Funding ratios of federally regulated private pension plans improved in the second half of 2009, but many still face funding issues, according to the Office of the Superintendent of Financial Institutions (OSFI).
The regulator released the results of its latest solvency testing of federally regulated private defined benefit pensions on Thursday. While finding that the average ratio increased modestly to 0.90 at year end, it pointed out that only 15% of plans had a solvency ratio of less than 0.80, compared to 40% of plans at the end of 2008.
Testifying before the House of Commons Standing Committee on Finance, Judy Cameron, managing director of OSFI’s Private Pension Plans Division, warned that many pension plans are not yet out of the woods.
“The strong investment returns that pension plans earned in 2009 have been offset to some degree by the effects of very low interest rates on plan solvency liabilities,” she said. “While the most recent solvency testing results suggest an improving trend, many plan sponsors will still be required to make significant special payments, which may pose challenges for some plans.”
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OSFI currently regulates 7% of all private pension plans in Canada, accounting for approximately 12% of private pension assets.
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