Benefits Canada recently published its CAP (Capital Accumulation Plan) Member Survey to assess the financial wellness of plan members and how they have fared since the start of the pandemic.

Retirement readiness and the pandemic
47% of plan members said they feel financially prepared for retirement, compared to 48% in 2020 and 55% in 2019. Furthermore, 59% of CAP members responded to no impact on their retirement age, however 17% expect to work longer than anticipated due to the impacts of the pandemic. In addition, 50% of respondents said they had to shift their focus away from retirement savings and towards other financial priorities during the pandemic.

Impact on overall well-being
14% of plan members said their personal financial situation worsened since 2019, while 35% said no difference and 42% said it was better. Those that reported worsened financial situations were also more likely to report increased physical health issues (74% vs 62%), increased mental health issues (74% vs 53%), and increased alcohol/recreation drug use (28% vs 20%).

Satisfaction and confidence in CAPs
Over the years the CAP member survey has tracked employees’ satisfaction with their employer sponsored plans, in particular, prior to a financial crisis and the subsequent recovery.  For example, prior to the 2008/2009 financial crisis and the subsequent recovery, plan member satisfaction with their employer sponsored plan ranged from 79% to 88% while satisfaction in 2021 dropped to 77%.

Furthermore, when CAP members were asked how confident they were that their retirement plan would provide them with the necessary funds needed for retirement, the confidence fell from 77% in 2016 to 63% in 2021.  In addition, optimism around being “on track” to meet the amounts needed to save declined from 68% in 2017 to 60% in 2021.

Replacement Ratios and Retirement Income
When it comes to understanding how to convert retirement savings to income and targeting income replacement ratios, the survey confirms that many CAP members do not understand these financial concepts. Furthermore, 75% of respondents who are in poor financial health said they have poor or no understanding of how to convert their CAP savings into an income stream upon retirement. In addition, CAP members who said they are worse off financially this year were twice as likely to have decreased their estimated replacement ratio.

Key Takeaways
Similar to previous years, the overall message remains the same; member education is a key component in ensuring financial independence during retirement. Member responses indicate a need for more education, better tools and resources and personalized support to help those with very little understanding of financial concepts and principles. This provides a strong message to plan sponsors to ensure their employee’s expectations are well managed, while providing the support needed to ensure financial success in retirement.