DB plan sponsors still worried about de-risking
De-risking is top of mind for Canadian DB pension plan sponsors, according to Morneau Shepell’s 60-second survey for April 2014.
The survey, which polled 62 DB plan sponsors, reveals that the majority (71%) of respondents have already taken de-risking steps since the 2008 crisis. The most popular measure has been to modify DB plan design, which involves reducing ancillary benefits, requiring higher member contributions or converting the plan to a DC arrangement.
For 2014, more than half (53%) of respondents will be considering more de-risking measures, particularly further modifications to plan design. “It is very significant that more than half the plan sponsors are considering further de-risking measures, given that nearly three-quarters of them have already taken steps to de-risk,” says Fred Vettese, chief actuary with Morneau Shepell. “About 40% of the private sector DB plans in our pension database are already closed to new members, and this percentage will almost surely continue to rise.”
Only one survey participant will be considering annuities as a de-risking measure for 2014. “This was somewhat surprising, given the widespread expectation that many more sponsors would be winding up their pension plans in 2014 and buying annuities,” Vettese explains.
Nearly half (42%) of the respondents are sponsors of public sector DB plans. According to the survey, the percentage of public sector plan sponsors that are considering de-risking is virtually the same as the percentage of private sector sponsors.
About one-third (34%) of survey participants do not intend to take any de-risking measures this year because they think the worst is over for capital markets and de-risking would come with an opportunity cost.
Green Shield Canada has upgraded its online services to incorporate new features such as drug, provider and claims history search, as well as the ability to upload online audit documentation. The upgrade also includes improved co-ordination of benefits statements, as well as an expanded list of providers that can submit claims and check eligibility for services online.
Sun Life Investment Management has launched three pooled funds: one focusing on private fixed income, one on commercial mortgages and one on real estate assets. Initial portfolios of assets total about $650 million and were contributed by Sun Life Assurance Company of Canada and Sun Life Financial.
SSQ Financial Group now offers compassion insurance to help employees caring for a gravely ill loved one. The new benefit allows those insured to parcel out their periods of financial assistance, giving them greater flexibility and the ability to return to work as soon as possible.
Russell Investments Canada Ltd. has launched the Russell Inflation Linked Bond Fund, expected to invest mainly in inflation-linked Canadian government bonds. The fund aims to provide a stable level of interest income that is hedged against inflation, targeted toward pension plans and other institutional investors that are applying de-risking strategies.
Work less, produce more?
The Swedish city of Gothenburg recently announced that it will test six-hour workdays.
The experiment will apply to one municipal department. Some of its members will work six-hour days, while the rest will put in eight hours. Both groups will receive full pay. After a year, the city will compare the two groups. If the experiment is successful, it will hopefully cover other municipal employees, according to Gothenburg’s deputy mayor, Mats Pilhem.
He says the move is expected to reduce absenteeism and increase efficiency, which is usually stifled during longer shifts. But critics dismiss the experiment as a costly populist ploy that would have no effect on productivity.
This month in numbers
30%: the average portion of wealth that rich Canadians plan to leave to their children — 2013 BMO Harris Private Banking survey
58% of Canadian workers feel they have just a job as opposed to a career (42%) — 2013 CareerBuilder.ca study
51% of Canadian employees see poor co-operation with colleagues as the top work stressor — 2014 Randstad Award survey
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