As the interest in target benefit plans (TBPs) grows, a new guide by Aon Hewitt says Canada’s pension industry needs to examine the range of choices available for plan governance.

The guide, Delivering on the Target Benefit Plan: Governance and Risk Alignment, looks at the regulation and possible governance alternatives of these fixed contribution, variable benefit pension designs.

The legislated regulatory framework is the front line in protecting plan members and providing security, according to the guide.

However, it is governance that provides the transparency that is vital to the success of TBPs because of the allocation of risk between employers, employees and, potentially, pensioners. Employers and plan members must be able to see clearly how the plan is working.

“All pension plans need to align plan design and pension governance so that those who are exposed to risk have the knowledge and power to manage their risks,” says William da Silva, senior partner, Canadian retirement consulting, with Aon Hewitt. “With target benefit plans, the members are clearly exposed to the greatest risk—the risk of not receiving the benefits at the targeted level.

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