While Canada’s pension system continues to rank well globally, the current economic environment poses particular risks for defined contribution pension plan sponsors and members, according to a new report by the CFA Institute and Mercer.
“As DC pension plans continue to make up a greater part of Canadians’ retirement, turbulent markets, soaring inflation and a higher cost of living are all impacting older workers that are transitioning to full- or part-time retirement,” said F. Hubert Tremblay, a principal and senior wealth advisor at Mercer Canada, in a press release.
Read: Canadian pension plans well positioned as inflation hits 31-year high: report
As DC plans increase in popularity, employers can support employees’ retirement planning by providing and promoting financial wellness tools and benefits, he said. “The retirement industry also needs to support workers transitioning into retirement by providing good options to convert accumulated assets into retirement income, low investment fees and helping future retirees understand how the [Canada Pension Plan and Quebec Pension Plan] can be leveraged to deal with investment and longevity risks.”
The report, which analyzed 44 global pension systems accounting for 65 per cent of the world’s population, ranked Canada’s pension system at No. 13 with an overall score of 70.6. It noted Canada’s retirement system could be improved by measures such as increasing the coverage of employees in employer-sponsored pension plans, as well as increasing flexibility in the retirement benefits provided and introducing a minimum access age for all pension products.
By comparison, the top five pension systems were Iceland, with an overall score of 84.7, followed by the Netherlands (84.6), Denmark (82), Israel (79.8) and Finland (77.2). Thailand had the lowest overall score at 41.7.