Canadian CFOs Believe Pension Crisis Will Continue

April 6, 2005 (PLANSPONSOR.com) - The number of Canadian CFOs who believe that they nation's pension deficit problem will continue has more than doubled in the past year, a new study asserts.

Forty-three percent of CFOs polled believe that the current problems with the pension system are widespread and will persist, up from 20% in 2004, according to a Watson Wyatt Worldwide survey, Business Insurance reported. Only 23% believe that the problem is cyclical, down from 39% last year.

The problem they see: chronic underfunding in pension plans, a situation that makes plan sponsors fund larger pension contributions.

Looking at their own companies, a majority (57%) of CFOs claim that they are only making the minimum contribution to their plans; only 32% are contributing more than the minimum.

Looking at the largest threats to defined benefit plans, 67% believe that volatility in future contribution levels is very risky, while 57% believe that an imbalance between funding and benefits is also a risk factor going forward. For defined contribution plans, the biggest threat is seen to be a lack of investment knowledge (47%).

Sixty-four percent believe that the adoption of a single pension regulator would strengthen the system, while 60% support the raising of the “excess surplus” threshold, which is currently at 10%.

The survey had responses from 77 CFOs; 64% came from companies with defined benefit plans, while 23% came from companies with defined contribution plans. Twenty-three percent of respondents came from companies with combination plans.

The survey will be available this fall, according to Business Insurance.

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