Canadian defined benefit pension schemes on downhill slide

Private sector employers in
Canada have crossed a “pension Rubicon”, professional services firm
Towers Watson has declared in an assessment of the Canadian pension
market.

For defined benefit (DB)
pension schemes this means only one thing – a steady decline into
oblivion.

Based on a survey of
executives responsible for more than 150 Canadian pension plans,
Towers Watson found that 51% of DB funds have been converted to
defined contribution arrangements for current or future employees,
up from 42% in 2008. This trend shows no sign of relenting, Towers
Watson noted.

In its study, Towers Watson
also found that improved economic conditions have had virtually no
impact on executives’ perceptions of a DB funding crisis, with the
percentage of respondents who agree that there is a pension funding
crisis remaining at historic highs since the financial downturn of
2008.

Specifically, the study found
that 56% of executives believe that the funding crisis will persist
for the long term compared with 34% who held this view in 2008
before the onset of the recession.

“The 2008 crisis may have been the final straw for senior
finance officers,” said Towers Watson investment services, David
Service. “While plan sponsors may not be able to afford to make
changes right now, many are working on strategies to de-risk or
even exit when the financial position of their plans
improve.”

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