Wrestling with alligators
When it comes to your pension plan, don’t get bogged down in the swamp. Make sure you have a clear vision.
- June 1, 2014 September 13, 2019
- 12:00
When it comes to your pension plan, don’t get bogged down in the swamp. Make sure you have a clear vision.
A common concern among DB plan sponsors these days is the sustainability of their pension plan. This question typically translates into whether or not the markets will give us what we need to be able to pay for the pension promise.
In the pension world, long-term expectations are always subject to short-term reassessment. Ten to 20 years ago, a 7% long-term expected return on pension investments was considered very conservative. Now it is considered extremely aggressive. The long-term return assumption has steadily declined, from 7% to 6.5% to 6% to 5.75%…turning pension programs that were once […]
One of the touted benefits of pooled registered pension plans (PRPPs) is that they involve an off-loading of fiduciary duty. The employer just has to select and monitor the administrator and have the payroll system remit the contributions. The administrator, acting as a trustee for the members, is responsible for everything else.
With a standard planning tool, we can plug in RRSP savings of a million dollars and an assumed investment return of 5% a year and determine that we can generate an income of about $76,800 per year, including government benefits, indexed to 2% inflation, and our money will run out in about 20 years.
De-risking has become the holy grail of pension investment management.
The federal government recently released Bill C-25, the Pooled Registered Pension Plans Act. This draft legislation is receiving praise for helping to close the pension gap—the gap between the level of income Canadians will have when they retire versus what they need or want to have. However, it is questionable how effective pooled registered pension plans (PRPPs) will actually be in closing this gap.
One of the major determinants of an investment strategy is the investment time horizon. How long an investor has to invest the money before it is needed greatly affects the way the money is invested. The conventional wisdom is that a longer time horizon allows for a greater allocation to riskier investments with a higher […]
I was asked recently to speak at the IFEB Conference on the topic “The Collision of Pension Reform and Poor Investment Returns.” I didn’t choose this topic; I inherited it. But I was both intrigued and somewhat disturbed by what it implied. I was intrigued because of the powerful image it invoked. Here you have […]
An article entitled “A nudge and a wink” in the Economist last April observed, “Governments are trying to ‘nudge’ people into doing what is good for them.” Around the world, governments are trying to force people, for their own good, to save more for retirement. They are expanding programs and using techniques such as auto-enrolment […]