Small businesses rarely lose good people over salary alone. A Toronto pension provider lets them offer the benefit that banks, hospitals, governments and other large employers rely on to keep staff.
Every small business owner knows the scenario: a key employee – a project manager, a senior bookkeeper, the technician customers ask for by name – announces they are leaving to work for a bank, a hospital, a government department or another large employer. The salary offer is a little higher. But it’s often a pension plan that closes the deal, leaving the business owner scrambling to fill the position.
A small employer can usually find a bit more salary. But until recently, it had no practical way to match the pension offer. Blue Pier, a Toronto-based provider of outsourced workplace pension programs, was built to change that for Canadian employers.
The Compensation Gap Salary Cannot Close
Pension coverage in Canada divides along sector and employer size. Statistics Canada counts more than four million public-sector members of registered pension plans, against fewer than 3.3 million in a private sector with almost four times as many workers. Much of the private-sector coverage that does exist sits with large employers. More than 13 million Canadian workers have no workplace pension at all.
Pensions matter to workers. In a HOOPP/Abacus survey, 70 percent of workers said they would change jobs and accept lower cash compensation just to get a pension plan. A workplace pension plan also sends a powerful signal. When it’s offered, the candidate sees the employer as established, committed to its team, and planning for the long term. An offer without one can suggest the opposite, whether or not it is true.
Why Bigger Employers Have Better Pensions
Large pension and other group retirement plans work for structural reasons. A well-resourced employer or professional trustees carry the fiduciary responsibility. Assets are invested by institutional managers at fees well below retail. Members do not need to become investment experts, because the plan administrator sets the investment policy. The employer’s job is largely to pay in.
A small employer trying to build the same thing alone faces governance obligations, complex regulations, fiduciary exposure, and costs that a business of 30 people cannot reasonably absorb. The usual fallback, a group RRSP, is a retail savings product. Members pick their own funds, the money can usually be withdrawn at any time, and under the Guideline for Capital Accumulation Plans issued by the Canadian Association of Pension Supervisory Authorities (“CAP Guidelines”), the employer remains responsible for curating investment options, monitoring fees, and plan governance. Fees for small groups are also typically higher, because a small plan lacks the scale to negotiate institutional pricing.
Other countries have addressed the small-plan problem by pooling assets in large funds. Master trusts in the United Kingdom, superannuation funds in Australia and 401(k) pooled employer plans in the United States let small employers join large, professionally governed pension funds and delegate the administrative burden to a third party. Blue Pier brings that model to Canada.
Pension Plan as a Service
Employers join the Blue Pier Retirement Plan, a multi-employer defined contribution registered pension plan, as participating employers. The employer chooses a plan design, enrols employees and remits contributions. Blue Pier’s independent Board of Trustees serves as plan administrator, responsible for governance oversight, regulatory filings, recordkeeping, and member communications.
Investments are managed by an institutional asset manager under a policy set by the trustees, much as large public-sector pension plans are run. Because members do not choose investments, the CAP Guidelines don’t apply to Blue Pier’s plan or its participating employers, substantially reducing the regulatory burden. The plan is available across Canada to employers with as few as five employees.
Competing on the Whole Offer
Plan design lets a small employer communicate what it values. Contribution rates that rise with years of service reward loyalty. Employer matching contributions reward employees who save and are engaged. Separate classes of employees can have different designs, and owners who draw a salary can join the same plan.
The tax treatment is the same one large employers enjoy. Employer contributions to a registered pension plan are not a taxable benefit to the employee and do not attract CPP contributions, EI premiums or provincial payroll taxes, so each dollar goes further than the same dollar paid as salary. (Some of the math is set out in more detail in a previous CanadianSME article, More Salary or a Pension Plan: Which Is Better?) Employers can pay plan fees directly as a deductible business expense, keeping every contribution dollar invested. Required contributions are locked in to provide pension income, and all members’ assets are protected from creditors.
For employers concerned about cost, Blue Pier recommends starting modestly and directing part of future pay increases into pension contributions, so the plan adds little or no net cost. The next candidate comparing offers then sees what a large employer would show them: salary plus a pension.
“Small businesses have always competed head-to-head with big employers on everything except retirement, because a pension plan takes scale and governance capabilities they don’t have. We solve that problem for small employers. A 20-person firm can now make the offer a bank or government makes – salary plus a real pension – and we carry the administration and the fiduciary responsibility. When a key employee weighs two offers, a pension can tip the balance toward the smaller workplace – with its closer connection to management, broader range of duties, faster decisions and less red tape.”
– James Pierlot, Founder and CEO, Blue Pier
Institutional Backing
Blue Pier works with a first-tier recordkeeper, an institutional asset manager and a federally regulated Canadian trust company. The company launched Canada’s first pension plan designed for physicians in 2020 and won an innovation award at the World Pension Summit in 2022.
Is Your Offer Competitive?
The last time your business lost a key team member to a larger employer, was it the salary or something else? Does your offer show a commitment to help employees retire well? If you offer a group retirement plan, how does it compare with what large employers would offer the same person? What would it take to put a pension in your next offer?
Employers can contact Blue Pier to compare their current arrangement or to get a personalized cost-benefit projection for a new plan.
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Disclaimer: This article is based on publicly available information intended only for informational purposes. CanadianSME Small Business Magazine does not endorse or guarantee any products or services mentioned. Readers are advised to conduct their research and due diligence before making business decisions.
