Frontlines

Letter to the Editor

It’s a mystery: no one here at Benefits Canada seems to know who sent Mayor Ford a copy of our magazine. But here are his thoughts on our publication and our industry:

Dear Alyssa Hodder,

Thank you for sending me a copy of your publication entitled Benefits Canada; the gesture is much appreciated. The issue’s coverage of DC and DB retirement plans was both informative and interesting. Indeed, your efforts help to both maintain an innovative environment and broaden Canadian industry.

As promised during the mayoral election, I am dedicated to delivering excellence in citizen outreach, creating a transparent and accountable government, reducing the size and cost of government, and building a transportation city. I remain committed to making Toronto a great city in which to live, work and play.

Yours truly,
Mayor Rob Ford
City of Toronto

ETF growth projected to continue

The Canadian exchange-traded fund (ETF) industry is expected to keep growing, according to a recent BMO Global Asset Management report.

The industry currently has $60 billion in assets under management— an increase of 6% from December 2012. Inflows this year have exceeded $4.1 billion. Fixed income ETFs represent approximately 55% of year-to-date inflows in Canada, at $2.3 billion. Equity ETFs have received nearly 40% of year-to-date inflows, at close to $1.7 billion. One reason this vehicle has grown in popularity this year is strong competition among Canada’s ETF managers.

The report predicts that ETFs will keep growing for the remainder of this year and next. As holdings within other investment vehicles, ETFs provide benefits such as tactical allocations, exposure to asset classes that are more difficult to access and diversified exposure to satellite investments. The low cost of ETFs is another big factor for their appeal as buy and hold investments—particularly during a time of lower returns.

Canada’s retirement system remains strong

Here at home, our retirement system receives a lot of criticism—but compared with other advanced nations, the country isn’t doing too badly. Canada held on to sixth position in the recently released Melbourne Mercer Global Pension Index, underscoring its status as one of the best retirement systems in the world.

This year, Canada’s index value fell slightly to 67.9 from 69.2 in 2012, according to the index (produced by Mercer and the Australian Centre for Financial Studies). Still, Canada maintained a B grade in the ranking, which indicates a system with a sound structure and many good features, but with room for some improvement.

“Canada’s retirement system continues to be one of the strongest systems in the world and stands to benefit from rising long-term interest rates,” says Scott Clausen, a partner in Mercer’s retirement business. “Canada has been able to maintain its strong rating by providing a combination of universal pensions, incometested pensions, employer pensions and individual RRSPs, although there is always room for improvement.”

These improvements include the provision of pension plans to more employees and an increase in the retirement savings levels of middle-income households, Clausen explains.

Denmark is the top performer in the ranking, scoring 80.2 with an A grade, thanks to its high level of assets and contributions, its provision of adequate benefits and a private pension system with developed regulations. Other top-ranked countries are the Netherlands (B+), Australia (B+), Switzerland (B) and Sweden (B).

The Melbourne Mercer Global Pension Index is now in its fifth year and covers 20 countries. It looks at both the publicly funded and private components of a system, as well as personal assets and savings outside the pension system.

Market Watch

Manulife has launched a product for people who are between five and 15 years from retirement. Manulife RetirementPlus helps near-retirees boost their retirement savings by offering them support through the key stages of retirement preparation: savings, preservation and income. In the savings phase, clients participate fully in the markets and have different investment options to choose from. When clients decide to secure a future guaranteed income rate, they can move their savings into the preservation phase. In the income phase, clients can draw a retirement income when needed.

Desjardins Insurance has launched a policy that offers a monthly benefit for people who require home and long-term care (LTC). Life LTC Advance provides policyholders who are age 65 and older with tax-free monthly financial assistance so that they don’t have to rely on loved ones if they lose their independence.

Standard Life Investments has started a Canadian Real Estate Fund, raising $77 million in initial equity. The product is a semi openended Canadian limited partnership with an English limited partnership feeder fund for foreign investors. It aims to give institutional investors in Canada and abroad exposure to the domestic real estate market, which, traditionally, has been difficult for foreign investors to access.

This month in numbers

61: the retirement age of Canada’s average public sector worker, compared with 63 for the average private sector employee — 2013 Canadian Federation of Independent Business report, Canada’s Two-tier Retirements

CIIN Minute

Canadian DB assets
Total fixed income: $390 billion