CANADA - The percentage of Canadian chief financial officers (CFOs) who believe that the pension underfunding crisis will persist has more than doubled since last year, according to a new survey.
The survey carried out by the Conference Board of Canada and Watson Wyatt found that 43% of responding CFOs believe problems are widespread and will likely continue beyond the next few years, an increase from 20% one year ago.
Respondents who feel the problems are serious but largely cyclical decreased from 39% in 2004 to 23% this year.
Gilles Rhéaume (pictured), vice-president, policy, business and society of the Conference Board said: “The views of sponsors of large pension plans about the duration of the problems in the pension system have shifted in the past year, toward a more pessimistic outlook.
When we asked CFOs to identify the greatest challenges they face with respect their organisation's pension plans, their responses were largely the same as in last year's survey. This indicates that these challenges linger and are of a systemic nature.
Ian Markham, director, pension innovation, Watson Wyatt Canada added: Although solvency levels are moving in the right direction, the improvement is largely due to the extra contributions that many plan sponsors have been making toward their pension deficits.
Furthermore, the beneficial impact on solvency levels by virtue of investment gains made in 2004 is being offset or wiped out altogether by lower bond yields and new pension actuarial standards recently introduced.
Among other findings, respondents are more likely to identify major threats to defined benefit (DB) plans than defined contribution (DC) plans.
CFOs identified the top three threats to DB plans as: the risks of major changes in future contribution levels (67%); the imbalance or asymmetry between plan funding risks and rewards (57%); and the risks of large fluctuations in pension expenses affecting future corporate financial statements (53%).
The Co-operative Group's Somerfield Pension Scheme has completed a buy-in with Pension Insurance Corporation (PIC), insuring the benefits of its pensioner members.
Caroline Rookes CBE and Michele Hirons-Wood have joined The Pension Superfund's board of trustees to focus on maintaining governance standards and safeguarding member benefits.
The first specialist independent firm advising pension schemes on bulk annuities or moving to a consolidator has been set up with ambitions to shake up the market.