A new retirement product is making its way to Canada. Here's what it means for pensioners
Tami Dove believes that pension need is still underrepresented in the Canadian annuities and investment market. Because of the lack of pension and retirement income coverage, the director of member experience at the Co-operative Superannuation Society (CSS) based in Saskatchewan, was determined to bring more coverage to Canadians who need it most.
These days she’s focused on a new form of coverage, one specifically designed to manage trends in the market. The Variable Payment Life Annuity (VPLA) promises to provide retirees with lifetime income while managing market headwinds and tailwinds, Dove noted. Dove explained how VPLA’s work to deliver this income, how they manage market fluctuations, and why plan sponsors in the DC space may want to consider them.
“It exists out there in the world in other countries but it's new to Canada,” she explains. “It's not here yet because every province has to get the regulations in place but you're going to see that product become available and be very specific to people in big DC plans. But it's an opportunity. I hope this product is something that gives the members that lifetime income solution that they're looking for.”
VPLAs are created to increase yields by incorporating mortality credits and longevity-risk pooling into a pensioner’s plans. A client’s funds are pooled with those of other plan members and together invested in a portfolio of stocks and bonds. Payments are made to the plan members based on the performance of the pool. When a plan member dies, their assets remain in the VPLA so remaining members can continue to receive income.
The recently nominated BPM Elite Woman highlights not only are pensions underrepresented in Canada, but employers also face challenges offering pension coverage because of the associated costs.
“If you took out the public servants, the people who are working for governments or quasi-governments, that representation goes drastically down,” she says. “You're down to the 17 to 20 percent of people who have access to pensions. We believe in retirement incomes for all. Because it's optional and it's a cost to the employers’ bottom line. They are providing the best benefits that they think they can provide for their organizations. It can be a little bit complex.”
According to the Healthcare of Ontario Pension Plan (HOOPP)’s Canadian retirement survey, most Canadians don’t have a workplace pension plan and many lack accumulated retirement savings. Pension anxiety ranks high among cost-of-living challenges. Only 44 percent have access to a workplace pension plan today, while 56 percent do not. Of those who do not have a workplace pension, half have saved nothing at all for retirement.
Dove noted this is one of the reasons why activists and policymakers across the country are trying to change break barriers, making it easier for employers to get into the benefits space by offering pooled registered pension plans and VPLAs to all Canadians. “Hopefully some of the strategies that people across the country are trying to do will improve pension and retirement income coverage,” she says.
As it turns out, Dove is also working aimlessly to improve the digital landscape in the pension space. “I’ve also been a techie at heart,” she says. “The pension world and the finance world has always been a little bit lagging when it comes to digital transformation. When you're in these worlds, you need to build systems and communications that help people understand their finances and their perspective. Maybe even give them some gentle nudges to keep them on track.”
Going forward, AI will be “top of mind in the pension industry”, Dove added, as fintech looks for ways to have technology support members in making their financial decisions. Regtech is also trying to find ways to make the regulatory regime watch and monitor pension plans a little bit better for the future.
