TORONTO&mdas;A new survey of 115 Canadian Defined Benefit (DB) and Defined Contribution (DC) pension / Capital Accumulation (CAP) plan sponsors from professional services firm Towers Watson suggests a growing sense of pessimism is settling over the Canadian pension landscape.
The study reveals that 65 per cent of DB respondents believe Canada is experiencing a pension crisis that will be long-lasting and likely to worsen in the next 12 months—that compared to just 56 per cent in 2011.
DB and DC/CAP survey respondents also expressed concern about adequate retirement income for plan members when a pension plan re-design is underway, with more than 70 per cent of DC/CAP survey respondents anticipating CAP-related litigation will increase in coming years, citing inadequate retiree income as a key factor.
In response to the on-going funding crisis, 54 per cent of DB respondents say they are planning or considering investment strategy changes, typically to de-risk portfolios.
In contrast to prior years when plan sponsors were more focused on seeking higher returns, 53 per cent of 2012 respondents (compared to only 36 per cent in 2011) appear willing to accept lower returns in favour of reduced risk.
Plan design changes appear to be a somewhat less viable de-risking tactic for employers, with only two per cent of current private sector DB plan sponsors expecting to switch to a DC/CAP arrangement for new hires in the next 12 months.
A further eight per cent of respondents are considering this move in the future.
Regardless of plan type or sector, the majority of survey participants (72 per cent) agree their employees are more concerned about pensions now than they were 24 months ago.
Mirroring this anxiety, the pension risk survey confirms that many plan sponsors feel the same.