Few have factored inflation, health-care costs, market downturns or longevity risk into retirement plans
New research suggests employers should become more proactive when it comes to preparing workers for retirement, as fewer than half of working-age Canadians have an employer-sponsored pension and most lack even a basic retirement plan.
The survey finds that 48% of non-retired Canadians have a workplace pension plan, whether defined benefit (DB) or defined contribution (DC).
A quarter of those with an employer pension do not know whether their plan is DB or DC. Only 33% of non-retired Canadians have a retirement plan and savings, and just 11% know how much annual income they will need in retirement.
Nearly half (49%) say they do not know their required retirement income at all, finds IG Wealth Management.
Shift from guaranteed pensions to individual responsibility
The study links today’s challenges to changes that began roughly 30 years ago, when large employers started phasing out DB pensions. As a result, more Canadians are relying on personal savings, government benefits and employer-sponsored savings vehicles rather than guaranteed income.
“The decline of defined benefit and contribution pension plans has fundamentally shifted the burden of retirement planning on to individuals in recent years,” says Christine Van Cauwenberghe, Head of Financial Planning at IG Wealth Management.
“Our data shows that while Canadians recognize this shift, many still lack a clear picture of what they need to save – and how to convert their savings into a ‘personal pension plan’.”
Already, 35% of workers expect to retire later than planned amid worsening finances this year, according to previous studies.
Knowledge gaps on retirement income and risk
As reliance on personal savings grows, the report highlights significant knowledge gaps. Only two-fifths of respondents say they understand Old Age Security (OAS), a Registered Retirement Income Fund (RRIF) or how retirement income is taxed.
Few have factored inflation, health-care costs, market downturns or longevity risk into their retirement plans, and 67% have not stress-tested their plan against any major economic or financial risk.
The study also points to rising emotional strain: 53% of non-retired Canadians express negative feelings about retirement, saying they are behind in their savings and unsure they will be able to afford to retire.
“This growing pessimism not only reflects their financial uncertainty but also creates a cycle of inaction, as anxiety becomes a major barrier to take meaningful steps toward improving their retirement outlook,” Van Cauwenberghe says.
The report identifies access to professional financial advice as a key factor in retirement readiness, but notes that only 36% of Canadians currently work with a financial adviser. Among those who do, 87% say their adviser helps optimise their retirement plan, 83% say they are educated on financial risks, 82% report being coached toward their goals and 84% say their adviser helps keep them on track.
“An advisor can help build a retirement plan that accounts for taxes, longevity, income sources, and risk – the pieces most people struggle with on their own,” Van Cauwenberghe says. “In a world without guaranteed pensions, advice is one of the strongest tools Canadians have.”
Canadians are making adjustments to their investment strategies rather than withdrawing from their retirement plans, according to a previous Sun Life report.
Why should employers care about workers’ retirement?
According to Citations Canada, employers have a responsibility to support their employees through the transition to retirement for the following reasons:
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Talent retention and succession planning – When employees retire, they can leave significant skills gaps in your workforce. By preparing in advance for an employee’s retirement, your organisation can anticipate future staffing needs and develop successors for critical roles.
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Employee well-being and morale – Offering thoughtful support during the transition to retirement demonstrates your organisation’s appreciation for an employee’s years of service. When other staff see that their employer treats retiring colleagues with respect and care, it boosts morale and strengthens a culture of employee appreciation.
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Saving time and reducing confusion – Retirement that is handled poorly can cause uncertainty and lower productivity for both the departing employee and those supporting the process. With clear planning and a consistent approach, the transition becomes more efficient, reduces risk, and helps safeguard your organisation’s reputation.
“Retirement is a major life event for employees, and it can lead to significant changes for an organisation,” says Citations Canada.
“Retirement marks a new chapter not only for the employee, but also for your organisation. By supporting a seamless transition today, you’re laying the foundation for a workforce that’s prepared for the future.”
