But there is a business case for the industry to step up to the challenge
There’s a crisis looming among Canada’s next-generation retirees according to a new report from Deloitte but addressing it could bring large gains for the financial services industry.
It found that 86% of pre-retirees (aged 55-64) are at varying degrees of financial risk that could see them running of money during retirement without action from individuals, industry, and governments.
The report, titled ‘Running out of time: An urgent call to fortify Canada’s private retirement pillars’ acknowledges the focus on the public elements of the Canadian retirement system, such as Canada Pension Plan, Old Age Security, and Guaranteed Income Supplement. But there has been less focus on private elements such as RRSPs and private pension plans.
But the in-depth analysis of 4,000 pre-retirees and retirees found that 55% of near-retiree households will have to make lifestyle compromises to avoid outliving their financial savings. These are mostly middle income households who fall between those who get maximum government support (31% of households) and the wealthiest families.
Additionally, only 14% of Canadians will be able to absorb the cost of some form of senior care or other unexpected costs without becoming financially vulnerable.
A number of ways to improve retirement readiness are suggested, such as bringing retirement planning closer to the workplace, creating incentive programs focused on cultivating healthy savings behaviour, and considering making pension plan contributions mandatory.
The report estimates that benefits to retirement advisors, mortgage lenders, health insurance providers and retirement income solution partners is up to $16.5 billion dollars of added revenue.
While, in conjunction with solutions directed to consumers and the government to implement, would help 38% of near retirees achieve better financial security in retirement.
- Better informing Canadians through the creation of retirement readiness checks and better address gaps
- Create data driven near-retirement planning offerings
- Develop retirement income products that increase certainty on cash flows
- Adopt tranched risk management strategies to extend longevity of retirement savings
- Better explain to Canadians benefits of reverse mortgages
- Convert private sector pension plans to public model
“All players in the retirement ecosystem have the duty to help Canadians fill their golden years with confidence rather than anxiety,” commented Deloitte partner Hwan Kim.