Canadian DB Sponsors not Optimistic for the Future
November 23, 2009 (PLANSPONSOR.com) – 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.”