Members of defined contribution (DC) pension plans in Canada are pessimistic about their retirement prospects and lack sufficient knowledge about the details of their investments and pension plans, according to a study commissioned by SEI Investments Canada.

The comprehensive study of over 2,000 members from 17 Canadian-based DC pension plans conducted in March 2004 indicates that only 28% of employees feel they will be able to retire when they want. The average age at which employees plan to retire is 61, or five years older than they desire.

These results are even lower than findings from a similar survey of plan sponsors conducted by SEI in November 2003.

A comparison of other findings reveals key discrepancies between employee and employer perceptions of DC plans. For example, employers believe 38% of employees will have enough to retire on, but only 6% of employees surveyed feel their pension will be sufficient.

The recent study also reveals that employees have limited knowledge of investing and of their DC pension plan in particular. Less than one in six employees (15%) consider themselves to be “very knowledgeable” about retirement planning and about one-third (34%) indicated that they did not feel knowledgeable at all.

Employees are also unclear on many of their DC plan features. For example, 75% of employees surveyed believe they can make their own contribution to their pension plan, when in reality, only 51% of organizations allow them to do so. In addition, only 39% of employees correctly knew that their pension plan is compulsory. In reality, 71% of members are in compulsory plans.

“Employees told us they know little about investing and their own pension plans. As it turns out, when tested, their actual knowledge was even lower.” said Patrick Walsh, president and CEO of SEI Investments Canada, in a news release.

In a DC pension plan, the level of contributions is fixed at a certain level and benefits vary depending on the return from investments. Unlike defined benefit pension plans, DC plans give the employee choice in where to put their savings, usually among stock, bond and money market investments.