Target benefit plans may be the answer to many problems facing pension plan design, according to a white paper.
Aon Hewitt has launched a website dedicated to target benefit plans for plan sponsors as well as industry and government leaders.
As part of ongoing pension reform initiatives, pension legislation in various Canadian jurisdictions is being amended to accommodate a new pension plan design feature, commonly referred to as a target benefit provision (although the label differs across jurisdictions). Plans containing target benefit provisions could come in different design forms, but, conceptually, they aim to provide […]
More than four years have passed since expert commissions in Ontario, Alberta, B.C. and Nova Scotia all endorsed target benefit plans (TBPs). TBPs are generally regarded as superior to DC arrangements since longevity risk is pooled and the intractable problem of educating a diverse population on myriad investment options is neatly circumvented by having one common fund. TBPs are also more suited to collective-bargaining situations since all members have the same investment return. Assuming that traditional DB pension plans are no longer viable in industries with volatile profitability—which means most industries—TBPs are the way to go.
In much of the western world, DB plans are on the endangered list. In some countries, such as Australia, these plans are virtually extinct.
Economic turmoil has dealth pension plans a hard blow in recent years, with both DB and DC plans struggling to deliver sustainable retirement benefits. The solution, according to Aon Hewitt, is in target benefit plans. The firm has released a guide, Target Benefit Plans: The Future of Sustainable Retirement Programs, outlining the need for a new approach to retirement plans.
Canada needs to look to target benefit plans if we are to have achieve adequate retirement savings, says the Association of Canadian Pension Management (ACPM) in its new Target Benefit Plan Paper.
The pooled registered pension plan (PRPP) announced by the federal government last year is the first step in the reforms needed to extend pension coverage to the more than 60% of the Canadian workforce not currently enrolled in a workplace plan. However, as the Ontario government hinted in its recent budget, there are a number of challenges with the PRPP design.
A passion for using Excel files to model financial trends led Toronto-based Malcolm Hamilton to the uncomfortable realization, in the mid-1990s, that DB plans were not going to work.
Air Canada and the union representing its flight attendants recently agreed to a new hybrid pension plan for new hires. It consists of a slimmed down DB tier, supplemented by a new DC tier. Some observers think this announcement signals a change in direction for pension plans, but that is unlikely to be the case. […]