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While the process has been slow to date, it’s clear the migration to defined contribution pension plans will continue in Canada.

Defined benefit assets comprised about 47 per cent of total financial wealth in 2007, compared to assets in DC plans and other group retirement savings accounts, which made up about 38 per cent, said Colin Ripsman, president of Elegant Investment Solutions Inc., during a panel discussion at Benefits Canada’s 2019 Benefits and Pension Summit in Toronto on April 17.

Read: Gap between DB and DC pension returns closing: study

By 2017, DB assets dropped to 43 per cent while DC and group retirement savings plans inched up to 39 per cent. But by 2026, that ratio is expected to reverse. DC assets, said Ripsman, are expected to represent 44 per cent of total financial wealth, with DB assets declining to about 36 per cent, likely due to several of those plans winding up.

“Since 1976, we’ve seen a gradual shift in membership out of DB plans,” he said. “It’s clear we will continue to experience a migration to DC arrangements in Canada.”

In light of these changes, how can DC plans operate more effectively? One key factor is strong enrolment, said Ripsman. “The success of the accumulation period is dependent on four key factors — enrolment, participation, investment options and engagement. Are plans requiring members to participate or are they leaving it optional for employees?”

In the United States, for example, the Pension Protection Act of 2006 allowed employers to introduce auto-enrolment for their employees. Today, auto-enrolment in the U.S. now stands just below 50 per cent, said Ripsman.

Read: 65% of global employees support pension auto-enrolment: survey

In Canada, employers face challenges in making membership mandatory due to some pension-related provisions in the Employment Standards Act, he noted.

Sobeys Inc. has mandatory enrolment for full-time employees once they reach the age of 25, said Jim Cooke, the company’s vice-president of total rewards, also speaking on the panel. “So you don’t have the option or alternative to opt out of our DC pension plan. Now, for part-timers when we do it — and with our company the vast majority of employees are part-timers — it’s not mandatory.”

But if a part-time employee has more than two consecutive years of 700 hours of work, they can opt into the pension plan if they want to, said Cooke.

Roman Kosarenko, senior director of pensions at George Weston Ltd. said all of the company’s plans for salaried employees are voluntary. “It’s kind of a philosophical position the company took and I think it was partly to create additional flexibility for people who participate in the plan, that they would get back better financial benefit.

“The people who don’t want to participate, they would subsidize partially the rest of them.”

Read: Editorial: A wish list from the DC pension industry

Copyright © 2020 Transcontinental Media G.P. Originally published on

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