The study compared a traditional workplace defined contribution plan with a more flexible model designed to accommodate workers managing competing financial priorities early in their careers.
In Mercer’s example, a 30-year-old employee earning $75,000 annually with access to a workplace plan featuring a 5% employer match could improve their retirement readiness age from 69 to 66 through the use of innovative plan features.
Under the traditional structure, the employee delays contributions for 15 years and later contributes a combined 10% annually through employee and employer contributions. The model also assumes limited exposure to alternative investments and a standard drawdown strategy in retirement.
By contrast, the innovative scenario assumes the employee begins contributing immediately through a more flexible plan design that allows access to savings for short-term financial needs. The model also incorporates higher allocations to alternative investments within target-date funds and access to a VPLA product designed to create a more stable retirement income stream.
“These combined DC innovations can help some Canadians retire over 3 years sooner,” Mercer said in the report.