The Canadian Association of Pension Supervisory Authorities’ latest consultation is seeking feedback on amendments to its guideline No. 8 for defined contribution pension plans, focusing on considerations around decumulation, such as communicating variable benefits, assumptions used in retirement projections and fee disclosure.
When it comes to withdrawals from a variable benefits plan, according to the amended guideline, plan administrators should consider providing information on: the options for withdrawal amounts, including minimum and maximum requirements; sustainable withdrawal fees; and income estimates based on different investment return assumptions, including optimistic, pessimistic and best estimate, as well as withdrawal patterns or an income projection tool.
“If income estimates or income estimation tools are made available, plan administrators should clearly indicate that actual future income patterns will likely vary from estimates. The assumptions used in the estimates should be clearly stated,” the guideline notes, adding that administrators should provide instructions on how and when plan members should inform employees about choosing a withdrawal amount.
As well, the assumptions used in estimating the expected monthly income at retirement should be reasonable and plan administrators should indicate that actual values will likely differ from estimates, according to the amended guideline.
“Plan administrators should demonstrate prudence in establishing appropriate assumptions,” states the guideline. “Plan administrators could use assumptions which are either internally or externally developed. The assumptions should be appropriate for the characteristics of the plan and plan members.
“Plan administrators should disclose the assumptions used to arrive at an estimated future benefit and/or value, including the assumed level of fees, and should clearly state how the estimate can be affected if different assumptions are used.”
Indeed, the amended guideline also addresses fees, noting the plan administrator should provide members with useful and relevant information regarding the nature and level of fees paid by the member, including asset-based fees that are payable with respect to each investment option.
“This information should be provided to members at least annually and also whenever investment options or fees are changed,” the guideline notes, adding each annual statement and termination statement provided to a member should disclose the level of fees being paid.
The association is welcoming feedback and comments on the revisions until Sept. 6, 2018. It will publish the resulting submissions on its website at the end of the consultation period.