CANADA - The funding levels of Canadian defined benefit plans have dropped to historic lows putting extreme pressure on companies to keep their pension schemes viable, a report by Watson Wyatt has found.
The fourth quarter alone was particularly damaging with funding ratios losing 11 percentage points in the last three months of the year.
"What's most troubling is that the significantly higher pension contributions that will be required to offset sizeable investment losses are placing additional strain on companies and negatively impacting corporate capital investment plans for 2009 and beyond," said David Burke, retirement practice director of Watson Wyatt's Canadian offices.
Burke said: "Canadian pension plans are certainly reflecting the declines in financial markets. However, members of DB plans will be at risk only if the company does not survive long enough to fully fund the plan."
Canadian companies are not alone in their pension burdens. Earlier this week, consulting firm Mercer announced that companies in the S&P1500 carry a record pension deficit estimated at US$409bn. (Globalpensions.com: 8 January 2009)
Canadian DC participants have also seen the value of their retirement assets decline, according to the Watson Wyatt report.
It said the value of the typical DC plan participant's retirement account decreased by 10% - 20% during 2008.
The Pensions Regulator (TPR) has set out plans to use "new regulatory initiatives" with over 1,000 schemes as it aims to tighten its regulatory grip and boost member outcomes.
HM Revenue and Customs (HMRC) has announced it is delaying the provision of data that will enable pension schemes to confirm the guaranteed minimum pension (GMP) benefits to pay to members until the end of the year.
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