In this Bright Paper we highlight some of the challenges plan members face in achieving on-time retirement, and how plan sponsors can support employees both to and through retirement.
Sun Life supports plan members with their retirement income planning from the moment they start saving. We extend this support to retirement and beyond through our decumulation program, My Money in Retirement. This helps members to create sustainable retirement income and achieve on-time retirement while also supporting organizational health.
Looking to help your plan members with retirement readiness? Our campaigns make it easy!
We’ve created campaigns to help plan sponsors build awareness of retirement planning support for plan members - well ahead of their retirement. These resources help make plan member campaigns easy to launch and execute. They’re available now through the Sponsor Resource Centre.
The new era of decumulation
For retirees. And the industry.
Introducing, MyRetirement Income, a solution not available anywhere else in Canada.
The power of planning – and advice
Many plan members need support and guidance on their financial and retirement journey. A recent study done by the Canadian Association of Retired Persons (CARP) for Sun Life shows that one third of Canadians struggle to plan for retirement.
Sun Life is here to provide seamless support leading up to and through retirement. Our approach starts by offering plan members personalized financial roadmaps, created using our suite of innovative tools tailored to their unique needs.
Retirement Planner – powered by Sun Life One Plan
In less than 5 minutes, plan members can use this tool to begin building a retirement plan, regardless of where they are in their retirement planning journey. With our new retirement planner, they’ll be able to:
- Complete a plan in less than 5 minutes
- Create retirement goals, and
- Determine an estimated retirement age and income projects.
If a plan member decides they want a more in-depth plan, Sun Life One Plan allows plan members to craft a detailed plan that suits their needs.
Sun Life One Plan
Sun Life One Plan is a simple, easy-to-follow goal-based planning tool. The full planner lets them create a more in-depth financial roadmap for their financial needs and protect their future. It provides plan members with advanced features, such as:
- Real time tracking towards their savings goals
- Personalized strategies to help get them closer to retirement sooner
- Freedom and flexibility to make changes to their plan as life circumstances change.
360 Plan Advice
Plan members always have access to one-to-one support through 360 Plan Advice, including:
- on-demand guidance from the Client Solutions Centre, or
- one-to-one help from a licensed consultant.
360 Plan Advice provides plan members with free access to personalized advice from licensed financial services consultants (registered as financial security advisors in Quebec). They can reach out to a consultant at any stage in their career or retirement planning.
Plan members can work with a consultant to review their retirement readiness and develop a robust retirement plan. This involves analyzing their retirement income options, exploring decumulation strategies, and using Sun Life One Plan.
Even after retiring from their employer, plan members who stay with Sun Life can continue to access this service at any time.
Decumulation challenges – why plan members need support
Plan members want to ensure they have the money they need in retirement – and not outlive their savings. The key question: How to turn their savings into an adequate income that lasts their lifetime?
There is no simple answer. It can be a complex process, which is why many plan members are looking for help. They have several challenges to address. These include:
- Outliving their savings. Plan members could deplete their retirement assets if they live longer than they expect. So, the risk of “guessing wrong” on life expectancy is significant. Their paycheque will also need to be replaced by savings income in a sustainable manner.
- Poor liquidity – not being able to access cash when needed. Plan members need to balance their guaranteed income needs with their potential need for cash flexibility.
- The right investment mix. Plan members may not achieve their retirement income goals. This can occur if their product and/or investment mix is misaligned to their risk tolerance and retirement horizon.
- Inflation – and rising health-care costs. Inflation can undermine a retiree's financial security. Many also underestimate how the cost of living fluctuates during the different stages of retirement. Inflation erodes purchasing power over time, while health-care costs for example, tend to escalate with age. Retirees often fail to budget adequately for dental care, prescription drugs, paramedical services, and long-term care– expenses that retirees are often on the hook for but may believe are covered by government programs.
- High retail fees. When plan members retire, they often transfer their savings to investments that can carry higher retail fees. Higher fees don’t always come with higher investment performance. Over time, these higher fees can put a dent in their hard-earned savings, hampering their ability to generate a comfortable retirement income stream.
There is no “one size fits all” solution. But every plan member can enjoy Sun Life support in saving for retirement and making informed decumulation decisions.
Our latest survey with Canadian Association of Retired Persons (CARP) shows how Canadian retirees are navigating retirement in Canada. Check it out here.
Our three-pillar strategy – supporting plan members to and through the decumulation phase
#1 Engagement and advice |
#2 A seamless plan member experience |
#3 Innovative retirement income solutions |
|---|---|---|
A key focus of our support is centred on ongoing digital engagement within the saving and retirement planning process. We engage with plan members early to ensure they have a clear path to retirement – a complete, detailed, tax optimized retirement income plan across accounts and government plans. Digital engagement is a powerful tool. Digitally engaged plan members have an average account balance 230% higher than those who aren’t digitally engaged. They are also twice as likely to take advantage of an employer match, with 79% maximizing the match. And they contribute 61% more to their accounts than those who aren't online. We also provide nudges for action at pivotal life moments. Check out our Designed for Savings: Digital engagement report to learn more. And through 360 Plan Advice, plan members can access personalized advice from licensed, salaried, Sun Life retirement consultants*. This one-on-one support helps them with both their accumulation and decumulation strategies. |
We provide a personalized and easy plan member-centric experience, with planning and action nudges at pivotal life moments. When retirement arrives, we know digital options make it easy and stress-free to enrol in retirement income products and generate, deposit and withdraw money – ensuring members have easy access to their money. Coupled with our engagement and advice strategy, members can adjust their plan along the way as their life circumstances change.
|
Many plan members will require two or more retirement income solutions to meet their individual needs in retirement. We provide a range of solutions to meet every need. These include RRIF/LIFs for flexibility and annuity products for income security. Members benefit from competitive fees, and products are available for their spouse or common-law partner to complete a household plan.
|
*Registered as financial security advisors in Quebec.
Retirement income solutions
We offer a full range of decumulation solutions, in a variety of structures. Our products balance flexibility and certainty. And we know that the right balance will differ for everyone.
Plan members can combine our products to achieve their unique decumulation goals. Professional advice and robust planning tools can be instrumental in ensuring that their product allocation mix appropriately meets their goals.
RRIF/LIF solutions
Group Choices RRIF/LIF Sun Life sponsored |
Organizational RRIF/LIF Employer sponsored |
|
|---|---|---|
Solution overview |
Our Group Choices RRIF/ LIF is like any other RRIF/LIF, but plan members keep their assets with Sun Life. This lets them continue to enjoy the same or similar investment options they had in their group plan. Sun Life Financial Trust Inc. takes on the role of Plan Sponsor and handles all plan governance, including investment selection and monitoring. They also maintain access to Sun Life supports, even though assets are no longer part of the employer’s plan. |
Plan members enjoy benefits similar to the Sun Life Group Choices RRIF/ LIF. The plan sponsor retains the responsibility for duty of care and due diligence. Plan members maintain access to all Sun Life supports. |
Fees
|
Group Choices fees are competitive compared to retail. Tiered pricing based on the size of the account balance may also reduce fees for plan members. |
Assets remain part of the employer’s retirement program. As such, plan members may share lower investment management fees negotiated by the plan sponsor. The investment management fee structure can be fixed or tiered. |
| Availability |
Widely available |
Available to certain sponsors based on their plan’s strategy. |
Alternative income solutions
|
Variable benefits | Sun Life annuity |
|---|---|---|
| Solution overview |
Variable benefits are like a RRIF or LIF (depending on whether the assets are locked-in or non-locked-in). But the assets stay within the DC pension plan. The retiring plan member chooses their payment amount, between the minimum and the maximum set by provincial legislation. There is no required minimum payment before age 72. |
Plan members can use some or all of their account balance to buy an individual life annuity. The annuity pays a guaranteed income for life, two lives, or specific period of time in exchange for this lump sum payment. In certain instances, members have the ability to defer income. |
| Fees | Assets remain part of the plan. Plan members typically share lower investment management fees negotiated by the plan sponsor. | There is a one-time set up fee, but no ongoing fees with an annuity purchase. |
| Availability |
Permitted everywhere in Canada, except in New Brunswick and Newfoundland and Labrador. At time of publication, only available for Sun Life assets subject to Quebec legislation. Under review in other jurisdictions. |
Widely available. They have not been popular in recent years, but with increased interest rates they are coming back in favour. |
We’re advocating for new decumulation options
We continue to lead the market in strengthening decumulation results for plan members. Here are two products for which we continue to advocate with governments to finalize legislation.
Variable Life Payments (VLPs)
These are also known as Variable Payment Life Annuities (VPLA) or Dynamic Pensions. We have leading experience with similar arrangements, as we currently administer several legacy plans under previous laws. But laws for new VLPs have not yet been finalized.
VLPs combine the best features of current decumulation options to create an entirely new income product. They offer a more balanced and cost-efficient solution, and typically higher income for retirees.
The key benefit is that they offer lower cost income for life. VLPs trade income guarantees for market participation and shared longevity risk with other pool participants. These features let plan members:
- Optimize their retirement income
- Harness potential market growth
- Benefit from longevity pooling
- Ensure a sustainable income stream for life.
Advanced Life Deferred Annuity (ALDA)
An ALDA lets a retiring plan member defer the start of their retirement annuity income until as late as age 85. This could give plan members improved flexibility in their retirement planning, opening the door to both tax deferral and longevity protection.
An ALDA can only be purchased using a maximum of 25% of their registered assets (to a maximum of $170,000 in 2024 – with the limit increasing annually)
ALDAs are not yet available. While the Federal government has passed ALDA legislation, there remain gaps between this legislation and provincial pension laws.
The decumulation challenge in today’s reality
Designed for Savings 2023
Packed with plan data, trends and analysis, this report continues to provide the most comprehensive look at capital accumulation plans in Canada.
Retirement Readiness
Key updates from our 2020 Year in Review on our commitment to engaging with plan members and supporting retirement readiness.