Offering dealership employees a retirement savings plan is a solid step to boost retention
Canadians now need more money than ever to retire — and many say they aren’t able to save enough to meet their needs.
A recent article in Wealth Professional Canada cited a BMO survey of Canadians that found that on average they believe they need $1.7 million to fund their retirement — and that rises to $2.1 million among working age millennials.
The same survey, however, found almost two thirds of respondents cited current economic conditions as a factor reducing their ability to save towards retirement.
“CADA, in conjunction with Canada Life, has developed the CADA 360 Retirement Savings program for dealers and their employees. Dealers can choose to participate in a Group RSP, Group RPP, TFSA, or DPSP. Most dealers operate a Group RSP,” said Michael Psotka, CADA’s CFO and Director of Member Services.
CADA 360 Retirement Savings provides the structure and low MERs on the investments, the dealers, with their employees can decide how much to contribute.
“CADA through a dealer committee and our expert investment consultants manage the CADA 360 Retirement Savings plan for our dealers. Composed of fellow dealers, the committee works on a not-for-profit basis to ensure the plan benefits dealers and their employees,” he said.
Because it’s a group plan, MERs on the investments are lower than participants can get on their own.
The timing is ideal right now for dealers to explore these programs, as they can be an effective retention tool to reward your loyal employees. “Now, more than ever, employees need the help,” said Cindy Robinson, Director, Governance & Plan Management, CADA Employee Life & Health Trust.
“Today many people just can’t afford to put money away. There is some responsibility for employers to help their employees to save for their retirement.”
Usually the participating dealerships create a matching program that adds to the contribution the employee makes. “It’s a smart thing for an employee to do. Adjusting your pay cheque by $50-100 a month might not seem that significant but it adds up, along with any match the employer puts in. Then at some point the employee has a nice little savings fund they wouldn’t have had otherwise.”
The CADA 360 Retirement Savings plans are customizable so that dealers can decide how much they want to match for their employees, and can even tier the program to provide more matched funds for employees based on their years of service. “They can build retention strategies into their retirement programs, and help motivate team members to build their careers with their dealership,” said Robinson. “Your Canada Life representative can work with you to tailor the program to meet your own dealership’s objectives.”
“The flexibility really lets dealers build a retirement savings plan that works for their needs and goals,” said Robinson. “By just tucking that little bit away every paycheck they are helping them with their retirement.”
Here is an example that shows how the plan can help your employees, even with modest contributions:
Anne is currently 40 years old and works in accounting. She is a single mother and hasn’t saved up much for retirement. Anne is a great and dedicated employee that the dealer would like to retain. The dealer decides to implement an RRSP match program for its employees. Anne decides to invest $40 a week, which is matched by her employer. After 25 years she has accumulated approximately $203,600 — resulting in an approximate monthly income upon retirement of $1,200 for 25 years.*
*Based on an estimated average plan growth of 5 per cent annually1
In terms of program details, CADA 360 takes on the fiduciary responsibility for the plan so the dealers don’t have to. Because it’s run as a not-for-profit, the plans have lower than retail investment management fees.
The program offers tax-effective and professionally managed investments, with convenient payroll deductions. Employees can easily transfer funds from another program, and employees have 24-hour access to their plan information, and are provided semi-annual statements showing them how their retirement savings are doing.
“Dealers know that looking after their employees is a key strategy to succeed in automotive retail,” said Tim Reuss, CADA’s President and CEO.
Notes
1 Calculations are approximate and for information purposes only. This is intended to assist in retirement planning; it is not a predictor or guarantee of future investment performance.
