One trillion.

I’m no math whiz, but that’s a lot of zeros. Twelve to be exact. It’s a big number.

So when our figures at the Canadian Pension Fund Directory showed the Canadian pension industry—including externally and internally managed pension assets—at the trillion dollar mark, I was somewhat humbled. With that kind of dough, you’d think the whole country could retire early and head south for a lifetime of sun and sand.

But, difficult as it is to believe, there’s still not enough in the collective piggybank. One need look no further than Canada’s largest pension fund for proof. Despite reporting a 17% return in 2005, the $96 billion Ontario Teachers’ Pension Plan is only 77% funded. That’s down from 84% the previous year.

Teachers’ president and CEO Claude Lamoureux says he’s concerned about the deficit, but that there’s not much more he can do. It’s up to the plan’s co-sponsors—the Ontario government and the Ontario Teachers’ Federation—to increase contributions or decrease benefits(see our Q&A with Lamoureux on page 102).

Teachers’ isn’t alone. Many plans sweetened benefits and took contribution holidays during the heady 1980s and 1990s—and are paying for it now. “We got briefly carried away in the 90s, thinking we would all retire at 55,” said Leo de Bever, executive vice-president of Global Investment Management at MFC Global, speaking at an industry luncheon in Toronto last month. He added the returns experienced during that period created unrealistic expectations about asset performance.

“The period of low returns that we’re currently experiencing is not unusual,” said de Bever. “If you look at bond returns right now . . . that’s all we should expect in the long run. And in the long run, equity returns aren’t going to be 15%, they’re going to be 7, 8, 9%.”

He added that plan sponsors and members alike need to realize that “there’s no free lunch.”

“The fact that we’re retiring so early is incredibly expensive. And there has to be a solution. You lower benefits and you retire later. But you can’t have it all.”

With $1 trillion in the bank, it may be difficult convincing plan members of that.

On another note, it’s been just over 25 years since BENEFITS CANADA started publishing its Top 40 Money Managers Report. Many of the names on the list have changed over the last quarter century. And the numbers have gotten a lot bigger.

To celebrate this milestone, BENEFITS CANADA will include special coverage in a number of its 2006 issues. In addition to our Top 40 reports in April and November, each issue published between now and November will include a Top 40 section, featuring observations from industry stalwarts about the past 25 years and what the future holds. As well, these special sections will include additional data pulled from our current money manager research and from our past lists.

Don Bisch