.

    People need help and it goes beyond education.

    On a separate note, I love your cartoons!

  2. Avatar William McDonnell says:

    Joe: people tell me that many employers do not wish to continue allowing their former active staff, now retired employees, to be offered a ‘suite of funds’ provided by the GRS Insurer Vendor they utilize because even though the retired member incurs the costs of being offered these funds into retirement, the employer is LIABLE should the member decide to ‘sue’ for insufficient investment earnings. Can an employer not simply have the now retiree sign a legal document to ‘release’ the employer from this perceived liability?

  3. Avatar Bob says:

    Firstly, far too much onus is put on the ER, they have a role but they are not responsible for all.

    To some degree, as a plan sponsor, the goal was to provide long service employees who were retiring from your organization a pension/continuing income.

    With immediate vesting a great amount of ER money goes to individual who will not be with your organization for a long period. The regulations also put much responsibility and liability on the ER and little on the individual and the amount of work continues to grow.

    Also not all employers and/or employees take the same view. In the organizations I worked for, I had good pension and benefit programs and we were losing good employees to other organizations.

    In exit interviews, the individuals outlined they were moving for money. When we discussed the pension program, the employer they were moving to did not have one or it was a small DC or Group RRSP arrangement. On the benefit side, the other employer did not have disability programs, did not provide retiree health and dental care. they also did not provide the range of vacation and stat holidays.

    But they did pay 10 to 15% more in annual earnings.

    In a world where it seems the average length of employment is shrinking, the question becomes to a plan sponsor why not set up a PRPP and/or a TFSA and communicate why and how people might save for the long term.

    In this arena, the sponsor has less admin, less expense and maybe can focus on the business at hand.

    While I likely agree with the view that a balance of income and benefits is a better way, it is becoming difficult to battle the finance side of both organizations and the individual who want it simple.

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