The Financial Services Regulatory Authority of Ontario is closely monitoring administrative risk and pension plan sponsors’ geopolitical concerns in 2025, says Andrew Fung, the organization’s executive vice-president of pensions.
He cites increasing non-investment management risks like fraud, identity theft, data breach, cybersecurity and the use of artificial intelligence as emerging risks that plan sponsors will face throughout the year.
However, ongoing investment risk is also top of mind due to geopolitical concerns and Canada’s currently dim outlook on its relationship to the U.S. Fung says pension assets are at risk in 2025 from falling inflation and a weakening economy.
“From an investment perspective, valuations are stretched. Many asset classes’ expected returns tend to be low over the medium term.”
An ongoing effort by the Canadian government to limit immigration could lead to a national economy that’s vulnerable to recession, he says. Given these productivity concerns, the pension sector is at risk with an aging population and the sustainability of plans.
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“As life expectancy rises, coupled with the fact that there is decreased . . . pension plan coverage — particularly in the private sector — that threatens the financial well-being and sufficiency at retirement [of plan members].”
The FSRA is also focusing on the ongoing rise of multi-employer retirement platforms that can boost the consolidation of pension plans. He sees single-employer pension plans continuing to pursue a merger with larger public sector pension plans to gain scale in terms of administration and investment. “There are other many different forms of multi-employment platforms that I think will continue to emerge.”
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As part of its 2024-25 annual plan released in April, the regulator confirmed its oversight in the implementation of a new target benefit framework for multi-employer pension plans. The regulation came into effect on Jan. 1.
In an October press release, the Ontario government said once pension plan sponsors start using the new regulation, they will monitor the new regime to ensure its effectiveness.
“In 2024, we focused on supporting the government to roll out their target-benefit funding framework,” Fung says. “In 2025, we will continue to focus on that and look at supervising the process of these plans converting into target vendor plans.”
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