August Hewitt Index Sees Below Average Transfers

September 13, 2001 (PLANSPONSOR.com) - Transfers by 401(k) participants in August maintained the trend set in earlier months of 2001, according to the Hewitt 401(k) Index.

On average over the month, daily net transfer activity was 0.05% of balances, below the historical average of 0.07%, and substantially lower than the 0.09% average net transfer activity recorded in August last year.

There were only two days of above-normal transfer activity during the month. In fact, 2001 has seen only 21 above-normal transfer activity days. This compares to 48 above-normal transfer activity days over the same period last year.

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Stocks to Bonds

On the 59% of the days this year in which transfer activity has occurred, the direction of transfers has primarily been away from equities and towards fixed income.

This is in line with changes in the equity market and a reversal of that seen in 2000, when transferring money chiefly moved into equities.

Over the month, 65% of the trading days saw fixed income attract more transferring money than equities, with 85% of money transferred heading for the GIC/Stable Value and Bond funds.

While overall transfers have been modest, so far 2001 has seen 57% of transferring monies going into GIC/Stable Value, while a comparable amount has come directly out of large US equities.

Contributing to Fixed Income

A similar shift has occurred in terms of contributions. In August last year, 77.5% of contributions went into equities, compared with August this year, which saw 73.9% of contributions destined for equities. 

In terms of overall asset allocation, 401(k) plan participants have allowed their exposure to equities to decline from 74.4% in August last year to 68.5%, the lowest stock exposure level since the index’s inception.

Much of this is being attributed to the failure of participants to rebalance during the equity market decline.


 

Performance Pay Increases in Canada

September 12, 2001 (PLANSPONSOR.com) - Canadian variable pay plans continue to grow in both number and design sophistication, according to the Watson Wyatt Worldwide's Annual Canadian Salary Survey.

The survey reveals an increasing trend towards offering pay-for-performance to all levels of employees.

Second and third-generation programs, designed to increase the awareness of employees to their company’s performance, are also becoming more evident.

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The survey notes a 10% increase in the number of organizations using variable pay programs, which involve a combination of quantifiable and subjective objectives to measure and reward employee contribution.

Plan Type

Results show that:

  • the number of organizations providing annual incentives increased to 83%, up 7.8% from the previous year
  • the number providing long-term incentives increased by 10% to 33% of the sample
  • the use of stock option plans remains at 26% of organizations providing incentives
  • the use of stock purchase plans increased by 14% over last year.

Other findings show that the average salary increase for all employees in the past year was 4.1%, an increase of 0.3% on the previous year’s growth rate.

Executives’ pay grew by 4.7%, an increase of 0.4% over the previous year’s increase. A further 7% of respondents did not provide salary increases last year.

Crystal Ball

While fewer organizations were willing to forecast rates for next year, compared to previous surveys, 71% of respondents did provide forecasts.

They revealed that average salary increases for next year are expected to be 3.7% overall and 3.8% for executives.

When the numbers are broken down by region, the survey reveals that for the coming year:

  • respondents in Ontario and British Colombia forecast 3.9% increases
  • those in Manitoba, Saskatchewan and the Atlantic provinces forecast 3.3% hikes
  • Quebec respondents forecast an overall increase of 3.7%.

British Columbia, Saskatchewan, and Quebec experienced the largest salary increases over the respective CPI rates for the past year.

Sector Increases

Breaking the data down by economic sectors:

  • public-sector companies forecast increases of 3% for the coming year and provided increases of 3.3% last year
  • private-sector organizations forecast increases of 3.8% for the coming year and provided increases of 4.3% last year
  • within the communications, electronics, and software sectors, forecasts are 4.6%, while increases for the previous year were 5.9%.

The survey, now in its thirty-third year, included the responses of 425 organizations of varying size, industry sectors, and location participating, representing 830,000 employees.

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