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- 16 November, 2021 Rebuilding For The Better: Boosting The Bottom Line Through Workplace Retirement Plans
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November 16, 2021
The Empire Club of Canada Presents
Rebuilding for The Better: Boosting The Bottom Line Through Workplace Retirement Plans
Chairman: Kelly Jackson, President, The Empire Club of Canada; Associate Vice-President, Humber College
Tim Shortill, Healthcare of Ontario Pension Plan (HOOPP), Chief Operating Officer
Alex Mazer, Common Wealth, Co-Founder & Co-CEO
Rahima Mamdani, YMCA of Greater Toronto, Chief People Officer
Rocco Rossi, Ontario Chamber of Commerce, President & CEO
Distinguished Guest Speaker
Andrea Boctor, Partner & Chair, Pensions & Benefits Group, Osler, Hoskin & Harcourt LLP
It is a great honour for me to be here at the Empire Club of Canada today, which is arguably the most famous and historically relevant speaker’s podium to have ever existed in Canada. It has offered its podium to such international luminaries as Winston Churchill, Ronald Reagan, Audrey Hepburn, the Dalai Lama, Indira Gandhi, and closer to home, from Pierre Trudeau to Justin Trudeau. Literally generations of our great nation's leaders, alongside with those of the world's top international diplomats, heads of state, and business and thought leaders.
It is a real honour and distinct privilege to be invited to speak to the Empire Club of Canada, which has been welcoming international diplomats, leaders in business, and in science, and in politics. When they stand at that podium, they speak not only to the entire country, but they can speak to the entire world.
Welcome Address by Kelly Jackson, President, The Empire Club of Canada
Good afternoon fellow directors, past presidents, members, and guests. Welcome to the 118th season of the Empire Club of Canada. My name is Kelly Jackson. I am the President of the Board of Directors of the Empire Club of Canada, and Vice-President, and Associate Vice-President at Humber College. I'm your host for today's virtual event, “Rebuilding for The Better: Boosting The Bottom Line Through Workplace Retirement Plans.”
I'd like to begin this afternoon with an acknowledgement that I'm hosting this event within the Traditional and Treaty Lands of the Mississaugas of the Credit, and the homelands of the Anishinaabe, the Haudenosaunee, and the Wyandot Peoples. In acknowledging Traditional Territories, I do so from a place of understanding the privilege my ancestors and I have had in this country, since they first arrived here in the 1830’s. As farmers in Southwestern Ontario, I imagine they felt a deep connection to the land, and yet likely did not recognize how that connection was built on the displacement of others. Delivering a land acknowledgement, for me, is always an important opportunity to reflect on our human connection, and responsibility to care for the land; and to recognize that to do so, we must always respect each other, and acknowledge our histories. We encourage everyone tuning in today to learn more about the Traditional Territory on which you work and live.
The Empire Club of Canada is a non-profit organization. And I would like to take a moment now to recognize our sponsors, who generously support the Empire Club, and make these events possible, and complimentary, for our supporters to attend. Thank you to our lead event sponsor, Osler, and thank you, also, to our season sponsors, Bruce Power, Canadian Bankers Association, LiUNA and Waste Connections of Canada.
I want to remind everybody participating today, that this is an interactive event. And so, those attending live are encouraged to engage with our speakers, by taking advantage of the question box by scrolling down below your on-screen video player. We will try to incorporate as many questions as possible throughout the discussion. If you require technical assistance, please start a conversation with our team, using the chat button on the right-hand side of your screen. And we also invite you to share your thoughts on social media, using the hashtags displayed on-screen throughout the event. To those watching on demand at a later date, and to those tuning in on the podcast, welcome.
It is now my pleasure to call this virtual meeting to order. I'm delighted to welcome our moderator today, Tim Shorthill. Chief Operating Officer at the Healthcare of Ontario Pension Plan, also known as HOOPP; HOOPP is a multi-employer defined benefit pension plan that, since 1960, has helped build the foundation for financially secure retirement for Ontario's healthcare workers. In partnership with Common Wealth today, who is launching its new research report, “The Value of a Good Pension: the Business Place for Good Workplace Retirement Plans,” HOOPP's research and advocacy is focused on highlighting the value of a Canada-model pension plan, which provides retirement income security for healthcare workers in Ontario, and on promoting the characteristics of why these models are successful. We look forward to hearing about the research findings in the report, and how important workplace retirement benefits are, to both employers and employees. I'd like to hand it over now to Tim, to introduce the panel and get the conversation started. Tim, welcome. And over to you.
Opening Remarks by Tim Shortill, Healthcare of Ontario Pension Plan (HOOPP), Chief Operating Officer
Thank you very much, Kelly. Kelly and I were together some time ago, so it's very nice to see you again. Hello, everyone, good afternoon. My name is Tim Shorthill, and as Kelly mentioned, I'm the Chief Operating Officer at HOOPP, which serves Ontario's hospital and community-based healthcare sector, with more than 610 participating employers. Our membership includes nurses, medical technicians, food services, staff, housekeeping staff, and many others, who provide valued healthcare services. In total, HOOPP has more than 400,000 active, deferred, and retired members. I want to thank Kelly, and the Empire Club of Canada, for the welcome, and this wonderful platform. Today, we have an esteemed panel of experts, and exciting new research, which looks at the importance that workplace retirement plans play in Canada's retirement system. On our panel today, we have Rahima Mamdani, the Chief People Officer at the YMCA of Greater Toronto; Rocco Rossi, President and CEO of the Ontario Chamber of Commerce; and Alex Mazer, CEO and Co-Founder of Common Wealth. Alex is going to kick us off, and present some of the key findings from the research, and then we will jump right into a discussion with the panel. Today we're going to examine some of the challenges that Canadian employers face in offering workplace retirement plans, as well as explore the value that businesses could realize, when considering or enhancing retirement plan coverage in the workplace. Alex, we'll turn it over to you.
Alex Mazer, CEO and Co-Founder of Common Wealth
Thank you very much, Tim. And I want to start by talking a little bit about why we did this research. We are a retirement company, a financial technology company, with a mission to serve people that have been left out of the traditional retirement saving system, including workers for small and medium employers, modest-income workers, and self-employed professionals. And although we and HOOPP serve different parts of the market, and offer different kinds of plans, we share a commitment to improving retirement outcomes for Canadians through evidence and improving our overall retirement system for the benefit of Canada. And when we were looking at the state of the retirement debate in Canada, there has been an ongoing conversation about the retirement challenge that Canadians are facing; but we felt that not enough attention had been played paid to the important role that employers play in our retirement system. And so, we wanted to take a look at, really, the business case for offering a good workplace retirement plan. I'm going to highlight some of the key findings from the research, but the full report will be available for download, both from HOOPP’s website and from commonwealthretirement.com, for those who want to delve into further detail.
So, the place to start the conversation, one place to start, would be to look at the challenges that businesses across our country, as well as employers, and other sectors, are facing when it comes to attracting and retaining talent. Virtually every survey that's done of businesses, finds that attracting retaining talent is a key challenge for people. I certainly know this myself, as a leader of a growing company, trying to attract talented workers in the technology, sales, marketing spaces. Toronto was recently ranked the number one fastest-growing technology hub in North America, which is fantastic; Vancouver was ranked third. But it does create challenges for employers. And increasingly, employers are looking for cost-effective ways to attract and retain top talent.
This slide really tells the story of workplace retirement benefits over the last couple of generations, and it says a couple of things. The first thing that it says, is really that the type of retirement plans that employers have provided have changed, away from traditional defined benefit pensions, towards kinds of plans like defined contribution plans and group RRSPs, that put more risk on the shoulders of individuals, and require them to make fairly complex decisions that, in many cases, they're ill-equipped to make. The other thing that this shows though, is that there's actually never been a point in Canadian history, when more than half of private sector workers had any kind of retirement plan at all; there was actually no golden age when everybody had a pension. And today, there are over 10 million Canadians—in other words, the population of Toronto times 2—that don't have access to a workplace retirement plan. And so, the challenge is, how do we provide that kind of access to more of our residents and workers who live in this country?
We felt, in putting this research together, that although there's a lot of arguments that are made for and against providing workplace retirement plans, there hadn't been a comprehensive business case put together. And in the absence of a business case, discussions about retirement security often get reduced to issues purely of cost, and we wanted to encourage people to think about it, not just as a cost, but also as an investment in human capital, as an investment in the bottom line. And so, we came up through our research, which included interviews with many employers across the country, as well as a survey of over 800 employers from across Canada, we came up with a 4-part framework for this business case, that I'm going to take you through some of the highlights today.
The first part of the argument is around what we call compensation efficiency. And what we mean by this really is, what bang for the buck do you get as an employer, for the compensation dollars that you spend? For most employers, this is the number one area of spend, and so you want to be as cost-effective in deploying that compensation envelope as possible. And so, what we look at, really, is how do different kinds of retirement arrangements, from providing no plan at all at work, to providing a best-in-class plan, how do they contribute to that compensation efficiency? And we identified six things, six factors that drive value and efficiency in retirement arrangements. They're things like automatic and regular saving, often with match contributions by the employer, often done through payroll, is incredibly powerful. The lower fees and costs that come from being part of a larger group workplace plan; Canadians pay some of the highest retail fees in the world, and workplace plans can considerably lower those costs. And it's things like investment discipline, helping workers make sensible investment decisions, and avoid the common mistakes that many individuals make when they're investing for retirement. So, when we look at those value-drivers, and we apply them to different kinds of archetypes of retirement plans, everything from a typical do-it-yourself, or typical individual approach where your employer provides no plan, right through the kind of Canada-model plan that, for example, HOOPP exemplifies, that Tim mentioned earlier, we find very large differences in the efficiency with which people can prepare for retirement. We looked at basically what is the cost for a typical worker to save enough to be able to maintain their standard of living in retirement? And we found that this could range from anywhere from $1.2 million over a lifetime, to a little more than $300,000, in the case of a best-in-class plan, a difference of almost a million dollars for a typical worker. And at a time when Canadians are increasingly concerned about the cost of living and affordability, you know, what this really says is, employers can help make the cost of living, the cost of retirement, one of life's biggest expenses, considerably more affordable and more cost-effective through workplace plans.
Another way to look at this is, how much is somebody's annual salary would have to go to retirement savings to achieve that retirement goal in these different kinds of arrangements, and how much money is left over after that for other uses, like take-home pay, or to pay for other elements of expenses? And this is a key part of compensation efficiency, because it really tells you how much of the compensation envelope you're providing to employees, will be available for uses other than retirement. And here we find, you know, a difference of up to 69% in the pay that would be available for other purposes, depending on the kind of retirement arrangement. In other words, if employers can help make retirement much more affordable for their workers through a quality workplace plan, they can free up more of that compensation for other uses, and therefore provide more value to the employee for the compensation dollar that they're spending.
So, where does this value come from? And this chart basically breaks down the sources of that value. It sounds like a very large number. Some of it comes from lower fees, that's maybe a bit unsurprising, because there's been a lot of debate about the value of lower fees. But it's a bit surprising to some, how much of the value comes from things like helping people avoid common investment mistakes, or pooling longevity and investment risk, which is another way of saying helping people avoid the risk of outliving their money, or a bad market downturn, an ill-timed market downturn just as they're entering retirement. Another key part of the value is what we call portability, and this is really allowing people to continue to benefit from these value-drivers, both as they move from job to job, and also as they move into retirement. We did modeling in the report that basically compares somebody who actually has the benefit of workplace plan, but doesn't have portability, with somebody who has access to a plan that they can take from job to job, and into retirement. And we found that there was a difference in retirement income, again, for a typical worker, a middle-income worker of over $600,000, in this case. So, there's huge value in allowing people, especially as the workplace changes, to have a portable plan that they can take with them.
So, the second element of the argument of the business case is around talent, attraction and retention. And this is obviously linked to compensation efficiency, because if you have more efficient compensation, you will be more effective and attracting quality talent for every dollar that you spend. But another way to look at this is, what do employers say are the most effective benefits, when it comes to attracting and retaining talent? And for this, we turn to the survey that was done in conjunction with this report. Basically, what employers reported to us, was that retirement benefits were the number one most effective lever for recruitment, and the number two most effective lever for retention. And this is comparing against things like pay, health benefits, disability, upward mobility, and other kinds of benefits that are being discussed a lot. So, employers themselves who provide these plans, say they're highly effective at accomplishing these attraction and retention goals.
The third element of the business case is around reduced financial stress for employees. And there's an increasing body of research on this, that shows a link between financial stress for employees, and the productivity of those employees at work. So, I'll give one example of this. The Canadian Payroll Association recently did a study that found that financial stress was costing Canadian employers almost $16 billion per year. And why is this? It's because many Canadians who are financially stressed are distracted by those financial stresses during the workday, and it prevents them from focusing on their work, because they're worried about paying their bills, living paycheck to paycheck, or having adequate savings to be able to retire. So, if we can do something to reduce that financial stress, there's a big impact on the bottom line. So, we asked employers about that as well. And what they said was that retirement benefits were the number one most effective tool, in the survey of 800 employers, for reducing financial stress, because you're helping people to save, build that confidence, and build that financial security for the long term, and therefore allowing people to focus on their day-to-day work, and not on the stresses of their finances.
The fourth element of the business case is becoming increasingly important, and it is around environmental, social and governance factors. More and more investors, including pension funds, and other institutional investors, are focused on ESG. And as they get more focused on it, one key area of concentration is the SESG, the social element; are employers doing a good job taking care of their human capital, taking care of their employees? And, given the important role that retirement benefits play in attraction, and retention and compensation efficiency, we think this is going to be an area of increased focus for investors, and therefore something that employers will benefit from focusing on as well. There are also increasingly clear gaps, from an equity perspective, between the retirement wealth of women, Indigenous Canadians, and people of colour, and white Canadians out there on the other end. Recent studies have shown a gap of between 25% and 30%, so offering retirement benefits is also an important thing employers can do to help create more equity in the workplace.
So, you know, given all this evidence, it sort of begs the question of why aren't more employers offering retirement plans? Why do we have 10 million Canadians without a workplace retirement plan? Well, you know, we've actually made it very hard for employers to offer quality retirement plans. That's starting to change, but we thought we should offer some solutions for policymakers, for businesses and for the industry, that would make it easier. And this assumes, by the way, that we continue with our system of it being voluntary for employers to offer a plan.
So, how do we make it easier? I'm just going to highlight a few of the of the recommendations, they're laid out in more detail in the report. So, one area to explore is what's called automatic enrollment, and this basically would allow employers, if they want to, to automatically enroll their employees in whatever kind of retirement plan they're offering. This has been done in the US since 2006, and now half of employers in the US are doing this option, and its increased participation in plans by 60%. And we found that if we did the same thing in Canada, we could get almost 500,000 more Canadians saving for retirement, while still making it totally optional for employers to use this feature. So, it seems like a smart thing to do. The other thing to highlight here is the idea of encouraging portable multi-employer plans outside the public sector. HOOPP is a great example of a portable multi-employer plan within the healthcare sector in Ontario, and there are some other examples too. For example, Rahima and our organization are working on an initiative called Common Good, which is a plan for not-for-profits who don't have a plan today, which is portable across that sector. But we think government should encourage more of this kind of thing, especially as the nature of work changes.
For businesses, you know, a couple of things to highlight, you know, one would be simply to offer a plan, if you're not offering one today. There have been innovations in the last five years that make this much easier, and we think the findings in the report challenge some of the conventional wisdom you sometimes hear, that you shouldn't offer retirement plan until you're larger, and that it's something that you should only put in place after you've got other kinds of benefits. We think employers should be thinking about that, really, from the beginning, if they can find an easy way to put something like that in place. And if you have a plan today, if you can enhance the value of that plan, then that's going to have a positive impact on the bottom line. So, looking at the six value-drivers we talked about is something that, in improving your plan, whether it's by upgrading and changing your plan, or changing some of the design elements, can have a very positive benefit in terms of your human capital strategy.
Now, the retirement industry itself, we also think could do a better job and continue to innovate, and also explaining to people the value, because this is something that's not always well-understood by employers, and by employees. So, I think the industry can help make it easier for people to capture the value; hopefully, you know, this report helps contribute to that as well, by offering a bit of a framework that HR professionals, and finance professionals, and leaders, and employers can use. So, to sum up, before turning it back to Tim, retirement benefits are a highly effective form of compensation that can deliver potentially up to a million dollars of value over the course of a lifetime. They're ranked by employers as the number one or number two tool for attracting and retaining talent, they can be highly effective in reducing financial stress, and they're going to get increasing scrutiny, likely because of the growth of ESG. So, there are solutions available that can help the 10 million Canadians that don't have a plan, while also helping our economy. So, I'm going to turn it back to Tim, but we'll look forward to the panel discussion and the questions. Thank you.
Excellent. Thank you, Alex, that was great. So, yes, let's get to the panel discussion. And I'm going to start with Rocco, and Rocco, first off, let me just thank you for lending your voice and your leadership to this important discussion. Now, your role, in the role of the chambers, as a leading advocate for businesses here in Ontario. But let's talk about the small- and medium-sized businesses. And in your view, how can they contribute to retirement security here in Canada? And maybe a second part to that, Alex talked about, you know, we make it difficult for these companies to offer retirement security. So, in your view, what's preventing them from doing it?
Rocco Rossi, Ontario Chamber of Commerce, President & CEO
A great question, Tim, and just an absolute delight to be on such an esteemed panel on an important issue. And I guess the first thing I'd say is, you know, we titled the panel ‘rebuilding for the future,” and as Alex has pointed out, this, in the case of many, the over 10 million, most of whom are being employed in small- and medium-sized businesses, this is about building for the first time, right? The war for talent is not something that was suddenly discovered during the pandemic; we had enormous skills gap before. And in fact, for the five years prior to the pandemic, in our annual survey at the OCC, we found that the skills gap, or that access to appropriate talent, was the number one concern on the mind of our members ahead of taxation, ahead of even hydro pricing. So, crucial, but it's two things. And really to underscore a point that Alex made around explaining the value, because for many employees, once they understand the value of retirement, of compound interest, of that kind of security for the future, then the efficiency argument becomes powerful. Without it, the efficiency argument actually goes away. There is no question that once you accept the notion of efficiency, then having a plan is a far better way to get to retirement security than not having a plan. But if you're particularly younger employees, without that explanation of value, what their concern is, is the immediate expense, and so, the number one issue in compensation that we get from many of our of our workers is just “pay me the maximum today, because I have today's expenses.” So, it's how do you explain that value, and small businesses with limited capacity are really not in a position to be the educators on this issue, and so there is that need there. And then there is the second need of how to make it easy for them to get on board. And so, things like OPTrust, that had been developed so that you don't necessarily need to have the size and scale of the healthcare industry, have been crucial elements to expanding the potential for our sectors.
Excellent, thank you for that. Rahima, let's turn to you, Chief People Officer—I keep saying pension, but Chief People Officer—for the why. And in the presentation, Alex talked about attracting and retaining staff, which I know is a key focus of organizations, but from your point of view, and from your organization's point of view, do you see a difference between organizations that offer retirement security, and those that don't, in terms of attracting and retaining employees?
Rahima Mamdani, YMCA of Greater Toronto, Chief People Officer
Oh, good to be with all of you today, I'm really happy to be part of this discussion. And so much, and that report really resonates with my day-to-day experience as an HR person, and I really do think that organizations that offer retirement plans do have a competitive advantage. And we've been hearing, now both from Alex and Rocco, about the very tight labour market, I think getting worse now as we're starting recovery from the pandemic. We hear so much about businesses that are just not seeing as many qualified candidates, roles going unfilled, you know, we've had strong candidates being counter-offered by their employers to stay, often with things like more flexibility, but really a lot of higher pay. So, I think anything that can be done to make a workplace more attractive, is really important in this market, and compensation is top of mind as the cost-of-living increases. You know, Alex can maybe talk to this a little bit more, but there were certainly studies that we saw in the pandemic, that many frontline workers don't have emergency savings. And we've known for some time that without retirement savings plans, a lot of Canadians don't have enough for retirement. So, anything that an employer can do, to support long-term financial sustainability for people, I think is going to be really attractive. And as Rocco said, you know, a lot of employees don't understand pensions well, but they do know that, you know, they don't necessarily do as well with retail rates of fees, and that they're not really sure how to, you know, where to where to go for kind of trusted advice. And so, if their employer can support them, and help them build that confidence in their long-term savings, I think it makes, you know, it really does give employers that edge. And I think of compensation as being like a three-legged stool, so you've got wages and salary, which, you know, do take people's immediate attention, but also benefits and retirement savings. And all three of those work together and are very important. So, depending on the stage of life that someone might be at, you know, different ones are going to be maybe more top of mind. But all of them are really critical. And so, I think, for employers looking to get that competitive edge as there is the score for talent, it is, it is something that we're seeing is a real difference.
Excellent, thank you, and I also want to thank you for lending your voice and leadership to this important conversation. And you started to touch on a topic that I'd like to probe a bit more on, and it has to do with financial stress, but also the stress of the pandemic, combined with financial stress. And so, recently, HOOPP commissioned a survey that found almost three in four employer respondents agreed that employees who experience financial stress are less productive. And I just want to get your view of how have you observed this correlation between financial stress and productivity?
Well, I think, you know, so many employers, if not all, are just seeing a real rise in mental health issues due to the pandemic, with new and deeper stresses. So, even if your workers haven't been affected by things like wage rollbacks, or reduction in hours, or temporary layoffs, their spouses may have been, or other family members, and it really contributes to this rising sense of anxiety that a lot of people face. And specifically, when it comes to productivity, you know, finances and compensation, I see those as a distracting factor. So, when people feel that they have enough for their needs, or that they're paid fairly for the contributions that they make, their energy is freed up to go elsewhere. Otherwise, it really is something that consumes a lot of people's attention, and rightly so. So, when people are worried about their finances, they might now start looking elsewhere, to see what other jobs are on the market, and as we've talked about, there's lots of choice out there. So, that really contributes to productivity in the workplace. And higher turnover, of course, creates costs for replacements; it also causes a dip in productivity, as you're now looking for new people, and you've got jobs going unfilled, you've got time for orientation, and making sure people are fully ramped up in their new roles, and, you know, and where people stay, if they're not leaving. That instability and stress, I think can really lead to a lot of health issues. Even before the pandemic, we were seeing a rise in mental health claims, and disability benefits; even more so where you've got this extra financial layer of stress. And that, of course, then means that when workers are off the job, it means that others have to pick up additional work, and the costs continue to rise. So, the finding in the study of the three quarters of employers saying that financial stress in affects productivity, I think, makes total sense, in my experience, as well.
Excellent, thank you. Rocco, I'm gonna go to you. Same question, but from your point of view, and the view of your membership, essentially, how are employers addressing employee financial stress—especially during this pandemic—but can retirement plans and pensions play a role there? What's your view?
Certainly, they can play a role, and I think there's an additional stress that we can't lose sight of. And that is, with a rapidly ageing population, there is actually a societal stress. Because think about it, the worse off people are coming into retirement, the greater likelihood that there's going to be a larger burden that needs to be borne by the government, i.e. by the remaining taxpayers, to make sure that people are taken care of, in decency and respect in retirement. And so, there's actually also a societal imperative to have the best possible retirement investment system available, to as broad a segment of the population as possible, because certainly, our members worry not just about today, but about what kind of, you know, requirements, particularly on the tax side, are going to be required by them and their businesses going forward, to continue to provide for the standard of living that we'd all like for all of our co-citizens going forward.
Excellent, thank you. Let's bring Alex into this. And Alex, to kick it off, thank you for your voice, leadership, and partnership on this particular research. In your presentation, you spoke about ESG. Let's focus in on the S. And can you talk to us a little bit about how the research suggests how pensions can play a role in the social part of ESG?
Yeah, it's probably the element of ESG that has gotten the least attention. Now, I'm not an ESG expert, but there'll be environmental and climate issues have gotten more attention; certainly, governance is something that institutional investors like pension funds, governance on companies and boards, that gets a lot of attention. But the S is getting more and more attention, there are more and more calls for companies to share data on this, there's more scrutiny and conversation. For example, in his annual letter to CEOs, BlackRock CEO, Larry Fink—BlackRock’s the largest asset manager in the world—talked about this issue of retirement security as an important one for CEOs to focus on. So, you know, it's that type of conversation, I think we're gonna see more of, you know, if as Rahima has said, this is a powerful tool, a competitive edge that employers could use but aren't using, or they're not using it as effectively as they could, I think that might be something that institutional investors are going to ask about. And as I mentioned earlier, there's not a lot of data on this in Canada, but there's more and more data about the wealth gap that exists between people of colour and white Canadians, with Indigenous peoples. And retirement, because it's such an important area of wealth, it's a huge part of people's financial security. And because companies can make a big difference on this, you know, we think there's gonna be more and more of a conversation about what are you doing to promote to close that wealth gap as employers? And if you can offer a retirement plan, and that's a proven way to do it, then that's a lever that you should use as well.
And when you talk about the powerful tool, Rahima let me ask you, when employees think about compensation, but total compensation, are they thinking just about the base pay? Are they thinking broader than that? Are they thinking about pensions or retirement security? What's your sense of that?
Well, I guess it really depends on the type of workplace, right? And you know, what the employee body is like. I think of those three areas that I mentioned, when it comes to pay, benefits, and retirement savings or pension, it's probably the least understood. At the same time, as people are getting closer to retirement, are starting to really invest some time understanding these issues, you know, the light bulb goes off about how important this is. And so, they're looking for the best possible plan design, and, you know, Alex's presentation, you know, it's, it's really quite dramatic, what different plan designs, you know, can really achieve in terms of outcomes. So, I think the more that employers educate their staff about these issues, the more there's an interest, and I've certainly seen that in workplaces before. And I would also say that employees really are pushing employers now, on their social good, you know, in terms of their own missions, in terms of how they actually are doing their work. But also, there are questions about so if we've got a pension plan, where are we investing our dollars, and do those actually meet the organization's values, and my own personal values? So, I do you think that there's a real coalescing around this issue, for sure.
Excellent. Well, let's open it up a little bit. And we've spoke, or we've heard a little bit about Common Good, but Alex, I wouldn’t mind hearing a bit more about that, or Rahima, from your point of view. Rocco mentioned the innovative new offering from OPTrust, OPTrust Select, and the college's plan, CAAT has provided an offering called DB Plus; these are really innovative solutions. Let's just have a bit of discussion about your view of these innovative solutions, and what else might be out there that we should talk about, and maybe highlight to some of the employers within Ontario and Canada. Who wants to go first? Who has a particular view on this?
Rahima Do you want to do you want to talk about Common Good a little bit?
Sure, I'd be happy to start. And you know, all of the providers that you've just mentioned, I think, you know, meet different needs around this. But, you know, as we're looking at how to provide plans that are portable, as Alex mentioned, you know, I personally, even having worked in this area for some time, when I saw the numbers of the portability factor, I found it shocking, you know, you kind of know it's there, but I've never seen it quantified before. And so, plans that are portable for people as they move from one employer to another, I think are really important. But the other aspect is really as employers, and Rocco, you mentioned this before, is a lot of employers are smaller, they don't have pension expertise on staff, even if they have an HR department, you know, pension is a real specialization that a lot of people don't understand very well. You know, there's a concern about the long-term costs of defined benefit plans, for example, but things like CAAT and OPTrust are now taking some of that away. And Common Good, I think fills another niche for smaller employers, and, you know, it allows employers to come into a plan where the work has really been done. It's been designed and vetted in a way that you can feel that you can trust that this is actually a good retirement offering. And as an employer, you don't have to do that back-end work, and it actually takes down your level of risk as well; and risk, of course, is a big thing that employers are concerned about. It also builds in things like your education for your employees, you don't have to actually create all of that yourself. So, I think those are really very, very important. And so, Alex, I don't know if you want to maybe expand on Common Good specifically, as a really new and innovative model as well.
Yeah, I mean, I agree with the points that have been made. Like, if there are 10 million Canadians with no plan, and, you know, the World Economic Forum has said that the global retirement gap is like a $70 trillion problem, like there's no one institution or plan that's going to solve this; we need innovation, we need policy change. We try to contribute to it through technology, and trying to make it really easy for small and medium, not-for-profits or businesses, you know, to offer a better version of a group RRSP, and group TFSA, that has portability, and that has education. I think Rocco made a really important point that we can't rely on employers to be the educators on this, we, you know, we need to as an industry do a better job helping people understand the value and communicate that value, so that employers can benefit from that value. Because if employees don't understand the value, then all this efficiency, as Rocco said, essentially goes out the window. So, you know, it's interesting to see from, you know, where we sit as a FinTech, if we look at all the investment around the world, VC and other investment that's gone into FinTech, very little bit has actually gone into tackling this retirement challenge, and we think that needs to change too. Because of the scale of the problem, and the opportunity, you know, it's great to see our pension funds, you know, whether it's HOOPP through research, whether it's CAAT or OPTrust, stepping up to try to solve this problem. And, you know, governments are starting to do more, they enhanced the CPP, but there are other changes that they could make as well. And it's great to see leaders from the not-for-profit sector, the Common Good Initiative is really a collaborative initiative between our organization and leaders like Rahima, and many others’ foundations in the sector, that said, “look, we need better solutions for not-for-profits, we need more than one solution, we want something that's portable across the country.” So, that's nice to see, but given the scale of the problem, you know, we need to accelerate this kind of innovation, and put more focus on this, as the population ages, and fewer people have those traditional pensions.
Well, we at the Ontario Chamber of Commerce, and the chamber movement across the country, provide a white-label group RRSP program, to try to simplify things, and allow an entry point for small- and medium-sized businesses to provide this as an additional value to their employees, to have it as something that they can compete for talent, but that makes it as simple as possible, and really reduces risk, reduces cost, puts the onus on education on the plan provider, that partners with the businesses as opposed to the employer because, you know, forget about having an HR department, in the SME world, very often that person is Head of Production, you know, General Counsel, HR and Finance. And so, there's really an enormous time constraint, not to mention a financial constraint. I mean, not everyone has the margins to be able to provide, you know, very rich plans; that said, they want to do their best to compete in the market. And so, how do we allow them to step into it, and provide that entry for themselves and for their employees? Because I'm a huge believer, again, because of the societal stress at the end of the day that we, you know, we HOOPP today, or we are HOOPPed later, right? As a society, I mean, we need that plan that is available, understandable, affordable today.
Thank you. Well, we're going to take some questions from the audience shortly, but I have just one last question, and I'll open this up to the panel. We're joined today by some friends and colleagues from the Ontario Ministry of Finance, from the Ontario regulator FSRA, we're all in the room right now—I can point my friend Judy from FSRA and wave—but with them in the room, and the good work that they do to either set the policy, regulate the policy, what advice would you have for them, to help further employers adopting greater retirement security plans? Alex, given your background at the Ministry of Finance, let's start with you, we'll go to Rahima, and then Rocco.
Well, yeah, there's lots we could talk about, but I guess if you boil it down, you know, policymakers and regulators should be making expansion of coverage a top priority. You know, when you when you look at ratings of Canada's retirement system, Mercer does an annual rating, and our number one weakness—we get a B+ usually, which is okay, but we could be better—is around, you know, this 10 million people, and what are we doing to help them. So, although there are steps being taken, you know, I think FSRA put out something on automatic features and automatic enrollment in the last couple of weeks, which is great to see, we think more focus should be put on helping small businesses, smaller employers, provide access to plans in a way that's very easy, and doesn't require them to take their eye off the ball in terms of just running their organizations
Rahima, your thoughts?
Well, I would wholeheartedly agree with all of that, and I guess I would just add, whatever can be done in terms of incentives for plans themselves to open themselves up to others joining, I think, and, you know, providing the access, so that others don't have to build themselves, I think would also be incredibly helpful.
Reduce regulation and leave more money in the pockets of small businesses so they can invest in their people.
QUESTION & ANSWER
Excellent. Thank you. So, we'll turn to some questions from the audience. And Rocco, I'll start with you. You made a comment that your members see the societal value of better retirement security. So, then, in your view, what is the remaining hurdle? What is keeping your members from moving forward on this?
Well, some of it is just resources, because again, you know, not everyone has 50% EBITDA margins, and so that they are challenged. Secondly, is that issue of being able to educate so that the employees are actually putting a value to it, because again, if saving for retirement is not a top priority for them because of and stage in their career, then you can't make the efficiency argument to them, because they've already rounded that down to zero, they want the cash today, so maximize my base pay, maximize what I can do to deal with my costs today. So, education, spread out, and then how do you simplify it? Because I don't have an HR and pension department, how do you template it in such a way that it's plug and play for me, as a benefit to add for my employees?
Excellent, thank you. Rahima, I'll go to you with this next question. And this might be a difficult one, but it's a great question to ask. And the question is, are there downsides to a pension, such as, quote, “golden handcuffs,” given that many individuals only stay with an organization for a few years? Do you feel that pensions actually restrict career mobility, or movement within the greater economy? And I’ll happily open this up to others, but Rahima let's start with you.
That's an interesting question. You know, sometimes employers come to the end of an employment relationship, and they would like someone to be ready to move on, but I don't think that that's an overarching problem for employers, you know, especially in this labour market, I think people are more focused on implementation and retention. You know, so if we were actually able to improve things with greater portability, it wouldn't be as big of an issue, either. I think, you know, when you create a great workplace, whether that's because you've got, you know, lots of training and development, or an excellent culture, or, you know, opportunities for career growth, all of that is something that you want as an employer, and so pension would be a part of that. So, to think of that one element as something that, you know, well, if we give people that, then somehow it's there's going to be a downside, I don't, I wouldn't necessarily think of it as something that should stand out in that way.
But logically, Rahima, if, you know, to try to explain to small business owner, I get that, you know, having a pension plan is then a tool to compete in the war for talent, but if that tool is portable, then the common sense part of me says, actually, then that's not something that I can use to keep people, because they can just take that. It's a nice additional benefit, but it's not something that that is going to be the piece that retains the person, I've got to then do the other things around it to retain. But I'm helping to find something that then I don't necessarily see the long-term benefit of
The next question—and Alex, why don't I start with you on this one, but the others may have a view—when you think of a small business who might be administering a pension plan, or retirement program, markets go up and down; so the value of what's in that retirement security program go up and down. So, how is a small business expected to manage the financial risk of when the markets go down, and they're required to essentially top up the pension plan, or top up the retirement account? Your thoughts on this?
Well, I think that's why we saw the chart, you know, in why, you know, the types of plans that are provided have shifted right? This idea of a single employer managing a defined benefit plan, especially if they're smaller, has become untenable for some of the reasons you've mentioned. And that's why people have shifted more to what are called capital accumulation plans, where the employer doesn't bear any of that risk, and the employee makes a choice of investments. And I think our view is, there are some options in between those two extremes, that don't require the employer to bear those risks and manage those investments—which doesn't make any sense for a small employer—and putting everything on the burden of the employee, and having to make them choose from dozens or even hundreds of funds where they get terrible results. So, you know, and there are many different kinds of options in between, like what we offer is in a group RRSP category, but with a lot of features that, you know, add retirement planning, and make it, in a way, more like a pension. And then there are defined benefit pension plans that are multi-employer, that don't require the employee to or the employer to bear that risk. So, those are both interesting solutions, and I think some of the discussion that Rocco and Rahima were having around retention really speaks to the need actually to have multiple solutions, because there are different designs that are gonna be more appropriate for different kinds of workplaces. If you're trying to solve for a younger workforce, you might want a different design, if you have, you know, turnover every two years of employees, that's going to be different than if you have turnover every 10 years. So, that's a conversation where, you know, you can talk to providers and look at different options, but not every employer is the same.
One last question, before we turn it back to Kelly to sort of close us off. And we've touched on this a little bit, but when you think about a business here in Ontario, whether or not they're selling a product, selling a service, or providing a service, much like the YMCA does. When they're organizing their workforce, it's really about the employee during the workforce. So, why should an employer be focused on providing something like a retirement plan to their employee, that is only beneficial after they leave the organization? Why should an employer be obligated to think about that timeframe during their employee’s lifecycle? And Rocco, why don't we start with you, and then go over Rahima and Alex.
Yeah, I mean, again, it comes back to the business case that Alex laid out at the beginning. You know, you think about it because you see it as one of the tools in the arsenal to build the best case, to attract and retain the best talent, because I'm thinking about you, this is part of your compensation, you're gonna want to save for retirement, so all of that is a reason to be thinking about it; and two, the longer-term societal implications because, you know, if we don't take care of those 10 million people without, and many of those who do have it, but maybe have bad pension plans, those are all going to be people within our society that society is going to have to take care of at some point, and to do that they're going to tax the economy. And so, again, there's also a long-term self-interest, that the better job we do at providing retirement security and equity for people, the more likely we're going to have an environment where you've got a stable, livable, workable society to live within, and that's in both our self-interest, and in our humanity.
That's excellent. Rahima, your thoughts?
Well, I think employers are really focused on trying to be an employer of choice. So, thinking about your employees, outside of just what happens, you know, now we're not necessarily all coming into a workplace from nine to five, but thinking about people, as you know, their whole selves, the mental health issues that they might have, the childcare burdens that they might have. You know, when you're trying to think about being the best possible employer to attract and retain top talent, there is a reality outside of what just happens in your workplace. And I think employers who recognize that, do better in terms of the kinds of employment that they can offer. And I think it does, you know, coming back to that very first question you asked me, it does actually give you a competitive advantage. And I think, you know, over the last year or two, there's been a real reckoning on many issues, you know, so thinking about mental health as a societal issue that really plays out in the workplace, and has an effect on your own productivity, but also thinking about issues of racism and inequity, and you know, Alex has brought up a couple of times issues of inequity that we have. And I think what we tend to do, is we respond, often, to issues of, you know, stresses or financial issues as individual challenges, and so, we respond with supporting individuals, but we really know that a lot of this comes from systemic issues that really contribute to how your employees are feeling. So, I think when you recognize that, and you pair that, you know, idea of good retirement savings, thinking of people as their whole selves, with other issues that you're probably going through as an employer, right now as well, thinking about how you contribute to income inequalitym and diversity, equity and inclusion, all these things, I think, play together. So, it really is taking a more holistic view than that very short-sighted, I've only got people for a few hours in the day, and that's my only concern for them.
Excellent. Thank you Rahima, and just thinking about your answer and Rocco's answer, it's exactly why HOOPP engages in this type of public discourse and research, in partnership with organizations like yourselves, and with Comon Wealth. And so Alex, I like to give it the last word to you before we turn it back to Kelly,
Maybe I'll end on a note of optimism. And we've talked a lot about the challenges of offering plans, but what we're seeing is more and more interest in this among young people. I mean, HOOPP has some great research that shows that young people actually do value this if it's explained to them properly; small businesses, technology companies, you know, players that wouldn't necessarily expect to be thinking about, you know, these long-term issues, are starting to think about it for some of the reasons that Rahima and Rocco have very eloquently described. So, I'm hopeful with a combination of innovation, policy change, and some of these tailwinds, when it comes to what employers are focused on, we're going to see, hopefully, you know, the next time we have a panel like this, it's going to be fewer than 10 million people without a plan; we can actually make a dent in this, both economic and societal issues. So, yeah, I'm really grateful for everyone who attended, and HOOPP for partnering on this important piece of research.
Yeah, and I just want to thank the three of you, and I'm keen to see what the next big societal problem three of you seek to solve. Kelly we’ll turn it back over to you.
Thank you, Tim. And thanks to Alex, Rocco, and Rahima, for joining us today. I'd like to now introduce Andrea Boctor, Partner and Chair, Pensions and Benefits Group at Osler, to deliver today's appreciation remarks. Andrea, welcome.
Note of Appreciation by Andrea Boctor, Partner & Chair, Pensions & Benefits Group, Osler, Hoskin & Harcourt LLP
Thanks, Kelly. On behalf of Osler, we are proud to sponsor the thought leadership presented here at this panel today. Tim, Alex, Rahima and Rocco, your questions, research, and comments, show us that pensions are so important in so many ways; important for individuals and planning their retirement, important for organizations retaining talent and managing their workforce; important for society, in enabling a good standard of living for older Canadians. Your questions, and research, and comments, also show us just how valuable an efficient pension is, that it has value well above and beyond the dollars that are put into it. Thought leadership is important to us at Osler. The members of our firm, and our pensions and benefits department in particular, devote a lot of time, and effort, and resources, towards projects, and advocacy aimed at improving the retirement income system in Canada; your research and experience can only help further that cause. We applaud your thought leadership, and we are truly grateful for the honour of sponsoring a discussion at the Empire Club on this important topic, with such distinguished and knowledgeable people doing such good things in our pension industry. Kelly, I'll turn it back to you.
Concluding Remarks by Kelly Jackson
Thanks, Andrea. Thanks again to our panelists, and everyone joining us today, or participating at a later date. Our next event is on November 23rd, at noon Eastern Time. Join us as we explore, with an expert panel, how Canada's video game industry has quietly grown into one of the largest and most successful in the world. More details, and complimentary registration, are available at empireclubofcanada.com. This meeting is now adjourned. Have a great afternoon. Stay safe and take care.