The value of the target date funds can vary due to market performance. The purpose of target date funds is to help members invest for the long-term. It’s not a short-term approach, which would require a more aggressive investment strategy.
What is Common Good’s policy when it comes to responsible investing?
The Common Good Plan is interested in offering something thoughtful on responsible investing, also known as ESG (Environmental, Social, and Governance), as part of our plan. The plan’s funds are managed by BlackRock, which manages more than $8.67 trillion in assets and serves more than 35 million investors. BlackRock is committed to evaluating sustainability insights and data across all of its investment processes and focusing on its dedicated investment stewardship activities.
BlackRock is currently researching ESG options in Canada and is looking to evolve the target date fund portfolios in the near future. We will continue to work with BlackRock to explore opportunities to integrate more responsible investing components into the plan’s investment program.
For more information on BlackRock’s approach to sustainable investing, you can check out the firm’s 2021 Stewardship Expectations, as well as BlackRock CEO Larry Fink’s focus on sustainability in his annual letter to chief executives.
Are target-date funds the only investment options?
Yes.
What is a target date fund?
Target date funds are professionally managed, diversified investment funds, meaning investing in a BlackRock LifePath Fund can provide an all-in-one investment solution at any age.
Each fund holds a number of underlying investments – from stocks to bonds, including U.S. and global markets, as well as real assets such as real estate and infrastructure – creating diversified funds with one main objective: helping to manage a member’s investment risk throughout their working years and into retirement.
When a member is young and far from retirement, the investment mix is more aggressive to help their investments grow. As they approach retirement, the fund automatically shifts to a more conservative allocation with the goal of preserving the member’s savings. When they arrive at their desired retirement date, the fund shifts to an investment mix to help the member retain spending power through retirement.
Is there a risk that the fees will increase in the future?
After five years, the employer fee will rise with inflation each year. This provision is included to ensure that the plan’s pricing stays constant relative to inflation over time. Low fees for both employers and employees are a key and core part of our philosophy and value. Any changes to the fees will be done openly and transparently, and with accessibility to employers and impact on members as our main focus and priority.
How can Common Good offer a low rate of 0.6%?
Low fees for members are a big part of what differentiates the Common Good Plan from others in the market. We have worked hard to offer such low rates, and have leveraged things like:
- Group purchasing power. We can get a better deal because services and products are being purchased on behalf of a large group.
- Digital technology. We don’t have the same legacy costs as traditional financial institutions like banks and insurance companies.
- A commitment to putting members first. Keeping fees low so that plan members can keep more of their retirement income is one of our core principles.
How do these fees compare?
The fees negotiated for the Common Good Plan are considerably lower than average investment management fees that Canadian retail investors pay. According to the Investment Funds Institute of Canada, the average Canadian investment fund has fees of about 2.1% of assets. In contrast, the Common Good Plan provides investment management services, plus all other retirement services offered by the plan for its members, for a total of 0.6% of member assets and $10/month per member.
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These low fees are a big part of what makes the Common Good Plan different from others in the market and directly impact retirement outcomes for members. The high fees typical in Canada can eat up over half of long-term investment gains, and you can take a look at this tool to learn more.
Do fees include taxes?
No, provincial taxes will be charged on all fees based on your province of residence.
What paperwork is required for joining the plan?
As the plan sponsor, you will be required to sign two agreements. The first agreement is a Sponsor Agreement with the Common Good Plan custodian, Canadian Western Trust Company (CWT). The agreement outlines the roles and responsibilities of each party. For example, it outlines that CWT is responsible for holding and safeguarding the assets of plan members and for maintaining the registration of the plan with the CRA.
The second agreement is a Service and Fee Agreement with Common Wealth, the plan administrator (and provider). This agreement details your responsibilities as the plan sponsor, as well as Common Wealth’s. For example, obligations related to communications, administration, fund access, fees, and privacy of information are outlined in the agreement.
What does it mean for the plan to have a fiduciary duty to plan members?
It means that Common Wealth, the plan provider, has to act in the best interests of plan members.