iA Financial Group’s Dustin Hunt says plan sponsors need to think beyond participation and balances to how plan members will actually use their savings
Group retirement plans in Canada have spent a lot of time and resources in encouraging plan members to save and make fuller use of the plans available to them. Auto-enrolment has grown, employer matches have become standard, and plan sponsors have spent years refining simulators and education tools aimed at getting plan members to put more money away.
Given how much effort has gone into the accumulation side of the business, plan members might expect an equally mature set of tools waiting for them on the other side of retirement. Somehow, that side of the industry has lagged behind.
Dustin Hunt, National Vice-President, Distribution, Group Savings and Retirement at iA Financial Group, has spent his career on both the group and individual sides of the business, and he says the imbalance isn’t hard to explain once you look at who plan sponsors are built to serve.
“There’s no question that the industry has spent more time on accumulation,” Hunt says. “The industry is spending a lot more time talking about decumulation now, but not necessarily actioning solutions or ways to deal with decumulation.”
Assessing why accumulation dominates the agenda
Hunt says the tilt isn’t unique to group plans, it shows up in the individual savings world too, and it starts early. People are told from a young age that they need to save for retirement, but as Hunt says, “When you’re younger, you’re not thinking about retirement. It’s such a nebulous concept that people don’t inherently understand.”
That leaves many people arriving at retirement with little real framework for what comes next. Costs also shift in ways people rarely plan for, he adds. Inflation hits differently once retired, since the basket of goods and services retirees rely on differs from what a 30-year-old is buying, and longevity and health risk compound the uncertainty further.
“They don’t recognize the variables that could affect their income or their retirement decumulation,” Hunt says. “They often underestimate how long they’re going to need their money.”
A plan member might know that they are projected to have $500,000 at retirement. That sounds meaningful, but it does not necessarily answer the question they actually have.
“What does that mean?” Hunt says. “Does that mean I’m going to have $100 every two weeks? Does that mean I’m going to have $2,000?”
He argues that income is easier for plan members to understand because it resembles the way they already manage their lives. Most people know what comes into the household each month and what their regular expenses look like. A lump sum is more abstract.
“If I have $500,000 at retirement, people can’t easily wrap their minds around what that actually means in a practical sense,” he says. “Tell me how much I have per month up until age X. That’s a lot more tangible.”
That is the thinking behind iA’s decision to incorporate both accumulation and decumulation into its retirement simulator. Instead of stopping at an estimated retirement balance, the tool can carry the plan member forward and show what that balance may translate into as income. Plan members need a number they can compare against the way they expect to live.
That is also why he believes decumulation planning should begin well before retirement itself. His minimum rule of thumb is about five to ten years beforehand, although he thinks the conversation should ideally start much earlier.
“If you don’t know what your target is or where you want to be and how much income you think you’re going to require, that’s going to change your accumulation and your saving habits,” he says.
Grappling with a behavioral blind spot
Hunt points to two patterns that concern him most; the first is excessive caution: retirees without a paycheque coming in can become reluctant to spend savings they can actually afford to use, for fear of running out later.
Research from the Employee Benefit Research Institute has found that roughly one-third of retirees still hold as much or more in savings in their mid-80s as they did when they first retired, a trend researchers largely attribute to fear of running out of money rather than a genuine lack of resources.
The second pattern is the one that Hunt finds more concerning: employees who don’t capture the full value of an employer match while they’re still working.
“If I said to you, here’s $20, no strings attached, do you want it? You’re likely not going to say ‘No, it’s okay’,” Hunt says. “The lack of saving is one thing, but when there’s a match by your employer and you’re not maximizing it, that baffles my mind. We see it across the industry.” A 2023 survey reported by Canadian HR Reporter found more than a quarter of employees who have access to a matching retirement savings program aren’t participating in it at all, let alone contributing enough to capture the full match.
Advice, he argues, is the biggest underused lever available to fix both problems. Most plan sponsors already give group plan members access to financial advisors, often at little or no direct cost, yet usage rates stay low, sometimes because plan members already work with an outside advisor, but more often, Hunt suspects, because they simply don’t know the service exists.
“Getting advice would be the biggest thing to help plan members, even if there’s no product evolution,” Hunt says.
A demographic clock the industry can’t defer much longer
Hunt’s own rule of thumb is that decumulation planning should start at least five years before retirement, though he says the ideal is much earlier, woven into someone’s financial thinking from the moment they start accumulating at all. He also expects employers to take on a bigger role than they have historically, partly because uncertainty about retirement readiness doesn’t stay contained to retirement. It shows up in current employees’ stress, productivity, and health well before their last working day.
With a larger share of the workforce approaching retirement in the years ahead, Hunt doesn’t think the industry has the luxury of treating decumulation as a secondary conversation for much longer.
“Accumulation is still very important, and it’s going to be the backbone that’s going to lead to decumulation,” Hunt says. “But there needs to be more time and energy spent on education and discussions and action as it relates to decumulation.”
This article was produced in partnership with iA Financial Group
