The gross income replacement level of capital accumulation plans has remained steady for both males and females over the previous quarter, while increasing investment returns were offset by a slight decrease in annuity rates, according to Eckler Ltd.’s capital accumulation plan income tracker.
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 and Canada Pension Plan/Quebec Pension Plan payments and will use their capital accumulation plan account balance at retirement to buy an annuity.
Read: Capital accumulation plans’ income replacement levels on the rise
The income replacement level tracked by Eckler has remained steady for almost two years, at 59 per cent for males and 57 per cent for females. Over this time, investment returns have been volatile and decreases in annuity rates have offset the positive investment returns generated in good times, according to Eckler.
“In our new reality of low interest rates, it’s crucial that members’ asset allocation aligns with their retirement income needs,” said Janice Holman, principal and defined contribution practice leader, in a news release. “A plan’s target date fund selection, default fund and member investment elections can significantly impact the level of retirement income a member can generate.”
Read: 2016 CAP Member Survey: Deconstructing how different employees view their retirement