More than $3 billion in pension benefits are lost due to not keeping track of pension plans
While Pension Awareness Day took place last week, Ontario’s financial services regulator is encouraging pension plan members and administrators to stay informed when it comes to keeping good pension plan habits throughout the month of February – and all year round.
Based on the Financial Services Regulatory Authority of Ontario’s (FSRA) latest estimates, there’s roughly 200,000 members that plan administrators are unable to get in contact with. The value of benefits being lost, as a result, is estimated to be more than $3 billion. While it’s not exactly a phenomenon, its cumulative over many years, Andew Fung, acting executive vice-president for pensions says, and things have changed since 2017.
“Prior to 2017, plan administrators were not required to issue any benefit statements to people who left employment. Since then, by law, they are required to issue them with a statement once every two years. So, in a way, it's kind of a continued connection with your plan members,” Fung said.
By creating pension awareness throughout the month, Fung highlighted that plan members and sponsors will not only understand the value of their pensions but hopes they will pay more attention when members their place of employment, either bringing along with them, their already accumulated pensions, or keeping a good record of their pension documents.
“It’s creating the awareness, not just the importance of retirement savings, but the importance of pension plans overall,” he says.
While Fung notes that it is unknown why the third Thursday of February is chosen as Pension Awareness Day, he says this is the time where a lot of people maximise and focus more on their RSP contribution. “The value of pension plans is the key theme, but more broadly speaking, saving for retirement and the importance of starting early,” he says. “You didn't feel the value of it when you were young but when you get close to retirement, every single dollar as a pension counts,” he says.
Pension is a complex subject to many people, Fung says, and while retirement is a lifetime away, people can get carried away and don’t pay attention to the critical documents. Reasons why pension plan members might lose track of their pension plan range from putting too much focus and effort when it comes to changing jobs or careers, forgetting to change their address and contact information and forgetting to inform their previous employer. Some members may even forget about their entitlement.
From the employee perspective, Fung says, it’s crucial for employees to understand the value of a pension. “Understand what it means, understand when they are entitled to receive a pension. The more you understand, the more you will attach the importance of that. [When] you think that something is important, you take good care of it, you keep track of your records, so don't lose track of those records.”
As for employers, Fung adds, they would do well to have good record keeping protocol, and they also should have an appropriate communication strategy to keep in contact with those who were previously terminated or who have left employment more than two years ago.
CAPSA also recommends that all administrators develop and implement a comprehensive records management and retention policy. The policy should specify appropriate practices and procedures that address elements such as how to manage plan records, how long they should be retained and specify individuals or entities who are responsible for these records.
When a plan administrator is unable to contact plan members through their last known address, administrators will be required to conduct a search for their member. Common search tools CAPSA recommends are custodians or fund holders associated with the plan, searches of government databases and other public records that are available, union contacts, professional associations, social media channels and registered letters to the last known address, among many others.
“When you look at the $3 billion, that's a lot of stranded money and you really don't want to lose out on your hard-earned pensions,” Fung said. “Pension should be part and parcel of your total compensation. People will not think twice about whether they’re missing $100 or a few dollars off their paycheck. But why not pension? Pension is a part of total compensation. People should be valuing that and should be paying attention to that.”
