Women's retirement readiness is a plan design problem: expert

For Women’s History Month and International Women’s Day, BPM is highlighting several pensions and benefits stories focusing on women in the workplace.

Women are contributing roughly 21 per cent less to workplace retirement plans than men. They also live longer in retirement.

And yet, the architecture of most group retirement plans in Canada treats every participant as though their career trajectory, cash flow, and confidence around money are identical.

Danielle Ferrone, director of group retirement solutions at People Corporation, argues that disconnect isn’t a personal failing. Rather, it’s a plan design problem. That’s why she identifies several structural levers that plan sponsors can pull to close the retirement savings gap for women.

For one, automatic features rank high on her list, starting with the default fund option. She believes a target date fund is today's best practice as a default because it removes the burden of investment selection from members who may otherwise choose overly conservative options.

“There are still some legacy plans that haven't updated that, so it’s critical that’s updated and one that you review regularly,” noted Ferrone. “Another area is women with smaller balances might be more risk adverse. They're not wanting that risk or the perceived risk. And so a target date fund also allows the professional fund managers to manage that for them. We don’t want anyone taking on more risk than they are comfortable with but they can have comfort knowing a professional is managing it for them."

How plans handle maternity and parental leave is another critical area Ferrone highlights, as many plans require returning employees to re-enroll or reconfirm their contribution rate. She argues this is a friction point that can cost women months of lost savings and missed employer matching. Her proposed fix is to keep contribution deductions the same when an employee returns, unless the employee says otherwise.

Ferrone underscored employers need to recognize that a return from leave often comes with a major shift in household finances, routines, and priorities, rather than acting as though nothing has changed. She emphasized advice and education need to reassure women that their situation is common and manageable, not a sign that they have fallen irretrievably behind.

She also frames retirement saving as a household issue, not just an individual one. Notably, if one partner can’t contribute as much for a period of time, the broader family savings strategy may need to adjust so that long-term goals stay on track. That changes the conversation from individual shortfall to collective planning.

Just as important, she argues, is widening the lens beyond retirement alone. Women returning from leave are often balancing competing demands, from emergency savings to education costs and new day-to-day expenses. Ferrone's point is that advice works better when it reflects that broader financial picture. Walking employees through their full financial wellness can build confidence, and that confidence makes them more likely to stay engaged with retirement planning.

She also advocates for auto-enrollment at the start of employment, set at the maximum matching threshold, with the onus on the employee to opt out rather than opt in. However, she noted this isn’t something that is allowed for all plans as the plan design and EA agreements have to align so it's only when applicable. She also stressed the importance of shorter eligibility periods, because employees who get accustomed to a full paycheck find it harder to accept deductions later.

"It's really hard when you get used to a paycheck, and then all of a sudden you're going to take 4 per cent off my paycheck. That’s hard to manage," she said. “We know that money is tight for folks so being able to have shorter eligibility for folks who are already used to that same paycheck with the deductions already off, goes a long way.”

Ferrone argues that employers need to tackle the confidence barrier head-on by challenging the common assumptions that keep people, especially women, from seeking financial advice, particularly as too many employees tell themselves they have not saved enough, do not earn enough, or can always start later.

She believes plan sponsors need to counter those beliefs with plain, practical education that makes advice feel accessible and immediate. That means showing employees that even small increases in saving can compound into meaningful sums over time and doing so in a way that is simple rather than technical or intimidating.

She also suggests that employers look more closely at whether there are barriers in how advice is delivered. If women would feel more comfortable speaking with a female advisor, that preference should be accommodated, noting she sees value in pairing women with advisors who understand the realities of maternity leave, childcare costs, and the cash flow strain that often comes with returning to work after an absence.

To that end, Ferrone points to employer-funded top-ups as one of the more practical plan design options. For example, if someone comes back after a year away, a one-time contribution that still qualifies for an employer match can help replace some of what was lost during leave.

Even where that kind of matching top-up is not possible, employers should still show returning employees how much a lump-sum payment or small regular contributions can grow over time so they do not assume they are permanently behind, Ferrone emphasized.

There’s also the case for more tailored education when employees come back from leave. Rather than dropping them back into the plan without guidance, Ferrone argues employers should walk them through what has changed, remind them to restart contributions, point them toward available advice, and connect retirement saving to the rest of their financial life, including budgeting around new household costs.

When asked what bold changes could make the biggest difference over the next few years, Ferrone pointed to communications and governance. On the communications side, she wants plan sponsors to be more direct, even provocative, in how they engage employees, as long as the message stays relatable and leads to action, while one-on-one advice, she noted, is the most effective lever.

On governance, she pushes sponsors to go beyond tracking participation rates and start breaking data down by gender. From there, the process becomes iterative - test an approach, measure whether it moved the needle, and adjust.

"We can't solve for that problem unless we know that there is a problem or a gap there to solve," she said.