New NIA report shows how biases and weak tools push workers to undercut their own retirement security
Two-thirds of Canadians who receive defined benefit pension income say it is “essential — something they couldn’t live without.”
That finding from the National Institute on Ageing’s (NIA) 2025 Ageing in Canada Survey sits at the heart of its report Understanding and Communicating the Value of Workplace Retirement Plans.
Retirees know the value of workplace pensions; workers often do not.
Why members undervalue workplace plans
The report says many workers instinctively favour “cash today” over deferred compensation, even when it weakens long‑term security. This shows up when they:
- focus on starting pay rather than total rewards
- under‑contribute in capital accumulation plans (CAPs) and forgo employer matching
- choose cash in flexible benefit programs
- elect lump‑sum settlements instead of lifetime pensions
- claim pension benefits as soon as they can.
The authors link this to complexity and a set of predictable biases.
Retirement planning involves long time horizons, uncertain variables, and little feedback.
Faced with that, many people “switch off,” defer choices or follow the path of least resistance.
Appendix A highlights several barriers: optimism bias, subjective survival bias, loss aversion, present bias, lump sum bias and herding.
Together, they lead people to underestimate future risks, undervalue guaranteed income and copy peers rather than assess their own needs.
The report also notes that those who influence decisions share the same biases.
Advisor compensation tied to assets under management can create tensions with low‑fee workplace plans or guaranteed income.
Families may favour lump sums because they resemble an inheritance. Framing practices such as “break‑even” analyses on CPP/QPP or annuities can recast longevity insurance as a gamble.
Reframing retirement: from accumulation to decumulation
The NIA argues that decades of saving condition workers to think in accumulation terms: balances, returns and net worth.
Retirement, however, depends on how much they can safely spend for the rest of their lives.
To shift that mindset, the report introduces the NIA Retirement Income Framework.
Instead of the traditional three‑pillar model (government, workplace and individual), it organises resources by function:
- an income foundation of predictable, lifelong monthly income for routine expenses, including CPP/QPP, OAS/GIS, workplace pensions and annuities
- spending buckets of flexible assets for non‑routine or unexpected expenses, such as RRSPs, RRIFs, TFSAs, home equity and other savings.
This retiree‑centred framing reduces mental effort and directs attention to the balance between secure income and flexibility.
The report says it encourages workers to consider how to convert savings into reliable monthly income, how to manage flexibility versus security and where gaps may exist.
The under‑sold advantages of lifetime income
Beyond the dollar amounts, the report sets out five key benefits of retirement income security:
- Lifetime financial security – “A guaranteed paycheque for life” that protects against market volatility and the risk of outliving savings, and supports essential needs such as ageing in place.
- Freedom and confidence in retirement – With secure income, retirees can enjoy their savings “without hoarding out of fear.” Without it, many underspend and treat savings as capital to preserve rather than draw down.
- Peace of mind and better health – Income instability and fear of running out of money link to lower well‑being and worse health outcomes. The report notes that stable income reduces this stress, allowing retirees to focus on living well.
- Reduced burden on families – Predictable income can lessen financial and caregiving pressure on relatives, especially as cognitive decline makes financial management harder.
- Protection against financial exploitation – Lifetime income reduces exposure to fraud, poor advice and family disputes over assets because there is less accessible capital to target.
The authors recommend that employers, plan sponsors and administrators explain not just how much and when members will be paid, but also these emotional, health and family benefits.
Tools that actually change behaviour
The report argues that traditional financial education is not enough. Poorly designed materials can trigger cognitive dissonance and make people double down on past choices.
Instead, it calls for a tiered approach to tools:
- Level 1 – plan‑specific estimators that use administrator data to give clear, personalised projections of workplace benefits under different contribution, earnings and retirement‑age scenarios.
- Level 2 – household‑level projections of net spendable income that integrate workplace pensions with CPP/QPP, OAS, GIS and taxes, and distinguish clearly between lifelong monthly income and flexible spending buckets.
- Level 3 – more sophisticated modelling and professional support for members with significant assets, built on accurate plan‑level data.
Used well, these tools slow decisions down, make trade‑offs visible and help members see their workplace plan as a central contributor to lifelong financial security rather than just a line on a pay stub.
