Since the early 1990s, when pension plan sponsors began in earnest to convert their DB plans to DC, Canada has seen a sustained shift in the pension landscape. Between 1991 and 2006, according to Statistics Canada, the number of members covered by employer-sponsored DB plans shrunk by 4%, while DC membership grew by 93%.
The tidal wave of Canadians nearing retirement is a well-known trend. According to Statistics Canada, by 2036, Canadians age 65 and over will comprise more than one-quarter of the population. Their biggest concern is the combination of creating a sufficient income stream and managing their health in retirement. Many of these future retirees expect their DC plans to play a significant role in their retirement, so plan sponsors are increasingly facing the challenge of identifying how they will manage and meet these expectations.
Replacement income levels generated by capital accumulation plans increased to 64% in the fourth quarter of 2013, according to Eckler’s Capital Accumulation Plan Income Tracker.
In a shifting CAP landscape, what’s the impact of industry consolidation on plan sponsors?
Since 2006, changes in markets and interest rates have led to a drop in the average capital accumulation plan (CAP) member’s replacement income ratio—to 62%, down from 88%, according to Eckler’s CAP Income Tracker (CAPit)
Over the last few years, a lot of time has been spent enticing employees to become more engaged in retirement planning. While engagement is still an important issue in the capital accumulation plan (CAP) space, an aging workforce nearing retirement is bringing other priorities to the forefront. De-accumulation and “emotional readiness” for retirement are becoming hot discussion topics.
Individual investment strategies have less of an impact on DC members' replacement income than plan contributions and interest rates, according to Eckler's Capital Accumulation Plan Income Tracker.
Amid low interest rates and a slow economic recovery, the income of capital accumulation plan members in Canada has declined significantly over the past few years, new figures reveal.
Canada’s workplace DC pension plans continue to struggle. Higher employer contributions can offset that trend, but they’re generally not taking place, leaving the onus on employees to increase their retirement contributions amid a slow economic recovery.
Employee participation in company DC plans in the United States is at an all-time high, and plan balances have reached pre-recession levels, according to a report.