Regulation lacks DB incentives
CANADA - Pension regulation in Canada does not provide appropriate incentives for employers to maintain their defined benefit pension schemes and leads to increased deficits, said David Dodge, governor of the Bank of Canada.
Speaking to a group of economists, Dodge explained the current regulatory framework provided a number of disincentives for firms to establish or maintain DB pension plans.
“These disincentives, along with recent low long term interest rates, have led to increased solvency deficits among many DB plans,” he said.
Dodge stressed pension regulation was crucial to the efficiency of Canada's capital markets since it would support pension plans in making the maximum contribution to the country’s economy.
According to the governor, although the measures taken by the federal and Quebec governments would bring significant relief to some DB plans, they were partial measures. “They do not address the fundamental disincentives faced by organisations sponsoring DB plans,” he said.
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