Canadian DB Sponsors not Optimistic for the Future

November 23, 2009 ( – A survey from RBC Dexia Investor Services reveals that 89% of defined benefit plan sponsors in Canada believe the pension system is either poorly positioned or average when it comes to the nation's future pension prospects.

Although 41% of respondents cite investment risk as the type of risk they are most concerned with, shortfall risk (the risk of pensions not generating sufficient returns to offset obligations) ranks a close second at 36%, according to a press release. Operational risk, selected by 8% of respondents as their primary risk factor, appears to be less of a concern among sponsors.

Almost half  (48%) of respondents indicated that their biggest challenge in 2010 is aligning future liabilities with assets, while 38% said they expected low returns to continue to be a significant challenge. Seven percent of respondents believe the introduction of a new style of pension plan accounting standards (International Financial Reporting Standards) will be their biggest challenge in 2010, while 4% believe it to be understanding new instruments and alternative investments.

“Whether due to recent market volatility or a lack of a unity from Federal and Provincial regulators, it is evident that defined benefit plan sponsors are finding it difficult to be optimistic about their ability to meet future pension obligations,” said Scott MacDonald, head, Pensions, Financial Institutions and Client Service for RBC Dexia, in the press release. “The respondents to our survey frequently suggested the need for all stakeholders to work more closely together to help alleviate the current strain on the pension system.”

Despite the pessimism, 72% of respondents ranked Canada’s pension system as equal to or better than other systems globally, and only 8% said they consider the Canadian system to be inferior to its global counterparts.