Evolving Risks, Structure and Strategies in Retirement Plan Governance

2016 Willis Towers Watson Canadian  Retirement Plan Governance Survey

December 9, 2016
| Canada

Three major trends emerge from the survey findings:

Employers have a growing concern over retirement benefit adequacy and financial well-being.
DC plan sponsors in particular are increasingly concerned about the ability of their employees to retire in a timely manner. In fact, given the business implications such as a stagnant workforce, potentially higher labour costs and lower productivity, 20% of respondents view retirement readiness as a risk today, and 33% view it as a risk two years from now. In general, our findings point to a shift in resources toward benefit adequacy and retirement readiness over the next two years. Cost will still be top of mind but to a lesser extent during this period.

More employers are using third parties to assist with investment-related activities.
A large majority of employers engage third-party advisors to assist with investment decisions related to their DB and DC plans. For DC respondents, increased governance is the top reason to outsource some or all of their investment functions, whereas for DB respondents, better risk management is cited as the top reason. Other reasons to outsource cited by a significant number of respondents include providing the pension committee time for strategic decisions, and the ability to implement a wider range of investment strategies.

Regulatory concerns are prevalent.
Plan sponsors continue to cite regulatory concerns as a key risk. However, organizations that have not been subject to a regulatory examination or audit are less diligent about conducting a compliance review, with only 43% of respondents going through this exercise, compared to 79% of respondents that have been subject to an audit.

Overall, the survey findings highlight the governance practices essential to managing risks and achieving positive outcomes that deliver value to both plan participants and employers.

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