Federal watchdog says pension funds are in good health

Most have recovered from significant challenges earlier in the decade

Ottawa (27 April 2007) - Contrary to the grim picture painted by corporate Canada, more good news has emerged for Canadians counting on pensions to support them when they retire.

Julie Dickson, acting head of the federal office of the Superintendent of Financial Institutions, says nationally-regulated pension funds have regained their health and are generally operating in the black again.

Early in the decade many funds were hit by a combination of low interest rates and poor investment returns. They were also required to incorporate new rules related to longer life expectancy, stiffer requirements in evaluating liabilities and several landmark court decisions.

Dickson cautions that fund managers must remain vigilant but she says the picture is much brighter than it was.

The total value of the assets of all federal plans at the end of last year was 6% (nearly $7 billion) greater than liabilities, a significant turnaround from a 10% ($12 billion) shortfall at the end of 2005, she says.

Dickson attributes the change to strong investment returns, better bond yields and special payments required by pension legislation.

She estimated that about half of all defined benefit plans are now fully funded, double the proportion a year earlier, meaning that they can fully cover their benefit obligations. Of the remainder, most are more than 90% fully funded. Just 20% are less than 90% fully funded and only 4% are less than 80% funded.

The office supervises about 450 defined benefit plans.

Larry Brown, national secretary-treasurer of the National Union of Public and General Employees (NUPGE), says the figures put the lie to scare tactics that have been used by many private employers to reduce their pension obligations.

"We have seen an incredible propaganda barrage aimed at convincing Canadians that the traditional pension plan was no longer a viable option," Brown notes.

"As recently as March of this year the Conference Board released a survey that claimed 80% of corporate leaders believe there is a 'widespread pension crisis'. Yet at the same time we have seen the corporate world awash in cash, with more billions of dollars in 'spare change' than at any other time in history," he adds.

"We've done the research - the real pension crisis is about the number of workers who are being denied the right to a decent retirement, not about the ability of corporate Canada to pay for pensions for their employees. This report from the federal regulator is one more setback in the attempts to justify radically reduced pension coverage," Brown says.

NUPGE released a new report last November entitled, No Pension Panic - The Real Pension Crisis - It's all about coverage, not funding. Download PDF NUPGE

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