Could a retirement savings plan help bridge the gap between employers and unhappy employees who are quitting to find something better?
The Great Resignation is the phrase used to describe how people are leaving jobs they may have tolerated in the past in search of something better in areas such as pay, working conditions and flexibility to do the job at home. Call it yet another surprise economic disturbance emerging in the pandemic.
A survey sponsored the Healthcare of Ontario Pension Plan (HOOPP) suggests workers leaving their jobs should add a retirement savings plan to their wish list when looking for a better position. Employers, offering a retirement plan could help efforts to retain the staff you have and recruit new people.
The pandemic has put more of a short-term focus on how we live, which means retirement probably isn’t on the mind of the people driving the Great Resignation. But the survey of 845 employers suggests having a retirement plan at work can ease financial stress, which many people were feeling even before the pandemic rocked our world.
Almost three of four employers in the survey agreed that employees experiencing financial stress are less productive. Offering retirement benefits seems to have helped manage this stress last year, when the full force of the pandemic was being felt financially, physically and emotionally.
Among companies in the survey that offered any sort of retirement benefits, 44 per cent said employee productivity has been better than normal over the past year and only 18 per cent said it worsened. Among companies not offering retirement benefits, 29 per cent said productivity improved in the past year and 23 per cent said it worsened.
That’s a sizable gap in productivity levels, even if you consider that companies with retirement plans are likely to offer other helpful benefits to their workers. Retirement plans help ease stress levels because people know they’re making progress with one of the most important lifetime financial tasks. For years, polls have shown that people feel anxiety about how much they’re saving for retirement.
Workplace retirement benefits include defined-benefit pensions, defined-contribution pensions and group registered retirement savings plans. Ideally, employee contributions are matched, at least to some extent, by money from the employer.
As you’d expect, the survey shows that better quality retirement plans were more likely to drive improved productivity. DB plans, with their promise of cash for life in retirement, were better than DC pensions and group RRSPs, both of which are investing vehicles designed to accumulate retirement savings. When you retire, it’s up to you to turn your savings into a flow of income.
As one of the DB pension plans in the country, HOOPP has made a point of advocating for workplace retirement savings programs. The HOOPP survey suggests there’s a benefit to employers in offering these plans, but employees may need some convincing.
With pensions and group RRSPs, employees might be asked to contribute 3 per cent to 5 per cent or more of their earnings. If you recently bought a home and started a family, you’d miss that money. Still, retirement benefits at work are a big win for employees.
One reason is the matching money from employers – think of it as deferred salary that compounds over the years through investments in stocks and bonds. Another reason is that saving money on your own for retirement can be a challenge. It’s easier to have your employer take a bit off your paycheque and send it on to be invested on your behalf.
Employers certainly think retirement benefits are an attraction for workers. In the HOOPP survey, close to 85 per cent of employers that have these programs think they are very or extremely important for recruitment and retention of employees, and stress management as well.
The wave of people leaving jobs in the Great Resignation has left employers in some sectors struggling to fill positions. Workers may find they have more leverage than ever before in selecting a job that suits them on wages, career opportunities, work-life balance – and retirement savings.
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