Head of Plan Services at HOOPP outlines research findings, cites DB plans as the 'gold standard'
Pensions, notably defined benefit (DB) plans, are more than just a retirement benefit. They’re a key contributor to financial wellness, mental health, and overall wellbeing.
That’s the message behind HOOPP’s Head of Plan Services, Ivana Zanardo and recent research that found retirement security has a profound impact on working Canadians aged 40-60.
"We believe that pensions have a big impact on an individual's financial wellness," she said. "One of the key findings was that for this group of workers who have a defined benefit pension plan, they reported a 9 per cent higher financial well-being and 10 per cent lower financial stress than those without a pension.”
“They also had a more positive experience and expectations for their retirement."
For employers, the research raises important questions about how they can support employees’ long-term financial security, particularly as the landscape of retirement savings evolves.
"We advocate for pensions for all Canadians," she said, emphasizing that a DB pension plan “is the gold standard.”
“However, any pension is better than no pension at all, and it contributes to an individual's well-being because it gives them that financial security,” she added. “Employers have told us that employees who have a workplace pension are more productive, which also helps them.”
Yet, DB pensions provide the greatest level of certainty. Unlike defined contribution (DC) plans, where employees bear investment risk, DB plans guarantee a steady income for life.
So, what makes DB plans “the gold standard”?
"You don't have to worry about whether you'll run out, which can be the case in other retirement programs," said Zanardo.
HOOPP’s research found that financial stress is the leading source of anxiety for Canadians, more than health concerns, family issues, or job-related stress.
"Canadians really think about their financial situation daily," Zanardo said. "We know that if our financial situation isn’t a positive financial situation because we don’t have savings for the future, that impacts our wellbeing, our productivity at work, our employers and ultimately, our health.”
With housing costs, inflation, and interest rates straining household budgets, many workers struggle to set aside enough for retirement. Even the broader retirement landscape has changed over the past few decades, with fewer workers enjoying the kind of stable pensions that previous generations relied on.
"A lot of Canadians aren’t thinking or planning for the future," she said. "A workplace pension plan puts that structure in place for them, so they don’t have to think about it. It’s there for them, so that they can focus on their day-to-day, knowing that they have that retirement security in the future."
For employers who already offer DB pensions, the focus should be on maintaining and enhancing their plans when possible, said Zanardo, emphasizing that just providing the DB plan goes a long way.
Consequently, the challenge for those without any kind of pension plan is ensuring some level of retirement security for their employees, said Zanardo.
"Find a way to implement a retirement program for your employees. We recognize that not everybody can provide a defined benefit program but find a way to provide retirement security to your employees."
She also urged businesses to take an active role in securing their own financial futures.
"Understand the value that having a pension can provide to you. Think about your future self and how it can benefit you," she said.
Even small steps, like participating in a group RRSP, if an employer offers one, can make a difference.
"If it's a group RRSP and you haven't decided to sign up for it, sign up for it," she said. "Having knowledge of the value that a retirement plan can have for you goes a long way."
For plan sponsors, controlling retirement stress among employees means ensuring they have access to retirement savings programs.
"A lot of other good employers have programs in place to support their employees and their mental health and well-being," she said. "But having that sense of security of knowing that you have retirement savings for that day that you do retire goes a long way."
"Our research has shown 1 in 10 who have that retirement security report higher financial well-being. That’s the level of impact that a pension can have on an individual’s physical and mental well-being… To me, that’s significant,” added Zanardo.
