Mercer analysis reveals that new DC innovations can offer a faster path to retirement for many Canadians
TORONTO, May 4, 2026 — Mercer, a Marsh business (NYSE: MRSH) and a global leader in helping clients realize their investment objectives, today released its 2026 Mercer Retirement Readiness Barometer (MRRB), revealing that innovative features in Defined Contribution (DC) plans could help some Canadians achieve their retirement goals three or more years earlier.
As Canadians navigate economic uncertainty and rising living costs, saving effectively for retirement can be a challenge. This year's Barometer, leveraging proprietary Mercer retirement readiness analytics, builds on last year’s findings, which highlighted the value of flexible DC plan designs for early career savers. For the 2026 Barometer, Mercer has analyzed the impact of two additional innovations alongside plan flexibility: Variable Payment Life Annuities (VPLA) and exposure to alternative investments like private markets. These analysis reveals how combining several DC innovations can dramatically improve retirement readiness across income levels.
"This year's Barometer illustrates that innovation in DC is aligning to better support retirement and savings outcomes," says Bernadette Chik, Mercer Canada’s Defined Contribution Leader. "By offering flexible savings options, access to annuity-like solutions like Variable Payment Life Annuities (VPLAs) and broader diversification through alternative assets, employers can create a truly powerful DC retirement ecosystem. This not only empowers their employees to save more effectively, regardless of their life stage or income, but also strengthens the overall financial well-being of the workforce and promotes a dynamic talent pipeline."
Mercer analyzed two scenarios for an early career worker:
In the first scenario, a Canadian worker was unable to fully benefit from their employer’s matching contributions since the start of their career because they had to prioritize other financial needs. During the accumulation phase, their investments lacked full diversification with only a small allocation (5%) to alternatives. Finally, at retirement, they did not have access to cost effective options to convert their savings into a reliable income stream.
In a second scenario, this worker’s experience looks different because the DC ecosystem around them had evolved. From day one, they had access to a flexible employer-sponsored retirement plan that allowed them to fully capture the employer’s 5% matching contributions – even while managing other financial priorities. Their portfolio was thoughtfully diversified with a meaningful allocation (15%) to alternative investments, that not only spread risk but unlocked new growth opportunities. When retirement arrived, they were supported with options, including the ability to turn their savings into steady income through a Variable Payment Lifetime Annuity.
This scenario reflects a smarter DC ecosystem – one that improved retirement readiness for this worker by three years. For higher earners, the impact is even greater, resulting in improved retirement readiness by as much as 5 or more years.
Recent advances in defined contribution (DC) plans can deliver the security and growth benefits for Canadian savers – without compromising flexibility.
- With recent updates to regulations – paving the way for the possibility of converting a portion of savings into VPLAs – DC plan members stand to benefit from longevity pooling to reduce the risk of outliving their savings.
- As target date funds broaden their allocations into alternatives including private markets, everyday investors can increasingly access and benefit from a growth source that was previously available only to institutional and large investors.
- With both of these innovations, DC plan members maintain control and can tailor both their accumulation and decumulation experience for their financial journey.
Together, these innovations position DC plans as the flexible retirement and savings benefit that can support the financial wellness of a diverse workforce and allow Canadians to shape retirement income and spending on their own terms.
About the Mercer Retirement Readiness Barometer
The Mercer Retirement Readiness Barometer measures the age at which different personas can comfortably retire, considering their participation within an employer-sponsored DC plan and benefits provided by the government such as CPP/QPP/OAS. The analysis above utilizes Mercer’s retirement readiness analytics using proprietary databases and tools.
Retirement readiness is defined at a 75% probability of thriving in retirement by having sufficient income – including government benefits – to maintain a desired lifestyle without running out of money.
Assumptions for Scenario 1: The worker is currently 30 years old, earning either $75,000 or $100,000. They save 0% of their income from age 30 to 45, and 10% from age 45 onward. Their accumulated assets are invested in a target date portfolio containing 5% alternatives.
Assumptions for Scenario 2: The worker is currently 30 years old, earning either $75,000 or $100,000. They save 5% of their income from age 30 to 45, and 10% from age 45 onward. Their accumulated assets are invested in a target date portfolio containing 15% alternatives, with a conversion at retirement to a Variable Payment Lifetime Annuity