Defined benefit pension plans key to employment decisions
Employer-sponsored programs take on heightened importance: Towers Watson.
One-third of employees take less compensation for enhanced retirement security.
TORONTO — Canadian workers want a secure pension plan as part of an attractive pay package, according to a Towers Watson report.
A survey by the global professional services company reveals one-third of Canadian employees would sacrifice a portion of their compensation for enhanced retirement security, while one in four would agree to forgo a bonus in exchange for additional retirement benefits.
“The fact that so many workers are willing to trade pay increases or bonuses for enhanced retirement security points to the significant unease that many employees hold towards financial planning for their retirement years,” said Ian Markham, Retirement Innovation Leader for Towers Watson.
The survey found that 50% of respondents with a defined benefit plan (DB) identified their retirement program as a key reason for joining their current employer, compared to 30% of respondents with a defined contribution (DC) plan or Group RRSP, where the payout is dependent on the investment fortunes of the plan member.
DB plans appear to play an even more significant role in retention. Depending on age, between 62% and 71% of Canadian DB plan participants cite their retirement program as a compelling reason to remain with their current employer, compared to between 30% and 50% of those with a DC plan.
DB plan participants under 40 years of age were twice as likely to stay with their current employer, compared to those with a DC plan.
The survey also revealed that a change from a DB plan to a DC plan has a strong effect on employee commitment and loyalty. While 75% of respondents whose DB plan had been changed in the last three years, but remained DB, say that they would like to continue working for their employer until they retire, that number decreases to 53% for respondents whose employers have changed to a DC plan.
Survey results are based on responses from 1,577 full-time Canadian employees at private-sector organizations with 1,000 or more employees.
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