De-risking is the major theme for defined benefit pension Plan sponsors in 2014
Results of Morneau Shepell 60-second survey for April 2014
TORONTO, April 17, 2014 /CNW/ - Morneau Shepell's 60-second survey for April 2014 indicates that defined benefit plan sponsors have pension de-risking on their mind. De-risking involves changing the investment approach or plan design to minimize future funding surprises.
In a survey of 62 defined benefit plan sponsors, 71 per cent have already taken measures to de-risk their plans since the 2008 financial meltdown of capital markets. The most popular measure has been to modify defined benefit plan design, which involves cutting back on ancillary benefits, requiring members to contribute more or converting the plan to a defined contribution arrangement.
For 2014, 53 per cent of the sponsors surveyed said they will be contemplating further de-risking measures, in particular, further modifications to their defined benefit plan design. "It is very significant that more than half the plan sponsors are considering further de-risking measures, given that nearly three quarters of them have already taken steps to de-risk," said Fred Vettese, chief actuary of Morneau Shepell. "About 40 per cent of the private sector defined benefit plans in our pension database are already closed to new members and this percentage will almost surely continue to rise."
Only one respondent indicated that purchasing annuities was a de-risking measure they were considering for 2014. "This was somewhat surprising, given the widespread expectation that many more sponsors would be winding up their pension plans in 2014 and buying annuities," noted Vettese.
About 42 per cent of the respondents were sponsors of public sector defined benefit plans. The percentage of public sector plan sponsors who were considering de-risking was virtually the same as for private sector sponsors. "This was another surprise since it is commonly thought that de-risking is something employers do only if they are on a glide-path to phasing out their defined benefit plans," said Vettese, "Clearly, public sector sponsors are just as serious about de-risking as their private sector counterparts, though the measures they take might differ."
About 34 per cent of all respondents said they were not thinking of taking any de-risking measures in 2014 because they perceived the worst is over for capital markets and de-risking would entail an opportunity cost.
About the 60 Second Survey
For more than 10 years, the results of Morneau Shepell's web-based "60 Second Surveys" have provided insights into the opinions of Canadian pension and benefits plan sponsors on high profile issues. The survey is completed by Morneau Shepell clients and prospects.
About Morneau Shepell Inc.
Morneau Shepell is the largest company in Canada offering human resources consulting and outsourcing services. The Company is the leading provider of Employee and Family Assistance Programs, as well as the largest administrator of retirement and benefits plans and the largest provider of integrated absence management solutions in Canada. Through health and productivity, administrative, and retirement solutions, Morneau Shepell helps clients reduce costs, increase employee productivity, and improve their competitive position. Established in 1966, Morneau Shepell serves more than 9,000 clients, ranging from small businesses to some of the largest corporations and associations in North America. With approximately 3,300 employees in offices across North America, Morneau Shepell provides services to organizations across Canada, in the United States, and around the globe. Morneau Shepell is a publicly-traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit morneaushepell.com.
SOURCE Morneau Shepell Inc.
Director, Corporate Communications