As the Canadian Association of Pension Supervisory Authorities looks to update its capital accumulation plan guidelines, the amendments must reflect the changes in the industry, said Angela Mazerolle, vice-president of regulation at the Financial Services and Consumer Services Commission of New Brunswick, during a session at the 2022 Canadian Pension and Benefits Institute Forum in Montreal this week.
“These guidelines were originally released in 2004 and were very well received by the industry at that time, but the environment has changed a lot in 18 years.”
In 2019, the CAPSA formed a working group of employers, service providers and industry associations to refresh the CAP guidelines. In May, the group released a consultation document with suggested changes to gather feedback from various industry stakeholders.
The most significant proposed change is that the new guidelines apply to financial products that didn’t exist in 2004, including pooled registered pension plans and tax-free savings accounts, she said, noting the document also proposed improved communications and disclosure practices with plan members, enhanced governance standards and clarification of the rights and responsibilities of plan sponsors, members and providers of CAPs.
Another major issue the CAPSA is spearheading is the development of cyber security guidelines for pension plans. “Cyber risks are key operational risks today and no pension plan, large or small, is immune,” said Caroline Blouin, executive vice-president of pensions at the Financial Services Regulatory Authority of Ontario, also speaking during the session. “These are also risks that change very quickly, so they require a dynamic response.”
The CAPSA’s consultation paper contains draft guidelines that are intended to identify what regulators can expect from pension plans regarding the protection of data and technology systems as a whole. The guidelines will also provide practical resources to help plan sponsors develop controls to mitigate cyber risks and develop robust plans to manage potential incidents.
The CAPSA also released a consultation paper this month on the development of guidelines on the use of leverage and the management of related risks. “Complex leverage strategies, such as swaps and repos, are increasingly being used by pension plans, which is why it is important to develop a financial risk assessment framework and to have discussions on the preferred measurement tools for quantifying the level of leverage used by pension plans,” said Blouin.
In 2021, the CAPSA also established a committee to develop a risk management guideline to assist pension plan administrators in fulfilling their fiduciary duties. But rather than develop a stand-alone guideline, the organization is aiming to canvass the industry on the possibility of issuing “super guidelines,” she noted.
So rather than issuing separate guidelines on environmental, social and governance issues, leverage and cyber risk, as well as a risk management guideline, the CAPSA would issue an overarching risk management guideline that covers all of these concepts, said Blouin. “We want to see if this is an approach that appeals to the industry or if they prefer separate guidelines for each of the topics.”
The CAPSA included all of these initiatives in its 2019-2022 strategic plan, which was extended to 2023 due to disruptions related to the coronavirus pandemic. The next version of the plan, which is in the works, may, for example, include goals related to the guidance of variable payment life annuities and target-benefit plans.