Canadians and Their Money

programs. We encourage, as a supplementary tool, the adoption of mechanismsprompting employees to maximize their retirement savings through “autoenrolment”and “auto-escalation.”• Auto-enrolment. Through auto-enrolment in a retirement plan, with an opt-outprovision for those who do not wish to participate, employees who neglect to“sign up” for voluntary retirement savings benefits will automatically be able toparticipate. Auto-enrolment can help “nudge” people with low levels of financialliteracy, or who simply procrastinate because they are overwhelmed by thevolume or complexity of information, into positive behaviours.• Auto-escalation. Through auto-escalation (again, with an opt-out provision),the amount of money an employee sets aside automatically grows over time,thereby helping to ensure that retirement goals are being met.Governments in the United States and elsewhere have adopted auto-enrolmentsolutions in the workplace, and these have proven to be a highly effective way ofimproving lifelong saving rates. Research in the United States has found thatparticipation rates under the standard opt-in approach were barely 20 percent afterthree months of employment, gradually increasing to 65 percent after 36 monthsof employment. Under auto-enrolment of new employees with an opt-out feature,the immediate enrolment rate was 90 percent, and after 36 months almost allemployees were participating. 31 In the United Kingdom, the government has agreedto introduce auto-enrolment as part of the launch of their National EmploymentSavings Trust program, which is scheduled for 2012. 32Recommendation 17The Task Force recommends that employers offer automatic saving programs and toolsto facilitate increased lifelong saving by Canadians, drawing on international best practicesin this area.31 Madrian, B. C., & Shea, D. F. (2001). “The Power of Suggestion: Inertia in 401(k) Participation and SavingsBehavior.” Quarterly Journal of Economics. 116(4): 1149–1187.32 Government of the United Kingdom, Department for Work and Pensions. (2010). Making automatic enrolmentwork – a review for the Department for Work and Pensions. Retrieved from www.dwp.gov.uk/policy/pensionsreform/workplace-pension-reforms/automatic-enrolment/index.shtmlTASK FORCE ON FINANCIAL LITERACY – III. Lifelong Learning 59