TORONTO, Aug. 27, 2020 /CNW/ -- Aon plc (NYSE: AON),
a leading global professional services firm providing a broad range
of risk, retirement and health solutions, has found that the
average Canadian worker will need to accumulate 10.9 times their
final pay to maintain the same spendable income after retirement,
according to its latest Real Deal report.
The Real Deal defines retirement income adequacy as having the
same spendable income after retirement as before, taking into
account changes in savings, taxes, medical expenses and other
factors. It compares the anticipated accumulation of retirement
savings (articulated as a multiple of final pay) to the target
accumulation required to maintain an employee's standard of living
after retirement.
The Real Deal can be used by employers to answer day-to-day
questions related to their retirement savings plans, such as how to
improve members' retirement readiness without increasing the cost.
The U.S. version of this tool has been used for more than a decade
to help Aon's clients understand the impact of different plan
designs and investment structures on average retirement income
adequacy, based on their own plan data and workforce
demographics.
"The retirement readiness gap is real for Canadian workers,"
said William da Silva, senior
partner and Canadian director of Retirement Solutions, Aon. "This
is an opportunity for employers to ask the right questions: Are
contribution levels appropriate, and designed in alignment with the
plan sponsor's objectives? Are employees equipped with resources to
manage their finances and plan for their retirement? Do employees
understand the impacts of medical cost inflation and other
post-retirement expenses? Clearly, there's a need to look both at
the substance of workplace retirement programs and at the 'soft'
levers of education and information."
"Every employee has unique circumstances, and how much an
individual should save ultimately depends on their own goals and
resources," said Rosalind Gilbert,
senior actuary and associate partner, Retirement Solutions, Aon.
"Canadian employees have clear expectations that their employer
should provide increased support for their overall financial
wellbeing, and Capital accumulation plan (CAP) sponsors are
focusing on areas that are well aligned with this objective. The
Real Deal arms employers with analytics to identify the overall
retirement readiness of their workforce and identify strategies to
address employee needs."
Other key findings include:
- Retirement income comes from various sources – workplace
retirement savings plans, government pensions (C/QPP and Old Age
Security (OAS)), as well as personal savings. On average, Canadian
employees need to have 16 percent of their annual pay going into
workplace and personal retirement savings every year from age
25.
- In the absence of personal savings, the average Canadian
employee1 will come up short against the 10.9 times pay
goal. They would have to delay retirement to age 70 to be
financially ready to retire and maintain the same net available
income after retirement or lower their standard of living by
approximately 30 percent to make up for the savings shortfall.
- For younger workers, retirement savings needs are even higher
than average, as they will likely need to provide for a longer
decumulation period due to increasing life expectancy, as well as
cover higher medical costs, which increase faster than
salaries.
About Aon
Aon plc (NYSE: AON) is a leading
global professional services firm providing a broad range of risk,
retirement and health solutions. Our 50,000 colleagues in 120
countries empower results for clients by using proprietary data and
analytics to deliver insights that reduce volatility and improve
performance.
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Media Contact
Alexandre Daudelin
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1 Age 45, annual earnings of $60,000, workplace retirement savings plan with
5% employee contributions and 100% employer match.
SOURCE Aon plc