The right plan design, alternatives exposure, and annuity access make the difference
A 30-year-old Canadian worker enrolled in a well-designed defined contribution plan could retire at 66 instead of 69 — simply by having access to the right tools from the start.
Three defined contribution innovations — flexible plan design, alternative investment exposure, and Variable Payment Lifetime Annuities (VPLAs) — can meaningfully shift retirement outcomes, according to Mercer's 2026 Retirement Readiness Barometer, released Monday.
For higher earners, the improvement can reach five or more years.
The barometer draws on proprietary Mercer analytics and defines retirement readiness as a 75 percent probability of not running out of money before death, assuming an appropriate income level — including CPP/QPP and OAS — is maintained throughout retirement.
Mercer modelled the gap through two scenarios for a hypothetical 30-year-old, Anthony, earning $75,000 with access to a 5 percent employer match.
In the traditional scenario, he delays contributions for 15 years due to competing financial priorities, carries only a 5 percent allocation to alternatives in his target date fund, and retires into a standard drawdown vehicle — landing at a retirement readiness age of 69.
In the innovative scenario, a flexible plan design lets him capture the full employer match from day one even while managing short-term needs, his alternatives allocation rises to 15 percent, and a VPLA is available at retirement to convert savings into steady income — bringing his readiness age to 66.
Mercer Canada defined contribution leader Bernadette Chik said flexible savings options, VPLAs, and alternative assets give employers the tools to improve DC retirement outcomes across income levels and life stages — strengthening the overall financial health of their workforce.
Each innovation addresses a distinct gap.
Flexible plan designs let members save toward multiple goals simultaneously, which Mercer says boosts participation across diverse demographics.
Broader alternatives exposure in target date funds gives everyday investors access to growth sources previously available only to institutional investors.
And recent regulatory updates have opened the door to VPLAs inside DC plans, allowing members to pool longevity risk and reduce the chance of outliving their savings — all while retaining control over both accumulation and decumulation.
The 2026 barometer builds on last year's findings, which focused on flexible design for early-career savers, adding VPLA access and alternatives exposure to complete the picture of what Mercer calls a fully innovative DC ecosystem.
