The replacement income level generated by capital accumulation plans has increased over the past four months, according to Eckler Ltd.’s capital accumulation plan income tracker. This is only the second time the tracker has increased in its history.
Eckler credits the uptick with increased returns for Canadian equities during the second quarter of the year, which more than offset the impact of interest rates.
Read: Low interest rates drive down income replacement levels
“Recognizing that members have limited time, interest and ability to manage their retirement portfolios, smart plan design and targeted communications that help members arrive at optimal outcomes are key,” said Janice Holman, a principal in Eckler’s Toronto office, in a news release. “Plan sponsors that manage their plans to maximize outcomes will benefit from happy retirees who are able to leave the organization when they want.”
The tracker assumes the member made annual contributions at a rate of 10 per cent starting at age 40, will receive maximum old-age security benefits and Canada/Quebec Pension Plan payments and will use their CAP account balance at retirement to buy an annuity. The member’s CAP account is invested based on a balanced strategy.
Read: Replacement income levels keep falling
