Economic growth, improved business investment and increased employment are all vital factors if Canada’s pension plans are to remain viable, according to a study.
The Global Risk Institute in Financial Services (GRI) study, which was undertaken with the Rotman School of Management at the University of Toronto, also demonstrates that, in the absence of these factors, public pensions will need significant reform and private plans will need greater contributions from their members and sponsors for benefits to be maintained.
“Recent debates about the current low levels of interest rates in developed economies are really just the tip of the iceberg,” says Michel Maila, GRI’s president and CEO.
He adds that the longer it takes for economic activity and returns on investment to revert to pre-crisis levels, the more delicate the challenges in the pension sector will become.
The focus on low interest rates has obscured the real issue, which is the length of time advanced economies are taking to recover to their historical rates of economic growth and job creation,” says Maila. “Given these research findings, it is only prudent risk management to prepare for the possibility of rates remaining low for a while longer.”