Is Your CAP Designed for This Market?
Canada’s exposure to the U.S. economy is significant.
Before we dive in, let’s quickly revisit what we mean by a Capital Accumulation Plan (CAP).
A CAP is a retirement savings program designed to help employees build long-term financial security. Contributions are typically made by both employees and employers, and the funds are invested over time.
Examples of a CAP with a retirement savings/income focus may include the following plans or arrangements provided for employees or members: defined contribution pension plan (DCPP) with or without post-employment variable benefits options, registered retirement savings plan (RRSP), deferred profit-sharing plan (DPSP), locked-in retirement account (LIRA), registered retirement income fund (RRIF), life income fund (LIF), PRPP, VRSP, and Tax Free Savings Account (TFSA). Examples of a CAP without a retirement savings/income focus include registered education savings plan (RESP) and First Home Savings Account (FHSA).
In today’s environment of rising trade tensions, geopolitical volatility, and unpredictable markets, plan sponsors face a growing challenge: ensuring that their CAP offers a strong range of asset classes, geographic exposure, and investment styles.
The goal? Helping employees manage risk, reduce volatility, and continue pursuing long-term returns.
What the numbers tell us
Roughly 25% of our Canadian GDP is tied directly to exports across the border. With tariffs and political uncertainty making almost every headline, many are asking: What impact will this have on my investments?
For members in a CAP, the answer depends on how much flexibility their plan allows.
Too often, investment menus are limited. This approach might work in ideal market conditions, but we are currently facing anything but.
In fact, beyond limited investment choices, the default investment option itself may have a geographic makeup and asset mix that is increasing risk for your employees.
At a time when geographic risk matters more than ever, employees need options that reflect today’s realities.
This includes the ability to distinguish and choose between Canadian, U.S., international, and global investment options, as well as access to both passively and actively managed investments.
This a critical strategy for helping to reduce market volatility during these uncertain times.
Is your plan equipped for volatility, or relying on outdated defaults?
Your business and team deserve more than a set-it-and-forget-it solution.
We like to understand what our plan members are truly willing to accept when it comes to investment risk.
While assumptions are often made based on age, this can overlook what really matters:
Does the member understand the risk?
Can they afford volatility right now?
Do they feel confident making changes when the market shifts?
This is where the CAP plan design and employee’s access to financial education intersect.
A big part of a well thought out Capital Accumulation Plan includes:
Regularly reviewing investment options and asset class availability
Evaluating whether plan provisions are still appropriate
Ensuring employees have both the guidance and the confidence to make sound decisions
- Providing meaningful financial education, tools, and access to full financial planning through advisors qualified to deliver comprehensive guidance with the goal of reducing employee stress and anxiety related to their finances.
It’s time to move beyond minimal requirements.
Plan sponsors have the opportunity to deliver smarter, more resilient solutions that reflect both the world we live in and the pressures their people are facing.
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