Meloche argues retirement income and decumulation solutions need scale, sponsor readiness, and advisor education before Canadian DC plans can adopt them
Canadian defined contribution plan sponsors have spent years refining default investment options during the accumulation phase but as Sun Life Global Investment’s Anne Meloche explains, the decumulation side remains a different story.
According to Meloche, the feedback her team has gathered from plan sponsors and group retirement services colleagues paints a clear picture.
“It’s not a knowledge problem; it’s a readiness problem. Only a handful of the most sophisticated, largest plan sponsors are looking to embed those solutions within their own plans and actively implementing Group LIF or RRIF arrangements, variable benefits, or, when available, a VPLA. For many, the hesitation comes down to governance capacity, fiduciary comfort, operational complexity, and the level of member communication and support required,” said Meloche, head of institutional business at Sun Life Global Investments.
The rest are leaning on Sun Life's broader platform to handle the retirement income conversation on their behalf, rather than building plan-level solutions.
“Most plan sponsors recognize the decumulation challenge and understand that members need help converting savings into sustainable retirement income. The gap is in execution,” Meloche added.
That dynamic has held steady since at least late 2024, when Sun Life launched its My Retirement Income solution. While the appetite for personalized, in-plan decumulation tools exists in theory, Meloche suggests the market lacks the scale to support the technology those tools require.
"For personalization, you need tools which can become very expensive to run if your market is very, very small," Meloche said, pointing to managed accounts in the US as a reference point. She said adoption there has been slow and gradual even with far greater scale while Canada faces an even steeper path.
“The US experience shows that even well-designed personalized solutions don’t automatically drive adoption. If members don’t understand them, trust them, or see their relevance, engagement will be limited,” she said.
Decumulation personalization needs Canadian market scale
Meloche sees potential for greater personalization within target date funds and a sharper focus on decumulation, but only once the Canadian market reaches sufficient scale. The US experience shows how slow that evolution can be, even with a much larger asset base. It isn't just a product or technology challenge.
“I hope we move away from this [active vs. passive] debate into where it is that we have high conviction, where is it that we can help with retirement outcomes and embrace alternative into portfolios? That’s the trend we'd like to see,” said Meloche.
“It pushes you to hybrid because alts can be expensive and to make the whole ecosystem work, it forces you to embrace passive, uncertain exposures. If you want to go a bit longer term with scale and maturity, we could expect greater targeted fund personalization and greater focus as well on the decumulation. But again, we need scale for that … You also need sponsors to be ready. You need advisor education. You also need plan members to be engaged because some have set managed accounts and they’re not using them,” Meloche added.
DC sponsors want easy solutions for complex problems
To that end, Meloche pointed to the fundamentals, underscoring DC plan members bear all the investment risk. After all, there's no promised pension and plan sponsors know it.
“When we speak to plan sponsors, what they really want is to help these plan members achieve their lifetime financial security. In this complex world of investments, what plan sponsors truly and deeply care about is simple to use, ‘help me do it’ solutions. That's their priority. But simple to use isn't about reducing the sophistication. In my mind, it’s about freeing up the plan member so that they can focus on planning for retirement and making sure they're aiming for the right outcomes, especially as the plan members gets closer to retirement.”
DC plan fee pressure reshapes default evaluation
While Canadian sponsors have largely gotten that part right, where Meloche sees a persistent gap is in how those defaults are evaluated once they're in place.
"We still often too often hear conversations mainly focused on benchmark relative performance and fees rather than being on how the solution truly helps the plan member achieve their retirement outcomes," she said, emphasizing a strong default needs to account for risk-adjusted performance, downside resilience, and income stability, not just returns and cost.
That fee conversation has since intensified particularly as Sun Life spent much of 2024 and early 2025 listening to clients and prospects after losing a few mandates following difficult years for active management in 2022 and 2023, Meloche noted. What the team heard back was consistent feedback, said Meloche, pointing to portfolio construction, performance, and fees which remained the top criteria. However, fee sensitivity had sharpened, particularly among certain client segments.
Consequently, most sponsors underscored they weren't looking for a pure passive solution. They wanted strong risk-adjusted returns at a competitive price, and many still valued alternatives in their portfolios, expecting those exposures to be part of the package as long as overall fees stayed reasonable.
A segment of sponsors also flagged a desire for something less complex to govern. That’s why Sun Life's flagship Granite series was built to mirror the sophistication of a DB plan portfolio, specialty fixed income, specialty equities, direct real estate, direct infrastructure and for some less resource-heavy plan committees, that level of complexity was more than they needed or could monitor effectively, noted Meloche.
"For some plan sponsors who are less investment savvy, who probably have less resources devoted to monitoring the activities of the plan, they said, ‘If this was a bit more simple for us, we would probably benefit from that’," she said.
Active-passive blend key to decumulation portfolios
The launch also reflects where Meloche lands on the active-versus-passive question - or rather, where she thinks the industry should land. She pushed back against treating it as a binary choice.
"What’s increasingly leading discussions we're having with clients is where it's best to use your active risk in your fee budget," she said.
According to Meloche, the logic runs through alternatives: private markets and alternative asset classes require active management by nature, and sponsors who want those exposures in a target date fund need to offset the cost somewhere.
"Using passive management, where there's efficiency and helping with your fee budget, it's really that equation of active risk and fees and using passive that’s complementary," she said.
She pointed to CAPSA Guideline No. 3, which calls on sponsors to understand the outcome a fund is designed to deliver, as a step in the right direction. But the gap between that principle and how selection conversations actually play out remains wide.
"It requires not only product innovation or technology. It also requires clear guidance around fiduciary consideration when you go and offer these new solutions in your plan," she said.
