CANADA - The current operating environment for pension funds has discouraged the creation and continuation of defined benefit (DB) schemes, according to a high level report by the Nova Scotia government on the future of the pension system.
It said fund promises must be fulfilled but funding rules should be flexible take into account market circumstances and constrain volatility.
The report's authors said 2008 was "extraordinarily difficult for investors" with global equity losses estimated at around US$30trn and the Canadian stock market down 35%.
Part of the problem facing fund governance, the report's authors said, was the pension system had become fragmented, with a "gradual accumulation of rules and regulations" which were not always clear.
The report said: "The government has recently made a number of patchwork changed to deal with specific situations, but which have had unintended consequences for other plans."
The net effect was an environment which "discourages the creation and continuation of DB schemes", particularly in the private sector.
The panel noted it could find no evidence of a new private sector DB scheme being set up within the past decade.
Overall participation in pension schemes fell by roughly 7% between 1996 and 2006 from 45.4% of the Nova Scotia workforce to 38.3%.
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