'Pensions reduce financial anxiety'

Each month at BPM, we offer a slate of articles and content pieces that go deep on a particular topic. This December, we’re exploring employee and plan members' well-being - and its link to mental health. 

Employee well-being often gets framed around mental health supports or flexible work but CAAT Pension Plan believes that financial security sits at the top. 

After all, Jillian Kennedy, chief strategy officer at CAAT firmly believes pensions shape how people feel about their lives long before retirement.

Kennedy underscored having a pension steadily accumulating early on creates a sense of security that supports other financial decisions, whether that means paying down debt, buying a home, or managing family obligations.

“People do actually worry about their ability to retire,” she noted. “They worry about the ability to choose when they're going to retire more than anything and obviously, that goes hand in hand with quality of life. When we start to think about these things, that is well-being. Well-being is really about our ability to control our quality of life and feel that freedom when we specifically talk about financial wellness.”

That perspective led CAAT to question why financial anxiety is allowed to build unchecked through much of a person’s working life as Kennedy acknowledged that mid-career is the moment when worry spikes for many, often after years of missed opportunities to save effectively.

In examining that pattern, CAAT found that workplace pensions play a larger role than expected, not just as a savings vehicle but as a behavioural anchor where predictability matters.

Kennedy emphasized pensions are particularly effective because they’re designed long-term outcomes and can’t be casually accessed. As a result, they become a stabilizing force that influences behaviour well before retirement.

When employees can see a pension steadily growing, that visibility creates near-term confidence, not complacency. She believes financial security in the background makes people more willing to take calculated risks and stay engaged with everyday planning.

“Pensions are supporting short-term confidence. The people who have those pensions and can see that kind of stability and financial security is there and it's building. Over their lifetime, they’re more confident to take risks and are more engaged in their short-term planning. We're starting to see that pensions reduce financial anxiety,” she said.

From CAAT’s standpoint, the effect is cumulative. Pensions lower financial anxiety, sharpen focus at work, and build durable confidence across a career. Kennedy notes that guaranteed income takes this further by removing the individual’s exposure to market outcomes and uncertainty. When employees can see a real, guaranteed foundation rather than an abstract account balance, trust and engagement increase.

“This is why defined benefit plans are still seen as that gold standard for employee engagement and well-being. Because now it's not something that plan members have to ensure they get that golden pot of money at the end. Not only is there a foundation, but that foundation is a guaranteed foundation. What they’re seeing is real,” added Kennedy.

Kennedy also suggests this compounds confidence over time and that the value lies in the tangibility of the benefit. It’s something real that employees can understand, trust, and build around rather than second-guess.

Yet, many employers shy away from offering pension plans because they require far more work and oversight than simpler savings options. Administering a plan involves managing filings, legislative amendments, and adapting to a shifting regulatory environment, which can be resource-intensive and uncertain, Kennedy explained.

She noted that even though pensions can enhance talent attraction, retention, and financial wellness, the return on investment often doesn’t justify the effort. As a result, this simplicity makes RRSPs far more attractive from an administrative standpoint.

Consequently, Kennedy sees opportunities for innovation. She envisions a system where employers could access expert support and streamlined infrastructure, allowing them to deliver the benefits of a pension without the administrative burden as it can provide the same employee benefits at the same cost as an RRSP while eliminating the operational complexity.

To that end, she also suggests traditional standalone pension plans could evolve into hybrid structures that combine different types of pensions, pointing to models like joint-sponsored plans used in the public sector, healthcare, and education, which allow employers and members to share governance and achieve greater scale.

These arrangements include target benefit and multi-employer plans, which are already emerging as subcategories within the pension framework.

She notes that within a DB regulatory environment, there is more room for design flexibility compared with defined contribution (DC) plans, where regulations are fragmented across provinces and the rules around group versus retail savings are less clear. Kennedy believes this blended approach represents the future of pensions in Canada and mirrors developments in other countries where DC plans have become dominant but have evolved to incorporate new design features over time.

Kennedy emphasized that the perception of pensions as complex and technical can obscure their real value to employees. The industry has layered acronyms, formulas, and intricate calculations onto retirement plans, making them intimidating and difficult to understand. She argues that simplifying the message like focusing on a predictable, steadily growing amount based on contributions and tenure can make pensions more tangible and relatable.

Kennedy believes the key for employers is to show they care about employees’ financial well-being by providing a roadmap toward financial security. Unlike individual investment accounts, the pension offers a growing income balance that employees want to preserve, creating long-term engagement while encouraging employees to stay and continue building their nest egg.

For example, Kennedy highlighted a case study from UHN, a healthcare employer enrolled in CAAT’s pension plan, where turnover dropped from 22 to 11 per cent.

“When we asked a lot more questions about that, they basically said by having something that shows the employer cares of my own well-being, something that provides me with a roadmap and a guide towards my financial freedom and empowers me to do something that helps me feel more confident without the complexity, is a reason to work and stay here.”