Canadian Investment Review

Private Sector Plans Seeking Liability Settlement: Survey

Written by Staff on Thursday, November 12th, 2015 at 10:05 am

727423_amsterdam_binocularCanadian DB pension plans are taking a more proactive and long-term approach to risk in an effort to better cope with volatility.

These are the Canadian results of Aon Hewitt’s Global Pension Risk Survey 2015, which polled more than 100 DB plans with over one million members in total and combined assets of approximately $200 billion.

The survey shows both public and private DB plans are focusing on risk more than ever before, but their approaches differ.

“In the private sector, the name of the game is liability settlement as plan sponsors are looking to eliminate defined benefit liabilities from their balance sheets through lump-sum offers and group annuities,” says William da Silva, senior partner and national retirement practice leader, Aon Hewitt.

“In the public sector, there remains a commitment to the DB structure, but in a more sustainable manner. Public sector plan sponsors are increasingly exploring strategies that balance the needs of all stakeholders through better sharing of risks and costs.”

The report also shows that 93% of Canadian respondents now have a long-term objective, compared with 87% in 2013 and only 50% in 2009.

Half of participants say they have a “robust” plan to achieve these long-term objectives.

About 37% of pension plans see cost stability as a long-term objective.

Additionally, the study reveals that 35% of plan sponsors intend to add more alternative assets in the next 12 months.

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