Struggling to attract and retain quality staff? A pension plan could make the difference.
“[Employees] are asking more and more about pension plans,” says Kevin McFadden, President of Sigurdson McFadden Benefits & Pensions. “It is a competitive marketplace for quality employees and that’s only going to continue to increase so I don’t see this topic as going anywhere except higher on the priority list of employers.”
In the last few years employers seeking advice about setting up pension plans has gone up “dramatically”, McFadden says.
A recent survey from Towers Watson shows 72 per cent of respondents believe their employees are more concerned about pensions now than they were 24 months ago. The release coincides with union disputes centering on pension concerns at both Canadian Pacific Railway and Air Canada, and industry leaders discussing the possibility of an impending pension “crisis”.
Some workplaces survey staff and find they prefer an increase in employer pension contributions to a pay increase because they recognize the long term value, McFadden says.
Employers should be asking whether they felt responsible for their employees’ retirement.
“By and large the answer has been ‘no’ in that only one in five private employers in Canada offers this sort of plan. I see that number increasing but not to anywhere near where it should be,” he says.
The main motivation behind most employers’ pension funds was to attract and retain employees, but it was also important for companies to maintain a turnover of staff. As older employees reached retirement age, they may choose to keep working if they are not adequately prepared for retirement.
“Due to age or health reasons their productivity may be lower so another reason to make sure your employees are prepared for retirement is to recognize that there will come a time when more productive employees should be taking over,” McFadden says.
Very few Canadians have pensions adequate for their retirement needs, he says. Plans where employers matched employee donations have considerably better long term results than those that were just shared funds.
There were distinct tax advantages for employers and employees in increasing pension contributions.
McFadden described an employer giving their worker a one dollar an hour raise. The employer’s costs went up proportionally, meaning that $1 would cost them $1.30 in McFadden’s estimation. At the same time, income tax meant the worker might only see $0.70 of that raise.
Comparatively, $1 put into a pension plan had no added costs for employers, and was tax exempt until it was removed by the worker.
As the first of the baby boomers reach retirement, inadequate savings could impact the national economy.
“This large bubble of the population is not adequately set up for retirement,” McFadden said “It’s going to cause huge financial problems and I think only when that happens will people and companies truly wake up to the magnitude of the issue.”