News Archives - August / September 2009
Wednesday, September 30, 2009
Details have now been provided by Canada Revenue Agency’s Registered Plans Directorate (RPD) on the administrative relief process for lump sum payments representing missed pension benefits, says a Borden Ladner Gervais ‘Pension Alert.’ Under the new procedures, plan administrators may now, in certain circumstances, make lump sum payments in lieu of missed pension benefits without obtaining prior RPD approval. However, they must provide details of the payments to RPD by way of an annual report. Among other things, the annual report must provide details regarding the affected member, the period of missed payments, the periodic pension amount, the rate of interest (if any) paid, the total lump sum catch-up amount, and the reason for the delay in pension commencement.
The Federal Court of Appeal in ‘Buschau’ reaffirms the deference to be paid to superintendent’s decisions, says a ‘Blakes Bulletin on Pension & Employee Benefits.’ In reinstating the decision of the acting Superintendent of Financial Institutions (the superintendent), it permits the pension plan in issue to be reopened to new plan members rather than requiring a plan termination and surplus distribution. The court found the superintendent’s decision was grounded in an assessment of the policy and objectives of the PBSA, specifically, “that the continued existence of a pension plan is a worthy goal.” It also found the decision to merge the pension plan was not irrevocable since no employee’s rights were being reduced by that revocation. The bulletin also says the court’s findings on the right to revoke a merger and reopen a pension plan may have significant application.
FTSE’s Currency FRB Index Series will expand its coverage into new investment strategies and responds to global interest in the alternatives space, says Mike Bruno, head of strategy, fixed income and alternative benchmarks. Speaking at its ‘Capturing the Currency Forward Rate Bias as an Alternative Beta’ session, he said currency for absolute return has a reasonable following in the UK, but other major markets, such as the U.S., are now showing keen interest. He said the joint effort by FTSE and Record Currency Management is now identified as a fundamental and sustainable return stream with low long-term correlation to other asset classes such as equities and bonds.
J.P. Morgan Worldwide Securities Services (WSS) has developed an asset allocation and manager selection analysis tool that enables clients to plan and map the risk-return implications of their current and new portfolios. The ‘Portfolio Construction Tool’ allows plan sponsors and other institutional investors to see which portfolios potentially generate the optimal risk-adjusted returns. It offers users the ability to optimize their own portfolio in any currency or select from a universe of asset classes and managers.
David Lester is head of the institutional sales effort for asset management at NT Global Advisors, Inc., Canada. Previously with SEI Investments, his primary focus will be on manager-of-managers investment products including total investment management and administrative outsourcing solutions for Canadian pension plans, charitable organizations, and other institutions.
Raniero Corsini is president and CEO of Forbes & Manhattan Asset Management Corp. Prior to joining the firm, he held senior leadership positions with Canadian investment management firms including Sentry Select, where he played a role in increasing assets under management, developing innovative products, and identifying new opportunities in the structured product sector for both the Canadian and international markets.Benefits Breakfast Club’s second meeting of the 2009/10 season. Experts will debate the relative merits and pitfalls of flexible benefits and healthcare spending accounts. It takes place October 29 in Kitchener, ON. For more information, visit https://www.connexhc.com
Tuesday, September 29, 2009
Consultants control one per cent of Defined Contribution assets, the majority of these in plans with more than $500 million in assets, says ‘The Cerulli Edge – Retirement Edition.’ The report says there has been a continued shift by consultants of client assets into alternatives and long-duration fixed income, as over three-quarters of consultants desire a consistent investment performance track record and no surprises. Institutional investment consultants have become a critical avenue for asset managers hoping to distribute through a 401(k) platform.
Pension language, terminology, and plan design (with an explanation of differences in the U.S. and potential cross-border issues) will be one of the areas covered at Osgoode Professional Development’s ‘5th Annual Essential Course in Pensions.’ Other sessions will look at topics such as regulatory/statutory pension regimes and requirements applicable to public and private pension plans. It takes place October 27 to 28 in Toronto, ON. For more information, visit http://www.osgoodepd.ca/
The CVCA – Canada's Venture Capital & Private Equity Association’s ‘State of the Nation – The Economic and Regulatory “NEW” Reality’ will look at what lies ahead in the coming year following one of the most challenging years since the Second World War. Top economists will discuss the validity of the stimulus measures taken by governments and the actions of the Bank of Canada as well as how events of the last year impacted the regulatory environment for banks, investors, and the PE and VC-backed community in Canada and abroad. Panelists include Brian Tobin, former premier of Newfoundland and senior business advisor at Fraser Milner Casgrain LLP; Michael Gregory, senior economist and managing director at BMO Capital Markets; and Neil Shafran, managing director of Kirchner Private Capital Group. It takes place October 29 in Toronto, ON, with broadcasts into Vancouver, BC; Calgary, AB; Winnipeg, MB; Montreal, QC; Ottawa, ON; and Halifax and Fredericton, NS. For more information, visit www.cvca.caThe International Foundation of Employee Benefit Plans is offering a number of educational programs in November in conjunction with the ‘42nd Annual Canadian Employee Benefits Conference,’ November 22 to 25 in Las Vegas, NV. ‘The Advanced Trustee Management Standards Part 1’ and ‘Part III Pensions,’ which offers advanced education for trustees and other senior level policy makers in areas such as compliance, governance, funding and plan design, administration, investments, underwriting methods, managing plan costs, communications, and ethics, take place November 19 and 20. ‘Part II Group Benefits’ and ‘Part IV’ will be held November 21 and 22. ‘Effective Disability Management: Unlocking the Secrets to Success’ takes place November 22. ‘Foundations for Trustees 1’ and ‘2 Pensions,’ designed to inform trustees of their responsibilities, will be held November 21 and 22. ‘2 Group Benefits’ takes place November 22. For more information, visit www.ifebp.org/Education/Schedule/
Monday, September 28, 2009
A trending disparity exists between the value an employee places on their benefits and pension plan and their actual knowledge of that plan itself, says a study by the TRG on what matters most to B.C. employees. It found 80 per cent of BC employees rate their benefits and pension plan as an extremely important factor in their overall job offering. Another 64 per cent of respondents said they would change jobs for a better plan. And yet, an understanding of their plan often seems scant at best. While 70 per cent of respondents claimed that critical illness coverage was an essential benefit, one-third surveyed couldn’t say if it was covered in their plan. This lack of plan knowledge is corroborated by an equally disconcerting trend toward communication lapses between employees, employers, and their plan providers. Twenty-four per cent of respondents couldn’t even name the person in charge of benefits within their organization.
The recent economic downturn has caused some employees to hesitate about saving for retirement because of more immediate concerns about job security or the state of their stock market investments. However, Retirement Made Simpler, a coalition of organizations committed to helping Americans save more for retirement, believes that to ensure a secure retirement for all Americans, it is imperative that employees save earlier, save effectively, and save more. Its survey found employed adults generally view 401(k) plans and automatic enrollment and escalation features in a positive light. Further, people continue to rely on their 401(k) plans as their primary means of saving for retirement, however confidence is low that they are saving enough. Significantly, a majority believe that even if their 401(k) account has lost value in the past year, it is more important than ever to continue to contribute to it.
Employee benefit budgets are not immune to corporate cost cutting, says a report by Prudential Financial, Inc. ‘A New Day in Employee Benefits’ found that less than half of U.S. plan sponsors say their benefits budgets increased from 2008, compared with increases reported by two-thirds of those surveyed the prior two years. About one-third of companies are maintaining their 2008 budget levels, while another 15 per cent say their budgets have decreased by an average of 16 per cent over last year.
The Ontario Teachers' Pension Plan Board is buying a major stake in Simmons Co., the U.S. mattress manufacturer that plans to file for Chapter 11 bankruptcy protection in a move that will put Teachers' and its U.S. partner in charge of the bedding unit and significantly lower the company's debt. Simmons, the maker of Beautyrest mattresses, says the plan is expected to reduce total debt from about US$1 billion to approximately $450 million and not affect the business operations from running normally. The restructuring includes the acquisition of Simmons Bedding Co., its subsidiaries, and parent company Bedding Holdco Inc. by affiliates of private equity fund Ares Management LLC and Teachers' Private Capital, the private investment branch of the Ontario Teachers Pension Plan.Time is running out to register for the ‘2009 CPBI Ontario Regional Conference.’ It starts next Monday, October 5, and runs to October 7 in Collingwood, ON. This year’s event will feature a stream directed at small business for the first time. Sessions planned will look at topics such as executive retirement arrangements for the small employer, CAPs for small business, and managing group benefits risk for the small employer. Other sessions will see Patti Croft, chief economist of RBC Global Asset Management, and Craig Alexander, vice-president and deputy chief economist for TD Bank Financial Group, provide a Canadian economic overview and Peter Klein, of Simon Fraser University, who will explain a practical guide to understanding leverage and risk in alternative investments. For more information visit, http://www.cpbi-icra.ca
Friday, September 25, 2009
The Court of Queen’s Bench of Alberta (Court) will not overturn the Superintendent’s decision that an employer with a final average earnings (FAE) Defined Benefit pension plan could not freeze future earnings as they applied to service accrued prior to the plan’s conversion. The court’s decision in Halliburton Group Canada Inc. v. Alberta is, therefore, important for any plan sponsor who is planning or has recently implemented a freeze of its FAE DB plan, says Watson Wyatt ‘InfoFlash.’ The court concluded that the appropriate standard of review for the superintendent’s decision was reasonableness rather than correctness. With the court’s acceptance of the superintendent’s decision in this case, Alberta appears to join Quebec in preventing a plan amendment or conversion from applying a freeze on future earnings as they relate to service already accrued in an FAE DB plan prior to the effective date of a plan amendment or conversion. In using the less stringent review test of “reasonableness” to evaluate the superintendent’s decision, the court has indicated that it will give a considerable degree of deference to the superintendent’s findings on matters relating to pensions.
Northern Trust has enhanced its online risk and performance tools for investment manager and institutional investor clients across the globe with the inclusion of new tools to deliver risk attribution and Value at Risk (VaR) information. The new tools provide an integrated view of historical risk and performance information for additional interpretation, comparison, and perspective including ‘ex-post’ or historical calculations which will supplement Northern Trust's existing ‘ex-ante,’ or forecasted, capabilities.
Marketing and communications projects from across Manulife Financial's Canadian division’s group savings and retirement solutions received a number of awards in the 2009 Insurance and Financial Communicators Association international awards competition. Initiatives earned it Best of Show recognition in for a new employee enrolment kit (benefits and pensions print materials). An award of excellence was earned for its annual plan member summary statement and it was given an honourable mention for its ‘Reveal Your Hidden Perk’ trade advertising.
Ron Sinnaeve is vice-president, operations, for Integra GRS. He is responsible for all operational and administrative teams, client member service support, the recordkeeping technology that supports the business and related risk management, and governance. Prior to joining the firm, he was actively engaged in the pension software industry.‘Life after the Credit Crunch’ is the title of the Alternative Investment Management Association (AIMA) Canada’s third ‘Under the Hood of Hedge Funds” session. Denis Gartman, The Gartman Letter; John J. Schmitz, SciVest Capital; and Stuart Kovensky, Onex Credit Partners; will offer their macro and micro thoughts and viewpoints in terms of alternative investment strategies. It takes place October 15 in Toronto, ON. For more information, visit http://www.aima-canada.org
Thursday, September 24, 2009
Inadequate pension coverage has become an issue too major to ignore and the Investment Funds Institute of Canada and Advocis, the Financial Advisors Association of Canada, are calling for solutions to the fact that Canadians are not saving enough for retirement. Howard Fergusson, chair of Advocis’ Pension Task Force, says “fewer and fewer Canadians are covered by pension plans each year.” With only 24 per cent of private sector employees with an employment pension, he says “this decline in pension coverage must be reversed.” Advocis is calling for regulatory changes to allow for a more favourable environment for Defined Contribution pension plans, including harmonized regulations between provinces and federally. This would reduce complexities and costs that discourage the establishment of plans. It also urges policymakers to create incentives for small and medium-sized businesses to sponsor pension plans. IFIC is calling for more research and greater awareness on the issue. Rather than focusing specifically on boosting pension coverage, IFIC is exploring a broader range of solutions to boost savings through RRSPs and other mechanisms.
The federal Department of Finance has released draft legislation that aims to improve the application of the GST to the financial services sector. The draft legislation improves on a previous draft released in January 2007 that sought to address advantages that currently exist in favour of imported financial services over domestic services in the levying of GST/HST. It also streamlined the application of the GST input tax credit rules to financial institutions. Following consultations with the financial services sector, it now includes provisions to allow Canadian firms to use a simpler approach to self-assess tax on services provided by their foreign branches to Canadian branches; to allow financial institutions to exclude certain derivative transactions from the self-assessment rules that apply to imported services; to allow large banks, insurance companies, and securities dealers to use their own proposed methods to allocate input tax credits in certain circumstances; and to provide financial institutions and the Canada Revenue Agency with more flexibility in the use of the process for pre-approving an input tax credit allocation method.
Fidelity Investments Canada ULC has officially opened its Montreal, QC, office, home to members of its Team Canada, as well as its retail and institutional sales and servicing teams. In March, it announced that Team Canada, one of the largest buy-side teams dedicated to researching and managing Canadian equity portfolios, was relocating to Canada after 12 years in Boston, MA. Founded in 1997, Team Canada is comprised of 24 portfolio managers and research analysts who manage equity mutual funds and institutional investment disciplines.
Defined Benefit programs still enjoy widespread support, says Diversified Investment Advisors. In fact, many employers now field more than one DB plan. Some 72 per cent offer an active traditional plan, while 43 per cent offer a cash balance plan. Cash balance plans have increased in popularity. For example, among firms with 1,000 to 4,999 employees, 41 per cent offer an active cash balance plan compared with less than 20 per cent three years ago.
In a trend that is likely to continue, nearly half of U.S. companies are automatically enrolling workers into 401(k) plans to encourage them to save for retirement, says a survey by Watson Wyatt. The survey also found that the number of companies that use target-date or lifecycle funds as their default investment option has increased sharply in the last few years. Nearly half now auto-enroll their employees into their Defined Contribution plan. Additionally, one-third of those that do not currently auto-enroll are considering it. The number of companies using lifecycle or target-date funds as their default investment option has increased significantly, from 38 per cent in 2006 to 62 per cent today.
BDC Venture Capital, Caisse de dépôt et placement du Québec and Le Fonds de solidarité FTQ are the joint recipients of Canada’s Venture Capital & Private Equity Association (CVCA) ‘Deal of the Year Award’ for the venture capital category. Clairvest Group Inc. is the recipient of CVCA's 2009 ‘Deal of the Year Award’ for the private equity category. The BDC Venture Capital, Caisse de dépôt et placement du Québec and Le Fonds de solidarité FTQ won this year’s venture capital category award for their joint investment in ViroChem Pharma, Inc. which engages in researching, developing, and producing drugs for viral diseases. In October 2005 and September 2006, Clairvest invested in Shepell·fgi, a Canadian provider of employee assistance programs. The investment generated an internal rate of return of 108 per cent and a multiple of 6.6 times investment.
David Smith and Rod Albert are members of the board for the Ontario Teachers’ Pension Plan. Smith is former chair and senior partner of PricewaterhouseCoopers and former CEO of the Canadian Institute of Chartered Accountants. He is currently the chair of the Government of Canada Audit Committee and chair of the federal Small Department and Agencies Audit Committee. Albert has served as president and general-secretary of the Ontario Secondary School Teachers’ Federation and as president and member of the executive of the Ontario Teachers’ Federation (OTF).
Wednesday, September 23, 2009
Royal Bank of Canada is making major changes to compensation plans for employees in its capital markets business. The changes alter how bonuses are calculated. Investment bankers and traders will have to wait three years for a larger proportion of their bonuses, and more employees will be required to hold bank shares. RBC managing directors will also be required to hold shares in the bank – at least equivalent to their average salary for the prior three years. It will now claw back employees' pay if it later finds that they failed to abide by proper procedures and caused a significant loss.
Ford Motor Co. of Canada Ltd. is facing a $1.8 billion shortfall in its pension plan. A letter to employees and retirees shows the pension plan held assets of $2.91 billion as of December 31, 2008, which would cover just 62 per cent of the liabilities if the plan were wound up. Ford wants to take advantage of a change in Ontario law that extends the period for addressing shortfalls to 10 years from five, but can't do so without approval of two-thirds of employees and retirees. As well, Ford is seeking the same deal as Chrysler and GM workers agreed to. This requires new employees to contribute $1 an hour for every hour worked to their own pensions, the first direct contributions auto workers will make to their own pensions.
The current public healthcare system in Canada is not sustainable, says Frank Swedlove, president of the Canadian Life and Health Insurance Association (CLHIA). In a speech entitled ‘The Myths & Truth About Canada's Unsustainable Health Care System,’ delivered to The Economic Club of Canada, he said the CLHIA entered the debate last June with its report on healthcare policy. “We are in the midst of an aging population and there are newer and more expensive treatments. If the trend continues, in 10 years time many provinces will spend 70 cents of every budget dollar on healthcare with little remaining for education, infrastructure, and innovation,” he said. As a result, it is critically important to redesign the healthcare system to enhance the health of Canadians while at the same time ensuring their economic future and prosperity. The CLHIA has made four recommendations –a patient-focused approach to healthcare, affordable prescription drugs, wellness and disease prevention, and continuing long-term care.
Private equity investors should not be in the business of running companies, says James Mara, senior managing director, international private equity, for GE Asset Management. Speaking at its ‘International Private Equity Luncheon Discussion,’ he said the best approach is for the investors to work through company boards to set agendas. However, the real starting point is to find companies with strong management. With private equity transactions, the focus should always be on the management of the company because there are no good companies with “lousy management,” he said.
Significant increases in premiums charged by financial institutions for renewing letters of credit are being observed this year, says Morneau Sobeco’s ‘News & Views.’ Increases in premiums at renewal vary by plan sponsor and by financial institution. Increases of between one per cent and two per cent of the face value of the letter of credit have been observed this year. Plan sponsors are advised to begin discussions with the financial institution holding the letter of credit earlier than usual. Given this important cost increase, plan sponsors should review the impact of the cost increase and ensure that the use of a letter of credit remains the most appropriate alternative for their particular situation.
The word of the day is “conservative” for pay increases in Canada, says Aon Consulting Canada’s 2009 pay increase survey. It found organizations plan to adjust their salary structures upwards by a conservative two per cent and award on average a 2.5 per cent increase in base salaries. Both the low digits and the less than one per cent difference between the two figures indicate a wait-and-see attitude. Despite the caution shown by employers, early indications of recovery are emerging. One notable such sign is the number of organizations that expect to lift the blanket pay freezes they held for 2009. For 2010, only 20 per cent, one in five organizations in Canada, plans a blanket pay freeze, a significant drop from 2009’s 33 per cent.
Cecil Bradley, director of policy, for the Ontario Pension Board (OPB), has won the Benefits and Pensions Monitor draw for the Callaway X-Tour Chrome Sand Wedge. Names were entered during the ACPM National Conference in Montreal, QC, at Monitor’s booth. Upon hearing the news, Bradley said he was shocked since “there were some pretty serious golfers interested in the club.” He said the win might get him even more involved in the game of golf.Irene Goryn is director with Legg Mason Canada's client service and marketing team, based in Toronto, ON. Most recently, she led the investment consulting arm of CIBC Asset Management's investment manager due diligence team.
Tuesday, September 22, 2009
Public pension plans and asset managers have strong credit ratings despite their poor returns in recent months, says DBRS Ltd. Pension plans rated include the Caisse de dépôt et placement du Québec, Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan Board, OMERS Administration Corp., and the Public Sector Pension Investment Board. While the public pension funds and asset managers rated “have been adversely affected by the challenging economic environment that prevailed in 2008 and into 2009,” they remain solid credits. DBRS points to several factors that support their high credit ratings including low leverage, superior liquidity positions, and strong sponsorship, along with large asset bases.
New legislation gives the Ontario government more flexibility regarding Pension Benefits Guarantee Fund (PBGF) funding, says a Morneau Sobeco ‘News & Views.’ The PBGF is required to be funded by employers who are Defined Benefit pension plan sponsors and the PBGF employer contribution rates have not changed for years. The 2009 Ontario Budget indicated that the government was concerned about the PBGF and provided that the PBGF will face an actuarial review. After the review, the government will consider establishing a PBGF agency that is independent. As a result, there may be a need for higher employer contributions. Currently, if PBGF assets are not sufficient to pay claims, the PBA allows for loans to the PBGF from the Ontario government. The new legislation will allow the Ontario government to offer money to the PBGF in the form of loans or grants. However, it also clarifies that government loans or grants are not mandatory and, at any particular time, the amount of PBGF assets, including any loans or grants, is the maximum amount of total PBGF liability. The new legislation shows the Ontario government does not want to concede that it would bail out the PBGF if the PBGF became insolvent.
Despite being severely affected by the current financial crisis, many Canadian companies expect to make less extensive changes to their executive pay programs than in 2009 in anticipation of an eventual economic recovery, says a survey by Watson Wyat. For those modifying the pay mix between base salaries, bonuses, and long-term incentive (LTI) vehicles, the primary reason is to strengthen the link between executive pay and company performance. For 2010, only 22 per cent expect to make further adjustments to the economic downturn. Very few respondents (13 per cent) are planning to freeze or reduce executive base salaries. Of those companies that made changes in 2009 close to half froze or reduced their executive base salaries, while one in three reduced or eliminated planned merit increases.
The elimination of golden parachutes and overly generous severance packages for top corporate executives are among executive-compensation reform recommendations made by the task force on executive compensation from the U.S. Conference Board. It also calls for the creation of links between pay and performance as well as for companies to demonstrate board oversight of executive compensation and maintain transparency with respect to compensation.
HSBC Global Asset Management (Canada) Limited has introduced a ‘Global Inflation-Linked Bond Strategy’ for tax-exempt Canadian institutional investors via a new Canadian dollar-denominated offshore global inflation-linked bond pool (formally known as the Oblig Inflation World Fund). The offshore pool invests in the main developed government inflation linked bond markets and hedges that exposure back into Canadian dollars, mitigating currency risk. Investments are held from the U.S. and Canada as well as the euro zone, UK, Sweden, Japan, and Australia. The offshore pool is managed by SINOPIA Asset Management. It is the first global inflation-linked bond pool available in the Canadian market.
Aon Consulting has made a number of appointments to its teams in Toronto, ON, and Montreal, QC. Deborah Taylor is vice-president, financial planning and analysis, in Toronto. Jean-Francois Chartray is a senior consultant with the Montreal corporate client solutions team. Martin Corio is a senior consultant with the Montreal pension administration team.‘Managing the Big Fat Changes’ will be the topic at an Employee Assistance Program Association of Toronto (EAPAT) breakfast. Speaker Peggy Grall, a certified executive coach and former psychotherapist, will take a light look at the serious business of navigating change. Participants will be shown how to do things such as identifying the types of business change their organization is currently in, and the leadership style that best serves employees in that circumstance. It takes place October 29 in Toronto, ON. For more information, visit email@example.com
Monday, September 21, 2009
The ‘elimination’ of mandatory retirement may have cost implications for employers and pension plans because benefits can continue to accrue past age 65, says Bettina Quistgaard, of Pink Larkin. Speaking on ‘Life After Mandatory Retirement: The Legal Perspective’ at the CPBI Atlantic 2009 Conference, she said employers with Defined Contribution pension plans will be required to continue making contributions, possibly on the higher wages or salaries of senior employees. For Defined Benefit pension plans, while the continued accrual of pension credits means a larger pension on retirement, this may be offset by the pension being received over fewer years. It will depend on the circumstances and the terms of the plan, she said.
Securities Lending Programs Adjusted
Securities lending participants are staying in the market or adjusting their risk parameters rather than suspending their program following the market volatility of the past 12 months, says a survey by RBC Dexia. Despite purported large-scale program suspensions, only 17 per cent of all survey respondents suspended participation while the majority, 60 per cent, made no changes at all to their program. The survey results depict an environment focused on risk mitigation and capital preservation, which 80 per cent of respondents rated as highly important, signalling a shift towards greater oversight and increased involvement in programs by securities lending participants.
The Canada Pension Plan (CPP) is on a sound financial footing, says a Heenan Blaikie LLP ‘Pension Pulse.’ It says the chief actuary for the Office of the Superintendent of Financial Services, Jean-Claude Menard, in a speech as part of the federal government’s HRSDC ‘Knowledge Talks’ series, reported that, on the basis of demographic and economic assumptions, the 9.9 per cent contribution rate will provide stable funding for the foreseeable future. It is projected that in 15 years’ time, the CPP’s assets will equal about 25 per cent of liabilities. The manner in which the CPP is funded is in stark contrast to the funding of private pension plans. While CPP contribution rates are designed to be stable and long term, the mandated short-term solvency funding model for private pension plans produces an unnecessarily high level of volatility, as the pension industry and pension plan sponsors have experienced recently.
Social media will replace much of what is being done now in benefits communications, says Paul Harrietha, of Eckler Ltd. Speaking on ‘Communicating clearly in a perplexing environment’ at the CPBI Atlantic 2009 Conference, he said it is being used more and more and gives members a mechanism to communicate their thoughts. While many companies are afraid to give social media to their employees for fear of what they are saying, he said they need to realize that their employees are already saying those things somewhere outside the organization where the company cannot respond. Social media provides a way to monitor what employees are saying and to respond to it immediately.
Mackenzie Financial Corporation has formed Mackenzie Global Advisors, a division to centralize sales and client service focus on the institutional investment marketplace. It combines Cundill Investment Research Ltd., which it acquired in 2006, and Howson Tattersall Investment Counsel Limited, acquired in 2008, to its institutional businesses. Consolidating the sales and service for the institutional businesses will solidify its client relationships on a single service platform and relationship model and allow clients increased flexibility and more selection of investment solutions. It will offer a range of investment strategies to meet the diverse investment objectives of pension plan sponsors, foundations, trusts, and other institutional investors.‘Hedge Funds and the Battle for Credit Risk Transfer’ will be the topic at the next AIMA Canada session. Houman Shadab, professor at New York University, will compare credit risk transfer with collateralized debt obligations and credit default swaps (CDSs). He will also discuss how recent events have highlighted the important benefits of transferring credit risk with CDSs and the role of hedge funds. It takes place October 7 in Toronto, ON. For more information, visit http://www.aima-canada.org/
Friday, September 18, 2009
The global financial industry has changed beyond recognition, says Serge Pepin, of BMO Investments Inc. Speaking at the CPBI Atlantic 2009 Conference on ‘The Challenging New World Of Investment,’ he said the third quarter of 2008 redefined the way investors saw and assessed their world. As a result, future capitalism will be known as “regulatory capitalism’ with more regulation driving investors back to more traditional investments. However, this form of capitalism will see “less lucrative” returns on investments because of the increased regulation. This will make proper diversification a key to investment success.
Plan sponsors need to consider how their plans will fare given the various economic scenarios expected to unfold following the credit crisis, said Jason Campbell, of Eckler Ltd. Campbell and other experts hypothesized the likelihood of several global developments at an ACPM National Conference presentation such as the 'Goldilocks' scenario, characterized by sustained moderate growth and low inflation; 'Japan: the lost decade,' characterized by sub-trend growth and deflationary risks; 'That 70s Show,' with a return to high inflation; or a 'Boom-Bust' scenario, with continuing oscillations of deflationary busts and booms. In preparation for any one of these situations, Campbell highlighted the importance of diversification, “and not putting all your eggs in one basket,” along with the effectiveness of liability driven investing, which is designed to reduce the risk associated with plan liabilities.
There must be more opportunities for Canadians to participate in pension plans, says a report from Advocis, The Financial Advisors Association of Canada. ‘Encouraging Small and Medium Sized Firms To Participate in Pension Plans’ says the most effective way to encourage higher participation is fostering employer-sponsored Defined Contribution pension plans. It says DC plans are a more viable option for both employers and employees because DC plans are affordable and costs can be controlled. Public policymakers can eliminate the barriers and create incentives for more employers to sponsor DC plans by improving the regulatory environment for DC plans.
The Kerry ruling “did not close the door” on the issue of allowing Defined Benefit surpluses to fund Defined Contribution plans, said Michael Mazzuca, of Koskie Minsky LLP, at an ACPM National Conference presentation. Mazzuca discussed the split decision regarding this particular issue, noting that minority decisions of this kind have a habit of resurfacing down the line. And while the Kerry decision deals with pension plans that are amended to provide a DC component, it does not deal with issues involving mergers of pre-existing plans, as in the case of both Schmidt and Aegon, an important area that will have to be closely examined, he said.
Prudently managed Defined Benefit pension plans “still make sense,” says John Sinclair, of the New Brunswick Investment Management Corporation. In a session entitled “Defined Benefit Plan: Investment Considerations in the Current Market Environment’ at the CPBI Atlantic 2009 Conference, he said the strengths of DB plans is what enables them to get through economic events such as those of the past year. He said they provide diversification because of their larger investment universes and longer time horizons. As well, they take advantage of long-term investment policies set out by experienced professionals which allow helps them get through difficult times. Finally, their liquidity allows them to meet short- and medium term obligations.
Given the ideal pension system – “portable, sustainable, affordable, mandatory” – a public response is the best answer, says Hamish Dunlop, of OPSEU Pension Trust. During an ACPM National Conference presentation, Dunlop examined the declining coverage facing Canadians, the shift from DB to DC, increasing costs, funding volatility, and pension bankruptcies. To him, an enhanced CPP funding model, with its economies of scale and targeted benefit approach, could meet all those challenges. He admits putting all our eggs in one basket, under the constant threat of political interference, could be dangerous. But so far, political interference hasn't been an issue with the CPP. As well, the flexibility of a public model is ideal since it could “adjust all relevant levers” down the road, such as benefits, contribution rates, and normal retirement age.
The Canada Pension Plan Investment Board made back 32 per cent of last year's losses in the first quarter, thanks largely to the rebound in the stock markets. CPP, which took a $23.6 billion hit in the 2009 fiscal year ended March 31, recorded investment profits of $7.6 billion in the three months to June 30, helping to soften what was the worst annual return in the fund's history. The fund, which shrunk to $105.5 billion last quarter, is back up to $116.6 billion thanks to the 7.1 per cent investment return and $3.5 billion in CPP contributions not needed to pay current pension benefits.
Benefit plan sponsors need to communicate and educate their members on the potential damage to their plans of fraud, says Jeff Alcock, of Manulife Financial. In a session entitled ‘Healthcare Fraud and Abuse – The Importance of Plan Member Engagement’ at the CPBI Atlantic 2009 Conference, he said plan sponsors need to be given the information to make the right decisions. In some cases, they are unwitting victims of benefits fraud and abuse simply because they are disengaged and don’t know what is happening. The increase costs to a plan as a result of fraud or abuse may put pressure on the sponsor to change, reduce, or eliminate benefits to reduce costs.Watson Wyatt has launched a new version of BenTrack, an online tool that helps multi-nationals manage the costs and risks associated with their benefit and compensation programs across global operations. It enables multi-national organizations to centrally manage benefit and compensation plan data from multiple countries, subsidiaries, divisions, or employee groups. With local language capabilities and access to benefit prevalence data, this user-friendly tool helps companies better maintain consistency and assess the competitiveness of their benefit programs.
Thursday, September 17, 2009
The head of the Canada Pension Plan Investment Board supports proposals to create a supplemental CPP. Speaking at the ‘International Conference of Social Security Actuaries and Statisticians,’ David Denison, president and chief executive of CPPIB, called for an expanded, mandatory CPP that would sit on top of the existing federal one. Although the current CPPIB team could run such a fund, he said it could also be managed by another organization in the public or private sector. A 2007 study by the Canadian Institute of Actuaries found only one-third of Canadian households are currently saving at levels that will generate sufficient income in retirement and about 11 million Canadian workers have no access to a workplace pension at all. Denison also called for uniformity of federal and provincial pension regulation to increase participation rates and contribution levels for Defined Contribution plans and individual RRSPs.
To get employees more engaged in their pension plans, “you have to get to know your audience,” said Tracey Riccardi, manager of compensation and benefits, Caesars Windsor, at an ACPM National Conference presentation. She discussed how her company's Defined Contribution member-education program has successfully incorporated aspects of marketing, in which employees' attitudes, inside and outside the workplace, are closely considered. To encourage a greater sense of shared responsibility for retirement planning, the company has posted educational material on pensions for employees where they take coffee/lunch breaks, on shuttle buses to work, on pay stubs, and in weekly and quarterly newsletters. It has also tried to target the somewhat younger age groups by making messages “short and sweet,” through modern mediums such as webinars, podcasts, DVDs, and e-enrollments.
Faulty investment expectations and overconfidence in markets, especially during turbulent times, can be better understood through behavioural finance, says Arnold Wood, of Martingale Asset Management. During an ACPM National Conference discussion, Wood looked at how aspects of social psychology relate to governance committee poor investment decisions; for example, by identifying how the presence of others impacts choices and how there is safety in numbers, as committee members typically choose to conform and avoid being ostracized. Committees also often lack the diversity needed to deal with complex financial matters, because they're made up of like-minded individuals with homogeneous biases. To ensure committees deal with investment risk appropriately, Wood suggests, among other things, encouraging dissent and independent views, employing a secret ballot system on controversial votes, and to minimize “railroading” or “pretention” with empowered teams.
Four of Canada’s leading pension funds have established a professorship in pension management. Prof. Alexander Dyck, an expert in corporate governance and corporate finance, will be the inaugural holder of the ICPM Professorship in Pension Management at the Rotman International Centre for Pension Management (ICPM) at the University of Toronto. The professorship was established with the support of the Canada Pension Plan Investment Board, the Hospitals of Ontario Pension Plan, the Ontario Teachers’ Pension Plan, and the Ontario Municipal Employees’ Retirement System. As part of the professorship, Dyck will undertake research in various aspects of pension management including governance, organization design, and the drivers of organizational performance. An additional goal is to add pension-related content to the MBA, Executive MBA, and Master of Finance programs at the Rotman School.
Sharing the advantages of larger pension plans can help other groups overcome their governance challenges, says Sherry Thodt, of TD Bank Financial Group, at an ACPM National Conference presentation. Thodt explained how its global governance model, made up of 28 pension plans, has achieved consistent governance protocols, standards, policies, and practices. She highlighted the importance of clearly defining roles and responsibilities, concise and consistent governance reporting, and regular assessment and continual improvement. David Miller, of the Hospitals of Ontario Pension Plan, talked about how smaller plans can claim these advantages from larger plans and how far legislation should go to promote pension arrangements for sharing the benefits of scale.
Teachers’ Increases Bristol Airport Stake
The Ontario Teachers' Pension Plan has increased its stake in the Bristol International Airport. Teachers, which already held a 14.5 per cent stake in the airport, bought the 35.5 per cent stake held by Australia's Macquarie Airports. The airport is the ninth busiest in Britain.
The evolving areas of pension reform arising out of legislative reviews conducted by Ontario, Alberta/B.C., Nova Scotia, and the federal system must undergo a “human process” of interaction among all key players, says Serge Charbonneau, of Morneau Sobeco. Speaking at the ACPM National Conference, Charbonneau discussed the importance of listening closely to what plan sponsors, employers, administrators, and other professionals, such as actuaries and lawyers, think of some of the conflicting recommendations. Plan sponsors, particularly, need to share their perspective with governments, says Kathryn Bush, of Blake Cassels & Graydon LLP. Proposed changes to quantitative limits of investment policies, for example, may sound reasonable in principle, but, as sponsors can point out, may be complex and expensive to employ in practice.
Steve Faraone is vice-president of Teachers’ Private Capital, the private investment unit of the Ontario Teachers’ Pension Plan. He will oversee the fund’s private equity investments in the financial services sector. He will also retain his previous responsibilities as director of private capital in the financial services portfolio. Kevin Duggan is vice-president in the tactical asset allocation department at Teachers’. He is responsible for executing equity products, including cash and derivative instruments, and overseeing equity index completion and internally managed market neutral portfolios. He joined Teachers’ in 1997. Michael Wissell is senior vice-president in the tactical asset allocation department. He is responsible for the department. He joined Teachers’ in 2002, and was most recently vice-president, tactical asset allocation. Ziad Hindo is vice-president, global opportunities, in the department. He is responsible for foreign exchange execution, commodity indexing, and a value-added program across asset classes. He joined Teachers’ in 2000 and was, most recently, director, foreign exchange and commodities.
Hugh O'Neill is president and CEO of the Canadian operations of sanofi-aventis. Most recently, he served as vice-president, market access and business development, at sanofi-aventis U.S. In this position, he was responsible for all drug reimbursement matters and worked closely with governments and private insurers.
Wednesday, September 16, 2009
More than 17,000 former Nortel workers have signed a petition demanding that the federal government take action to force the company to make pension payments. Former Nortel employees in Canada say the government has shown little interest in ensuring pensions are paid. They say the U.S. and UK governments guarantee company pensions by law and these countries have moved to grab seize Nortel assets around the world for these payments. Canada, meanwhile, is watching from the sidelines, the former Nortel workers say.
The Liberal Member of Parliament for Don Valley West is set to introduce a Private Members’ Bill requiring public and private pension plans to disclose considerations given to environmental, social, or governance (ESG) factors during the selection, retention, or liquidation of investments under the plan’s responsibility. Robert Oliphant says “this bill is about transparency. It will ensure that clear information about the way investment decisions are made is available to protect pension plan members. It also recognizes the significant role pension funds play in the Canadian economy.”
The expanded scope of practice for various healthcare providers, including pharmacists, in proposed Ontario Bill 179 will increase their ability to deliver care, says Dennis Darby, CEO of the Ontario Pharmacists’ Association. Speaking at the Drug Benefit Conference, ‘The Evolving Drug Benefit Landscape: 2010 and Beyond,’ he said Bill 179 has implications for many stakeholders including public and private payors. The purpose of Bill 179 is to utilize health professionals to their full potential, increase access to a range of qualified health professionals, and optimize patient care through the collaborative practice across and between healthcare professionals.
Tom Hockin, chair of the Expert Panel on Securities Regulation, expects Canada to have a single regulator by 2012. Speaking at the
‘World Alternative Investment Summit Canada,’ he said legislation could be proposed next year with the single regulator replacing the current 13 by 2012. He said the financial crisis has been a major factor in the change in attitude. “The biggest balance sheet if you want to backstop the financial crisis is Ottawa. The federal government cannot give backstops and be a systemic player if it doesn't regulate securities.”
Fund Market Value Declines
The market value of retirement savings held in employer-sponsored pension funds declined $19.8 billion, or 2.4 per cent, during the first quarter of 2009, says Statistics Canada. This drop in value follows decreases of 8.7 per cent in the third quarter and 6.7 per cent in the fourth quarter of 2008. Employer sponsored pension funds amounted to $791.1 billion at the end of the first quarter of 2009, down $163.5 billion from a high of $954.6 billion at the end of 2007. The market value of stocks and equity funds accounted for 31.1 per cent of total pension fund assets at the end of the first quarter of 2009, down from a high of 40.1 per cent in the first quarter of 2006. The proportion of fund assets held in bonds increased to 38.4 per cent. Expenditures of $31.4 billion exceeded revenues of $17.6 billion in the first quarter for a negative cash flow of $13.8 billion. This was the third consecutive quarter that pension funds experienced a negative cash flow.
U.S. employees might find their 2010 employee benefit packages include financial rewards for promoting healthy lifestyles, full coverage for preventive services, closer scrutiny of dependent and spousal coverage, and greater use of consumer-directed health plans, says Watson Wyatt. More than four in 10 employers said they will raise deductibles, copayments, and out-of-pocket maximums due to the economic crisis. Yet, they are continuing their push to improve the health of employees and their families. In addition to continuing the focus on wellness communication, employers are offering workers (and, in some cases, spouses) incentives such as gift cards, cash, and discounted premiums for undergoing a health risk assessment or participating in smoking cessation, weight management, or fitness programs.
Graeme Johnson is managing director of Cordiant. He will lead its investor relations group and participate in the investment process. Previously, he worked for the Deutsche Bank Group as managing director, head of Europe, in the private equity funds group.
Tuesday, September 15, 2009
Canada's three westernmost premiers will push ahead next year with developing a regional pension plan if talks to create a national program fail. The premiers of Alberta, British Columbia, and Saskatchewan noted only two in 10 employees in the private sector have a company pension to help them save for retirement. An Alberta-BC government-commissioned review in November 2008 suggested a government-sponsored program should be offered to the self-employed and workers without company pensions. A provincial-federal task force on pensions and other savings options is slated to finish its work by the next finance ministers meeting in December. However, the western premiers say if this doesn’t come up with an action plan, they will push ahead with their own plan.
The Financial Education Institute of Canada has launched the latest generation of its curriculum as a tool to fight employee anxiety and stress during today’s uncertain economic conditions. “The so-called experts may have declared the ‘Great Recession’ over,” says Graydon Watters, its president, “but the day-to-day reality is far from rosy among Canadian workers.” He says its holistic approach puts employer benefits in a meaningful context for the individual’s personal priorities and plans. “As a result, employees can relax and engage in the process whole-heartedly knowing that there is no other agenda than their own financial well-being.”
RI Research Firms Join Forces
Sustainalytics and Jantzi Research Inc. have merged. The new entity will operate as Sustainalytics globally and as Jantzi-Sustainalytics in North America. The new company responds to an increasing appetite for international environmental, social, and governance (ESG) research coverage underpinned by local expertise. The combined company will enable clients to leverage a management team across Europe and in North America that has been actively involved in the evolution of the RI sector.
Warren G. Holmes and Kevin J. Smith are managing directors, corporate finance, for Paradigm Capital Inc. Holmes will work with its research, trading, and institutional sales groups to grow its presence in Canada’s energy sector. He has more than 25 years of investment industry experience. Smith brings 13 years of investment industry experience with bank-owned and independent investment dealers, focused on Canada’s energy sector. Most recently, he was with Macquarie Capital Markets Canada.
James Davis is vice-president, investment planning and economics, and Scott Picket is vice-president, research and risk, in the asset mix and risk department of the Ontario Teachers’ Pension Plan. Davis is responsible for the fund’s strategic investment planning, as well as recommending tactical risk management strategies and new asset classes for the fund. He joined Teachers’ in 2006 and has more than 20 years experience in investment strategy and management. Picket is responsible for overseeing the assessment of the fund’s investment risk and promoting a risk-conscious culture at the fund. He joined Teachers’ in 2000 and was, most recently, director, quantitative analysis.Poul Winslow is vice-president and head of external portfolio management in the public market investments group at the CPP Investment Board. He leads the team responsible for selecting and managing relationships with external managers across a wide range of active mandates. Previously, he was chief investment officer of fund and manager selection at Nordea Investment Management.
Monday, September 14, 2009Claiming the ever-widening disparities in the coverage of cancer drugs is causing widespread financial hardship and undermining medicare, the Canadian Cancer Society is demanding a national catastrophic drug plan, which would mean government would pay once drug costs exceed an established threshold. Its report, ‘Cancer Drug Access for Canadians,’ shows a combined $1.1 billion was spent on cancer drugs last year and one in 12 Canadians face catastrophic drug costs – defined as greater than three per cent of net household income. The average cost of treatment with newer cancer drugs is now $65,000 and even workers with private insurance face co-payments of up to 20 per cent of the cost of cancer drug as well as caps on how much the plans will reimburse. The report says a patchwork system and an “impenetrable level of complexity” in how drugs are approved and reimbursed leaves many cancer patients facing burdensome costs and intolerable stress. All provinces and territories have endorsed, in principle, the idea of a catastrophic drug plan and eight provinces have a form of catastrophic drug plan already. The Cancer Society would like a national formula to ensure that all patients face similar rules.
CFA charterholders continue to show less confidence in the effectiveness of Canadian regulatory and investor protections than do those outside the country, says the CFA Institute Centre for Financial Market Integrity’s ‘2009 Financial Market Integrity Index (FMI)’ report for Canada. The FMI gauges CFA charterholders’ perceptions of the state of ethics and integrity in six different markets around the world and how these perceptions change over time. “It is interesting to note that the comments of Canadian survey respondents are largely unchanged from those expressed in 2008, with the country’s regulatory system at the top of their list of concerns,” says Kurt Schacht, managing director of the CFA Institute Centre. “Those who commented on regulation in Canada often endorsed a one-regulator model to help co-ordinate regulation and strengthen regulatory enforcement.” The Canadian FMI also reported that based solely on the integrity of market participants and the effectiveness of regulatory and investor protections, respondents in Canada show only a slightly lower inclination to invest in the Canadian markets than they did last year. The percentage of respondents who said they were likely or very likely to invest in Canada dropped to 72 per cent in 2009, compared to 79 per cent in 2008.
The Canadian economy will outperform all industrialized nations next year and Canadian investors are also likely to outperform their international peers, says a report for CIBC World Markets Inc. The bank’s newest economic outlook calls for the Canadian economy to grow by two per cent in 2010. This compares with U.S. real GDP growth projected at 1.5 per cent next year. The report notes that the Canadian economy is being bolstered by government stimulus spending, a sound financial system, and a household sector much more resilient than others abroad. With slow growth abroad, however, CIBC economists warn that Canadian GDP growth will be hampered by weak export markets. “Canada could be waiting another year for truly robust growth to return,” says economist Avery Shenfeld.
Participants in 401(k) plans shifted $203 million to equities from fixed income in August, according to Hewitt’s 401(k) index. Total equity allocations rose to 56.2 per cent of all 401(k) assets from 55.3 per cent in July. While equity allocations have increased steadily since February, the average is still well below the 62 per cent of a year ago. Lifecycle funds received 32.1 per cent of all inflows in August, or $147 million, while international funds received 17.6 per cent, or $80 million.
Desjardins Financial Security has launched ‘On Target Retirement,’ a personalized financial planning tool for members of its group retirement savings plans. It is a simulator that combines online solutions with more traditional communication tools so that plan members can take stock of their finances and set their retirement goals using customized information based on their own personal situation. Members will now be able to determine whether or not they can achieve the target they have set for themselves and identify any changes that may need to be made to their investment strategy. It is part of the ‘Setting Sail for the Future’ education program available on the secure site for members of Desjardins Financial Security group retirement savings plans.Osgoode Professional Development’s ‘5th Annual Essential Course in Pensions’ will examine issues such as managing the transition from Defined Benefit to Defined Contribution plans. It will also offer post-conference workshops on mastering multi-jurisdictional and cross-border pension issues and labour, employment, and
human rights issues in pensions. It takes place October 27 to 28 in Toronto, ON. For more information, visit http://www.osgoodepd.ca/
Friday, September 11, 2009
Canadian employers are taking a cautious approach to salary increases for the coming year after having made dramatic cuts to salary budgets in 2009, says Hewitt Associates’ ‘31st annual Salary Increase Survey.’ The average salary increase is projected to be 2.8 per cent nationally in 2010, up from the 2.2 per cent increase actually awarded in 2009. Employees in some provinces can expect their salary increases to better the national average. Organizations in Alberta and Manitoba are projecting average increases of three per cent and 3.2 per cent respectively, while those in Saskatchewan are forecasting 4.2 per cent increases, the highest in the country.
Dexia Asset Management announced its official entry into the Canadian marketplace with the opening of its new representative office in Toronto, ON. With C$120 billion in assets under management, Dexia offers a full range of investment vehicles including traditional, alternative and structured management, sustainable and responsible investment (SRI), and micro-credit funds. Christophe Vandewiele, head of Dexia Asset Management Canada, says "As the Canadian market begins to emerge from the extended period of financial turbulence that has gripped the world, we are convinced that there is an interest in, and an appetite for, intelligent fund solutions."
The Bank of Canada kept the overnight rate at 0.25 per cent and has reiterated its conditional commitment to keep it at this low level through mid-2010, says an ‘RBC DS The Harbour Group: Quick Comment.’ Short-term market interest rates in Canada are on track to stay extremely low for the next year, forcing investors to look to equities and corporate bonds for higher income streams. The bank notes that a global economic recovery is taking hold and that Canada's economy could turn out to be stronger than the bank has been expecting in the second half of this year. Despite this, it still views the balance of risks to its inflation outlook as "tilted slightly to the downside." The strength in the Canadian dollar is one of the reasons for this downside inflation risk.
CIBC Mellon Global Securities Services Company has been appointed to provide global custody, unit holder recordkeeping and fund accounting for Marret Asset Management Inc.'s closed-end and pooled funds. "Marret is dedicated to maintaining the highest standards and achieving a leading long-term performance record for our clients," says Lara Misner, vice-president. "We're confident that CIBC Mellon's excellent service and solutions will help us deliver high quality products for years to come." Marret is a credit fixed income manager and advises on more than $3 billion in high yield and investment-grade corporate debt assets for institutional and mutual fund clients.
Internet Code Violators Fired
The Bruce Power nuclear generating station in Ontario has dismissed dozens of contract employees over inappropriate internet use, says a CBC News report. Details of the alleged violations were not released, nor was the exact number of contractors, although reports indicate that it may be up to 100. The violations were by temporary employees and contractors who held a wide range of positions at the plant. An investigation was launched after routine monitoring of computers showed internet use that violated the company's code of conduct. However, Bruce Power says the code of conduct violations didn't leak any information that may put the safety of the public at risk.
Irshaad Ahmad has been appointed managing director of Russell Investments’ United Kingdom division. While assuming his new responsibilities in its London offices, he will also serve as interim president and managing director for Russell Canada as the firm searches for a replacement to head its Canadian retail and institutional businesses. He joined the firm in 2004 and led Russell Investments Canada Limited since 2006.
Connex Health’s ‘8th Annual Employer Forum on Workplace Health and Productivity Management’ will take place May 12 to 14 in Ingersoll, ON. Presenters will be asked to explore the resources available to plan sponsors that will help them understand the needs of their employees and how to develop a targeted strategy that will address needs in ways that will be most effective. Details of the 2010 agenda will be available as they develop throughout the fall.Investment trend forecaster Gerald Celente, founder of the Trends Research Institute; and Dennis Gartman, the ‘trader's trader’ and publisher of the ‘Gartman Letter;’ will be the keynote speakers at the Toronto CFA Society’s ‘Annual Forecast Dinner.’ Special guest is John D. Rogers, president and chief executive officer of the CFA Institute. It takes place October 14 in Toronto, ON. For more information, visit http://www.torontocfa.ca/
Thursday, September 10, 2009
The Supreme Court of Canada decision in the Kerry case probably means more work for lawyers, says Ari Kaplan, a partner at Koskie Minsky LLP and counsel for Kerry (Canada) Inc. employees and former employees who took the company to court. Speaking at the CPBI Ontario region session on the case, he said the court reaffirmed the concept that when making a plan amendment, you have to start at the beginning. This means that companies trying to amend their plans need to have all the plan language from day one assessed by lawyers. The challenge for employers is that most want to know what they can do today, not what plan language of the past says they can do. As a result, he believes the need for legal opinions has been made more important.
Organization will once again look at retaining key talent and rewarding performance as markets stabilize – indicating a “salary thaw” for 2010, says Shelley Peterson, principal for Mercer’s Human Capital business. Peterson’s summary of Mercer’s ‘2009/2010 Canadian Compensation Planning Survey’ during a breakfast seminar revealed that 31 per cent of Canadian organizations implemented broad salary freezes in 2009, but that only eight per cent plan on doing so in 2010. While a “cautious rebound in base salary increases is expected,” many employers will face limited budgets. They also face continuing pressure from shareholders to disclose rationale behind executive compensation arrangements and “say-on-pay” changes to compensation programs. While facing these challenges, employers will have to assess and align short- and long-term incentive plans, and take a closer look at their performance measures.
Pension Index Declines
Following the pattern of recent months, August included strong portfolio return and a significant decline in corporate bond yields, says Towers Perrin's ‘Capital Market Update.’ As a result, the increase in its liability measure exceeded the increase in asset value, with the net impact being a one per cent decrease in its Pension Index for the month. While the index is still up slightly for 2009, it has dropped more than 23 per cent from its year-ago level.
Ceridian Canada Ltd. has launched a bilingual, on-line divorce toolkit, the first of its kind in the Employee Assistance Program industry. It includes two downloadable audio recordings featuring Deborah Moskovitch, a Canadian divorce consultant, educator, and author. The first recording focuses on the emotional aspects of divorce and the second on the legal process. It also includes articles on topics such as getting finances in order and finding a lawyer. In 2003, there were 70,828 divorces in Canada and, according to Statistics Canada, almost one in four marriages will end in divorce.
J.P. Morgan has formed a prime-custody solutions group to deliver its integrated prime brokerage and custody platform to clients. The unit will serve hedge funds and asset managers seeking a combination of prime brokerage capabilities and securities services. The creation of the group comes at a time when hedge funds are launching long-only funds and seeking structures that allow them to house certain assets with custodians, while traditional asset managers are executing long/short strategies that require financing through a prime broker.
One-third of U.S. workers have little or no understanding of their employer-sponsored Defined Contribution plan, says a survey by The Hartford Financial Services Group. It found nearly three-quarters of workers have “less than a complete understanding” of their employer’s retirement savings plan. However, it also showed most employees have a better grasp of other benefits, such as healthcare coverage and life insurance.
Barclays Capital has continued its strategic expansion in Canada with the establishment of two new senior positions. Ian Montgomery has been appointed chief operating officer of Canada and John Kennedy has been appointed chief compliance officer of Canada. Both executives will support the execution of the firm’s strategy in Canada. Montgomery, who joined the firm in 2003, will be based in New York. Kennedy will be based in Toronto. Previously, he was director of compliance for Fidelity Investments.
Gary Ostoich is chair of the Alternative Investment Management Association – Canada. He is president of Spartan Fund Management which manages a multi-strategy hedge fund. He has been a prominent figure in the Canadian hedge fund industry for many years, originally as a lawyer in the early 1990s when the Canadian alternatives market was in its infancy. He has been associated with AIMA Canada since it was established in 2003 and played an integral role in its founding as one of the organization’s initial executive committee members.
‘Investment Manager Evaluation: Identifying Drivers of Long-term Success’ will be examined at the next Toronto CFA Society luncheon. A panel of Sharon Wilson, regional manager research head at Mercer; Benjamin F. Phillips, director of research for Casey, Quirk & Associates; and Kathleen Wylie, senior research analyst – Canada for Russell Investments; will examine issues such how the focus shifts as the perspective changes from that of an institutional client to a consultant and how recent market events have changed or reinforced current views and practices. It takes place September 29 in Toronto, ON. For more information, visit http://www.torontocfa.ca/
The International Foundation of Employee Benefit Plans’ ‘Canadian Health and Wellness Innovations Conference’ will look at cutting-edge ideas and strategies in Canada. It takes place February 21 to 24 in Phoenix, AZ. Attendees will learn innovative approaches to managing healthcare costs and will gain an understanding of the components of all-too-familiar cost drivers. For more information, visit http://www.ifebp.org/The Benefits Breakfast Club’s 17th season will open with a session entitled ‘ Breaking Down Silos: Understanding Stakeholders.’ Mark Smithyes, director of health policy, Novartis Pharmaceuticals; Bessie Wang, director, professional services, TELUS Health Solutions; and Steven A. Semelman, president of Gemini Pharmaceutical Consultants Ltd.; will address topics including the addition of new products to plan formularies and the savings opportunities that will result from the expiration of patents on a number of blockbuster name brand products. It takes place September 17 in Burlington, ON. For more information, visit http://www.connexhc.com/
Wednesday, September 9, 2009
An individual company’s health trend factor can often be three to five per cent lower than the insurers, says Michael Worb, president and CEO of Pal Benefits. Insurers surveyed for its ‘2009 Guide to Health and Dental Trends’ report indicated an average trend factor of about 15 per cent for overall health. However, Worb says its health trend factor is based on an examination of data culled from its book of business as well as outside sources. It also views each company’s plan through the lens of their unique demographics, utilization, and industry. Plus, insurers need to build a margin into their calculations. Worb says when a company is self-funded with enough employees (usually more than 50), the principles of group economics can be fairly applied and their specific metrics on utilization can be weighted very heavily when negotiating plan renewal costs which may, in turn, allow a company to enjoy improved rates on the cost of providing benefits.
CBA Benefits/Retirement/Financial Consulting has launched its new website. The new site reflects Corporate Benefits Analyst’s mission to work in partnership with its clients to understand the unique needs of organizations and to develop, deliver, and manage group benefit, retirement, and financial programs that support business goals. It can be seen at http://www.corpben.com/
Jonathan Graff is co-president of Benecaid. He will share the position with Marla Schwartz who has been its president since 2005. Previously, Graff was president and vice-chairman of Kaboose Inc., an online media company in North America and a parenting club in the United Kingdom before it was acquired by Disney and Barclay's Private Equity in June 2009.Recent developments in Canadian benefits law will be reviewed at a K-W Chapter of the ISCEBS. The session will review the key issues in downsizing, business closure, layoffs, and terminations as they relate to benefits, labour, and employment law. It takes place September 22 in Waterloo, ON. For more information, visit http://www.kw-iscebs.org/
Tuesday, September 8, 2009
The Office of the Superintendent of Financial Institutions has issued a draft guideline setting out disclosure obligations for Defined Contribution pension plans. In a letter sent to DC plan administrators, OSFI says that the guideline is intended to inform the pension industry “of the general principles as well as more detailed requirements” that OSFI will expect to be disclosed to plan members, eligible employees, and spouses. The general principles set out in the guideline call for plan administrators to ensure that disclosure is timely, understandable, accurate, complete, and useful; and that it is carried out in adherence with fiduciary responsibilities and duties of care. Comments on the draft are due by December 31.
U.S. President Obama has announced "new steps to make it easier for American families to save for retirement." Specifically, the announcement said that the Department of the Treasury will
expand opportunities for automatic enrollment in 401(k) and other retirement savings plans, enable workers to convert their unused vacation or other similar leave into additional retirement savings, and help workers and their employers better understand the available options for tax-favored retirement saving through clear, easy-to-understand language. The White House noted that it will also streamline the process for 401(k) plans to adopt automatic enrollment.
Even though planned salary increases are the lowest in almost a decade, they are still substantial compared to prevailing low inflation rates and considering the fragile economic recovery, says Morneau Sobeco’s ‘27th Annual Compensation and Trends Projections Survey.’ While 2009 has seen considerable wage freezes (35 per cent to 40 per cent of survey respondents depending on the job category), fewer employers are anticipating freezing wages in 2010 (10 per cent to 15 per cent depending on job category). Instead, employers are planning to review their salary structures, job evaluation systems, and incentive plans in order to better control their compensation costs. On the benefits side, containing healthcare cost remains the number one priority. Employers are also broadening their focus from disability management efforts to health management efforts in an attempt to better control disability costs. On the pension side, following abysmal 2008 market returns, Defined Benefit plan sponsors are aggressively pursuing strategies to alleviate funding pressure, both in the short run and in the longer run. In the short term, sponsors have been looking at the myriad of solvency funding relief measures put forward by the various governments. In the longer run, plan sponsors are looking into ways to better manage pension risks and minimize nasty surprises in the future.
The world's largest pension funds saw total assets fall back to 2006 levels last year, says Watson Wyatt. The assets of the largest 300 schemes fell by 13 per cent in 2008 to $10.4 trillion (6.3 trillion pounds), although the compound annual growth rate (CAGR.L) was at around 10 per cent over five years. Asia-Pacific region's share of global pension assets about $3 trillion – has surpassed that of Europe for the first time. North American pension assets are struggling to keep pace. Asia-Pacific CAGR is at 19 per cent over five years, while Europe's is at 12 per cent and North America is at four per cent.
If a dialogue between governments and employers on transforming pensions and healthcare is based only around an equation about the cost and adequacy of benefits, this may well become confrontational, says a Mercer ‘Perspective’ on the World Economic Forum report ‘Transforming Pensions and Healthcare in a Rapidly Ageing World: Opportunities and Collaboration Strategies.’ Alternatively, constructive dialogue may create win/win scenarios if employers, encouraged by or in concert with governments, take initiatives such as promoting work for older people, providing financial education, or improving the processes for savings or improving annuities to make the exchange of lump-sum payouts more effective. Similarly, employers may play a constructive role by effectively collaborating with financial services firms and healthcare providers. Multi-national pooling between countries for life insurance and multi-country management of health arrangements are examples of such collaboration. As country legislation allows, these types of developments will become more sophisticated and will extend into other areas of asset management and risk mitigation, Mercer believes.Mark Redman is senior managing director, Europe, of OMERS Private Equity, a division of the Ontario Municipal Employees Retirement System. He will oversee the division’s direct investment strategy in Europe and will establish and lead the investment team in the sourcing, execution, and post-acquisition management of direct private equity transactions.
Friday, September 4, 2009
Attention needs to be paid to ensuring governments make long overdue improvements to pensions as the economy recovers, says Ken Lewenza, CAW president, in his Labour Day message. He says public pensions need to be enhanced through the Canada and Quebec Pension Plans to provide seniors with a more livable income and allow ageing workers to retire in dignity and younger workers to keep their jobs. Current CPP and QPP levels are only 25 per cent of an individual's pre-retirement income. “Workers across the country, union members or not, must renew our call for enhanced public pensions,” he says. Part of this must be setting up a federal pension guarantee fund, similar to what exists in Ontario, which will guarantee a minimum pension level for workers who lose their jobs and their pensions due to a workplace bankruptcy.
The Canadian Human Rights Tribunal (CHRT) decision in ‘Vilven v. Air Canada et al’ is instructive not only for the fact that it strikes down certain parts of federal human rights legislation, but also for its discussion of the need to accommodate the older worker by making appropriate changes to the employment contract, including the collective agreement, says a Mercer ‘Communiqué.’ It says in a world where mandatory retirement no longer exists, the need for creativity in employment solutions is of prime importance. The CHRT has found that the mandatory retirement saving provision of the Canadian Human Rights Act is unconstitutional and that Air Canada’s mandatory retirement policy must be rewritten.
The Investment Funds Institute of Canada is calling on the federal government to improve Canadians’ incentive to save for retirement. In a letter to the House of Commons Standing Committee on Finance, it recommends the committee contemplate ways to improve incentives for retirement savings and the tax treatment of those savings. Measures to consider include allowing pension income-splitting for registered retirement plans where holders are less than 65 years of age (as it is for pensions); reducing RRIF minimum withdrawals to reflect longer life spans; and addressing what it calls “the unfair excise tax treatment” of group and individual RRSP savings.
Rising stock markets around the world drove the assets of the typical U.S. corporate pension plan higher, resulting in an improvement of the funded status of the typical plan by 0.5 percentage points to 79.7 per cent at end of August, up from 79.2 per cent at the end of July, say monthly statistics from BNY Mellon Asset Management. Assets for the typical moderate risk portfolio increased 2.7 per cent, outpacing the 2.1 per cent rise in liabilities for the month. For the year, through August 31, the funding ratio for the typical plan is now up 5.8 percentage points.
Pension trustees, plan administrators, or pension advisory committee member can help develop their skills to actively oversee pension investment and plan governance at ‘SHARE’s Pension Investment and Governance Course – Basic and Intermediate.’ It will provide attendees with interactive and hands-on training to give them the practical knowledge and skills needed to serve plan members' best interests. It takes place October 26 to 29 in Toronto, ON. For more details, go to http://www.share.ca/en/courses_events‘Where the Jobs Are – Looking to the Future of Canada's Labour Supply’ is the topic of the next Manitoba CPBI Council breakfast seminar. Andrew Ramlo, director of Urban Futures Incorporated, will discuss the potential opportunities and challenges as employers manage labour supply issues. It takes place September 24 in Winnipeg, MB. For more information, visit http://www.cpbi-icra.ca/
Thursday, September 3, 2009
The European market may not be properly pricing the long-term advantage of “green” properties over conventional ones, says Greg Hartch, managing director, Real Estate Europe, for GE Asset Management. Speaking at its ‘European Real Estate Luncheon Discussion,’ he said Europe is fully commited to sustainability in real estate with the EU calling it a “fundamental” objective. Hartch says that the demand for “green” real estate is growing, particularly with global corporations and governments. He expects rental growth and tenant retention will be greater for “green” properties, increasing the yield for investors.
The Caisse de dépôt et placement du Québec is part of an underwriting syndicate that made a US$500 million credit facility available to Bombardier, a world leader in aerospace and rail transportation. The Caisse's contribution to this financing package amounts to US$195 million, in the form of a line of credit with a two-year term. This credit facility will be allocated primarily for the general working capital needs of the corporation. At the end of 2008, the Caisse observed that financial markets were tightening and consequently reserved C$1.5 billion to finance companies with a promising outlook, together with other market players. Today's transaction is in addition to those announced earlier this year as part of this program.
Employers will play a critical role in shaping public policy and addressing healthcare and pension benefit cost concerns as the ratio of elderly persons to the working-age population dramatically increases in coming years in many parts of the world, says the World Economic Forum. Its report, ‘Transforming Pensions and Healthcare in a Rapidly Ageing World: Opportunities and Collaboration Strategies,’ calls on employers and policymakers to expand and shift their strategic thinking, making a compelling case for immediate and collaborative action by the private and public sectors. “Even more impressive, the analysis sets out a pragmatic blueprint for transformation, by identifying the most promising strategies and providing key scenarios of the future against which to consider the effectiveness of each. The key strategies range from the now existing, but under appreciated, to new and highly innovative options that merit serious consideration,” says M. Michele Burns, chairman and chief executive officer of Mercer which, with the OECD (Organisation for Economic Cooperation and Development) supported the report.Northern Trust has introduced a reporting service that can help investors in private equity funds anticipate cash flow requirements in the short and medium term. ‘Private Outlook’ will help improving the ability to manage the liquidity challenges institutional investors face when presented with sudden demands for capital funding. Developed jointly by Northern Trust and Sand Hill Econometrics, Inc., it enables institutional clients to project likely ranges of cash flow behaviour in ‘drawdown’ types of investments, including venture capital and buy-out partnerships.
Wednesday, September 2, 2009
A majority of workers are satisfied with their current employer-sponsored retirement benefits, says a survey by Watson Wyatt. In particular, many place a high value on plans that offer security and flexibility. Findings also show that employees are using company programs as their primary source of retirement savings with 61 per cent viewing their company’s retirement program as the primary vehicle to save for retirement. Nearly one-third (29 per cent) would not save for retirement without it. More employees with Defined Benefit plans (62 per cent) are satisfied with their retirement program than those with only Defined Contribution plans (51 per cent).
The Canada Pension Plan Investment Board has joined a group of investors to acquire a 65 per cent stake in Internet-calling service Skype. The CPPIB will have a 15 per cent stake. The other investors include Silver Lake, Index Ventures, and Andreessen Horowitz. eBay Inc. keeps 35 per cent of the company, valued at $2.75 billion, just more than the $2.6 billion it paid for Skype in 2005.
S&P 500 companies with employee pension plans put less into funding those promises than they did into management’s stock grants and options, says a study by the ‘Analyst’s Accounting Observer.’ It found that the combined fair value of restricted stock and options issued as executive compensation during 2008 was $44.5 billion. Those same companies put $39.5 billion toward employee pensions.
The 2010 median forecast salary increase budget is three per cent, down a half per cent from this year, says The U.S. Conference Board’s ‘Annual Salary Increase Budgets Survey.’ This is the lowest yearly forecast for company salary budgets since the survey began 25 years ago. Salary increase budgets refer specifically to the pool of money that an organization dedicates to salary increases for the coming year. Changing market conditions throughout 2009 pushed companies to adjust downward their salary increases as the economy worsened. The survey reports a full percentage point drop in the medians of the 2009 salary increase budgets in all employee categories except executive, from 3.5 per cent to 2.5 percent. The executive category was down two full percentage points from 3.5 per cent to 1.5 per cent.
The Co-operators is the newest member of Ceres' corporate network as a result of its five-year track record on sustainability reporting and commitments to addressing climate change. It is the first insurance company among more than 80-member companies that comprise the Ceres network. A coalition of investors, environmental groups, and public interest organizations, Ceres works with companies to address a variety of sustainability challenges, including global climate change.
Margaret E. Franklin will serve as vice-chair of the CFA Institute board of governors. She is a partner at KJ Harrison & Partners.
David Miller, of the Hospitals of Ontario Pension Plan (HOOPP), and Sherry Thodt, of TD Bank Financial Group will examine ‘Taking Governance to the next level’ at the ‘2009 ACPM Annual Conference.’ They will address current issues and other concerns to ensure pension committees have a best in breed governance structure in place. It takes place September 15 to 18 in Montréal, QC. For more information, visit http://www.acpm.com/
Tuesday, September 1, 2009
EnnisKnupp is bringing its conflict-free global investment consulting services to Canada, announcing it will open an office in Toronto, ON. EnnisKnupp is an independent investment consulting firm that develops client-specific solutions for institutional investment programs in traditional assets and all areas of alternative investments, as well as fiduciary and governance policies. Founded in 1981, it has more than 160 pension plans, endowments, foundations, and not-for-profits clients, representing more than $1 trillion. Rob Boston will head the Toronto office. His background includes time at Frank Russell Canada and, most recently, MFC Global Investments.
A steep rise in the cost of providing final salary pensions in the private sector has pushed the long-term bill for these plans in the UK above £1 trillion for the first time, says Aon Consulting. It says rising life expectancy and declining annuity rates have worked with falling bond yields to drive up the cost of providing pensions. Since the value of pension assets are unlikely to keep pace with rising liabilities, funding shortfalls will result. The deficit at the top 200 plans reached £78 billion, up from £73 billion the previous month.
British pensioners living in Canada, Australia, and South Africa will argue before the European Court of Human Rights (ECHR) that they're victims of discrimination. They claim are being treated unjustly because of a British policy that freezes their weekly pension payments and denies them the inflation adjustments given to British retirees who stay in their country. Their claim has been rejected previously by British courts and at a lower court of the ECHR. About 500,000 British expats are affected by the policy, including more than 150,000 in Canada, says the International Consortium of British Pensioners. However, 500,000 British pensioners living in non-Commonwealth countries – including the U.S. and Britain's 26 partner states in the European Union – have their British pensions adjusted for inflation automatically due to EU and U.S.-Britain reciprocal arrangements.Joe Barbieri, an investment research analyst, public market investments, at a Canadian pension fund. In the Benefits and Pensions Monitor exclusive online article ‘The Origins Of The Subprime Fiasco In The U.S.,' he writes subprime mortgages existed as far back as the 1980s, but were a very small niche market within the U.S. mortgage market. Factors that lead to the meltdown include the outsourcing of mortgage operations by the banks. A “large slice” of the mortgage business went to private mortgage brokers whose business is to generate sales and commissions. Since mortgage commissions depend on mortgage size and they had no stake in the risk of homeowners not keeping up their mortgage payments, a dangerous situation was created. “It is clear that there are many players involved in the development of the subprime fiasco, but there was also a lot of time involved in getting to the current situation,” he says.
Chris Caswell, manager, compliance of benefit plans, at Rio Tinto; and Eleanor Marshall, vice-president and treasurer, Bell Aliant; will be on the panel of plan sponsors at the CPBI Ontario Region’s ‘Pension Investment Forecast 2010.’ Other panelists are Leo de Bever, chief executive officer, AIMCO; and William W. Moriarty, president and CEO, University of Toronto Asset Management. The session will also feature presentations from Jonathan Tetrault, of Mckinsey & Company, who will set the stage with an overview of the investment trends in the industry; Dr. Marlene Puffer, managing director, Twist Financial Corporation, who will talk about the trends in liability driven investing (LDI) and some practical considerations in this environment; and Malcolm Hamilton, of Mercer, who will offer his thoughts on the Defined Contribution plan challenge. It takes place January 13 in Toronto, ON. For more information, visit http://www.cpbi-icra.ca/
CVCA Meeting Features Rosenberg
David Rosenberg, chief economist and strategist at Gluskin Sheff, is the keynote speaker at the CVCA's ‘2009 Annual General Meeting and Dinner.’ Rosenberg is one of North America’s leading economists and has been labelled the “man with the crystal balls” as he was one of the first economists to warn of the housing bust in the U.S. and the ensuing consumer and financial market meltdown. The event will also feature the Venture Capital ‘Deal of the Year’ and Private Equity ‘Deal of the Year’ awards. It takes place September 22 in Toronto, ON. For more information, visit https://www.cvca.ca
The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including October 2009 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains seven worksheets:
- Commuted Values – 2009 Basis
- Commuted Values – 2005 Basis
- Commuted Values – 1993 Basis
- Marital Breakdown – CSOP 4300, March 2003
- Marital Breakdown – CSOP 4300, March 2003 (ALTERNATE)
- Annuity Proxy for Solvency Calculations for Non-Indexed Pensions and Fully Indexed Pensions
- Minimum Interest on Employee Required Contributions (including the 12 month average rates).
Monday, August 31, 2009
The Canadian Centre for Policy Alternatives is calling for reforms to the country’s financial system to reduce systemic risk and instability. Its report calls for the creation of a single, national securities regulator; giving the Office of the Superintendent of Financial Institutions authority to approve all financial instruments that are available to Canadian investors; and, requiring credit card companies to have their Canadian operations function as federally-regulated financial institutions. The report also calls for closer oversight of credit rating agencies.
One in six Defined Benefit pension plans in the UK is now closed to existing members, says the Association of Consulting Actuaries. Its research also shows while nearly 90 per cent are closed to new members, 18 per cent no longer allow existing members to increase their pay-outs. The figures also show that closures are likely to rise, as nearly 40 per cent of employers admit they are considering changing the way benefits are accumulated. Nearly 80 per cent of the firms surveyed called on the government to make it easier for them to offer 'middle-way pensions.' They said current legislation prevents them from sharing investment, inflation, and longevity risks with employees.
The current state of play under Ontario's drug pricing and reimbursement regime will be examined at the ‘The Evolving Drug Benefit Landscape: 2010 and Beyond.’ Nathaniel Lipkus, a pharmaceutical sector lawyer from Gilbert's LLP, will discuss how key stakeholders will be required to adapt as Ontario minister of health and long-term care reforms the way that pharmaceutical supply chain participants do business in Ontario. It takes place September 15 in Brampton, ON. For more information, visit www.regonline.ca/
Friday, August 28, 2009
The funded status of typical funds managed under both traditional and LDI strategies improved in July, says a Watson Wyatt ‘Investment Brief.’ Asset performance was very positive and the market liability proxy, which is based on the swap curve, was mostly unchanged. Still, at the end of July 2009, the funded status for a typical corporate plan managed under a traditional investment approach was 33.1 per cent below its January 1, 2008 level. The funded status for a typical plan managed under an LDI strategy was off by 23.1 percent for the same period.
Most UK companies are not yet taking advantage of the significant cost savings salary sacrifice program can generate, says Mercer. Through salary sacrifice arrangements, employees agree to the exchange of earnings for non-cash benefits. The reduction of base salary means both the employer and employee pay less National Insurance (NI). Employees can also get a tax saving with certain benefits. However, while many participants offer salary sacrifice through childcare vouchers, only 27 per cent offer pension salary sacrifice. However, with future reduction in state second pension accrual and increases in NI contributions, pension salary sacrifice will become more attractive to both the employees and the employer. For a UK plan with 500 members, an average salary of £30,000 and an average contribution of five per cent, the total potential company NI saving is approximately £100,000 a year. In addition, there is the benefit of savings to the members.
Paul Stephens has re-joined the Vancouver, BC, office and assumed the role of market lead for Hewitt’s health management practice. He has 19 years of human resources consulting experience, the first 14 years at Hewitt’s Vancouver and Calgary, AB, offices providing pension and benefit plan consulting services.
Elena Morandi-Bonner is director and account executive at Buck Consultants, an ACS company. A professional project manager, as well as a quality systems and business standards expert and certified auditor, she has extensive experience in project management, systems support, and quality management.The importance of plan member engagement in preventing healthcare fraud and abuse will be examined at the ‘CPBI 2009 Atlantic Regional Conference.’ Jeff Alcock, of Manulife Financial, will discuss the importance of engaging all stakeholders, with particular focus on the role of the plan member in mitigating the risk and impact to group benefit plans. It takes place September 16 to 18 in St. Andrews, NB. For more information, visit http://www.cpbi-icra.ca/
Thursday, August 27, 2009
Canada’s maze of provincial pension regulations discourages the creation of national, single-employer pension plans, says a study by the C.D. Howe Institute. In ‘The Pension Tangle: Achieving Greater Uniformity of Pension Legislation and Regulation in Canada,’ author Gretchen Van Riesen, of GVR Consulting, says national single-employer pension plans covering employees across Canada are at a very fragile juncture as 60 per cent of working Canadians are without a private pension sponsored by their employer. This is due, partly, because cross-jurisdictional differences in pension legislation and regulation make it less likely an employer with employees in more than one province will establish a registered pension plan. This is counter-productive, given that Canadians face a serious gap in pension coverage, says Van Riesen. The report points out that the provinces – which are responsible for establishing minimum standards for design, funding, communications, and administration of pensions – have developed their legislation at different times and with different provisions. In addition, different aspects of pension policy tend to fall under different ministries – principally finance, labour, and justice – that have different constituencies, priorities, and expertise. As a result, employers face a confusing myriad of rules and a higher risk of administrative error and legal challenges, which acts as an obstacle to those considering creating national pension plans. To address the problem, she suggests four options for regulatory reform and harmonization, all of which incorporate better harmonization of pension legislation.
The transition to International Financial Reporting Standards is a good time to review benefit plans, says Darrin Bull, a principal at Mercer. Speaking at its session ‘Are you ready to board the IFRS train?’, he said the move does mean significant changes for pension plans at some publicly accountable organizations, private enterprises, not-for-profit organizations, and public sector organizations. For example, the accounting for plan amendments must be recognized over the full vesting period which, in some cases, means immediately for some plans. As well, the move to mark-to-market accounting where the status of the plan must be reported on the balance sheet could result in large shifts in shareholder equity.
As companies attempt to regain control of pension finances, they are shifting their focus to liability matching and risk management, says an SEI ‘Global Quick Poll.’ It shows that more than two-thirds (68 per cent) of respondents reported there is an increased focus on managing pension assets in association with the pension's liabilities. More than half (54 per cent) said their organization has an increased interest in risk management. However, on average pension executives are spending half of their time on either administrative activities (27 per cent) or monitoring investment managers (23 per cent), while only spending less than a fifth of their time on functions necessary to implement new strategies such as evaluating new investment managers (10 per cent) and researching new asset classes (six per cent). It also found plan design changes continue as almost half (48 per cent) of global plans are closed to new hires.
U.S. employers have been making changes to the investment lineups of their Defined Contribution plans, says a Watson Wyatt survey. More than half (56 per cent) have already made changes since June 2008 or are planning to by the end of 2009. Nearly half (45 per cent) of companies added new U.S. equity funds to their lineup, while 62 per cent dropped an existing U.S. equity fund. It also found the vast majority (93 per cent) of companies offer a default investment option in their DC plan with 71 per cent offering a target-date fund.
A plan member newsletter based on call centre feedback has earned Sun Life a ‘Best of Show’ award at the Insurance and Financial Communicators Association ‘2009 Annual Awards Competition.’ ‘Benefits Bulletin’ is newsletter from the company’s group benefits division. Created in 2004 as an information tool to help plan members better understand and utilize their benefits plan, it has evolved to include questions from Sun Life’s call centre to ensure the content accurately addressed the needs of the plan member.
Mike Pastuszak is manager, business development, group savings and retirement, at the Standard Life Assurance Company of Canada. With more than 15 years of experience in the pension industry, he will serve brokers in Ontario and strengthen its distribution through the broker channel. Jacques Lépine is regional vice-president, eastern region, retail markets. Previously, he worked for international organizations in positions that included vice-president, sales, for Quebec and the Maritimes.
Wednesday, August 26, 2009
Corporate pension funds have been making numerous changes to their investment programs in response to the economic crisis, says a survey by Watson Wyatt. These changes include significantly reducing their target equity allocations and shaking up their fund manager lineup. However, relatively few funds have taken steps to better plan and implement risk strategies or lower costs. The survey found two-thirds (67 per cent) of companies have made or are planning to make policy changes in 2009 and 2010 to their Defined Benefit plan asset allocations. By next year, these organizations project that they will have decreased their average target equity allocations to 47.8 per cent, a nearly 10 percentage point drop since last year. The survey also found that almost three-quarters (73 per cent) of companies have hired or fired managers since June 2008 – 52 per cent having both hired and fired managers.
The State Street Investor Confidence Index for August 2009 rose by 3.5 points to 122.9 from July’s level of 119.4. Looking across the regions, the confidence of North American institutional investors declined slightly by 2.2 points from 120.6 to 118.4, a decline echoed among Asian investors, whose confidence fell 2.3 points from 94.1 to 91.8. By contrast, European institutional investors displayed increased risk appetite, and their confidence benchmark rose 4.3 points to 109.2 from 104.9 last month. This represents the eighth consecutive improvement in global investor confidence. At the same time, the rate of increase in the index has moderated relative to some months ago, suggesting that institutions are being somewhat selective in their allocations.
Northern Trust has completed the launch of a specialized securities lending technology and reporting platform designed to provide clients with transparent, continuous, and timely information on their lending program. The securities lending dashboard provides a snapshot of data that is specific to each client. This snapshot includes information such as loan and collateral balances, total earnings on lendable assets, and investment maturity profile and credit ratings. Customized to each individual client, the reporting enhancements display as a dashboard on Northern Trust Passport.Five streams will examine the key elements of organizational success at the ‘13th Annual Health Work & Wellness Conference 2009.’ Streams will include ‘Making It Your Business,’ a stream which looks at how to assess, interpret data, evaluate, develop useful healthy business frameworks and strategic plans, and link it all to business objectives; and ‘Small Workplaces – Small Communities,’ a tool kit for small businesses (and large businesses with regional offices in small communities). It takes place September 30 to October 3 in Gatineau, QC. For more information, visit http://healthworkandwellness.com/
Tuesday, August 25, 2009
Firms looking to grow by acquisition will become the dominant drivers behind merger and acquisition activity in the global asset management business in the months ahead, says research from Jefferies Putnam Lovell. It sees the more traditional M&A catalysts of firms seeking product diversification, distribution, and capital to reignite growth and liquidity for retiring owners, returning as M&A motivators. Divestitures will still account for the majority of assets under management changing hands in the next 12 months. Additionally, it predicts that financial institutions that sell their asset management arms will retain minority stakes to participate in economic upside, bridge pricing gaps, and cement strategic and distribution links. It also foresees firms considering public offerings later this year and early in 2010.
Concern among British workers over the viability of retirement plans is fading, says Aon Consulting’s ‘Admin Tracker’ in the UK. It found nine per cent fewer members asked what their payouts at retirement would be in the quarter ended June 30 than in the previous quarter. As well, 17 per cent fewer requests were made about the current value of pension accounts than in the previous quarter. The data seem to indicate that confidence in retirement plans is returning as a result of stock market rallies.Two recent decisions of the Federal Court of Appeal (FCA) – General Motors of Canada and The Canadian Medical Protection Associations – could mean GST savings opportunities for employers and other sponsors of benefits plans, writes Craig Robertson, of Deloitte & Touche LLP. His ‘Exclusive Online Article’ Sales Tax Cost Of Administration says the decision comes as “a relief at a time when most pension plans are in deficit and employers are hard-pressed to find the necessary funds.” The decision sets out when plan sponsors can seek exemptions from the GST. To see the article, click on the link about, or visit www.bpmmagazine.com
Monday, August 24, 2009
The International Accounting Standards board (IASB) is looking for ways to eliminate a sharp divide in the way pensions are accounted for around the world. Currently, nations with relatively shallow corporate bond markets use government-issued debt to measure whether pension schemes are in surplus or deficit. As the yield of corporate bonds increased during the financial crisis, pension schemes in countries using them to measure their liabilities saw a significant drop, reducing the impact of falling asset values. Countries using government-issued debt had the opposite experience as yields on these bonds fell, increasing liabilities and driving down investment returns even more. These countries include Sweden, Norway, and some areas of Latin America and Asia Pacific. The UK, U.S., Canada, and Eurozone would not be affected if these proposals are approved. The IASB has called for comments to be received by the end of September.
Whether an investor is a pessimist or optimist may also indicate how prepared he or she is for retirement, says data from Fidelity Investments. It found that investors with a more pessimistic outlook are less likely than those with a more optimistic outlook to expect a comfortable lifestyle in retirement (61 per cent of pessimists, 83 per cent of optimists). Despite financial concerns, only 15 per cent of pessimists have completed a detailed income plan to help guide their finances in retirement, compared to nearly twice as many optimists (27 per cent). The results also show pessimists are less likely than optimists to take on risk with their investments, especially in relation to the ongoing market uncertainty.
Panel Looks At Future
A panel of experts from pharmaceutical, pharmacy, pharmacy benefit managers, and private payers will explore the future at the next Connex Health event. ‘Breaking Down Silos, Understanding Stakeholders’ will focus on the basics of their business and comment on current issues as well as the future challenges and opportunities they face. Presentations will be followed by a panel discussion on topical issues that affect formularies such as exclusive product agreements, the impact of patent expirations for blockbuster drugs, and the impact on patients and payers of the changing pharmacy environment. It takes place September 17 in Burlington, ON. For more information, visit https://www.connexhc.com/conferences.asp?id=1
Friday, August 21, 2009
The Harper government is misleading Canadians on pension issues, says Larry Brown, national secretary-treasurer of the National Union of Public and General Employees. Writing in its ‘National Union,’ he says instead of responding effectively to the crisis, the government is stalling and even moving backward. Canada has a pension crisis with more than 60 per cent of workers without a pension plan and there are too many plans that may not deliver the pensions they promise because of the economic meltdown. As well, with the Kerry decision, the Supreme Court has declared open season on the only real pension plan, a Defined Benefit plan, he says. In the face of this multi-pronged crisis, Brown says many companies have abandoned their obligation to provide pensions for their employees “by moving to a system that simply accumulates a pot of money, but does not actually provide a pension. This is called a Defined Contribution pension, but in reality it’s a simple savings plan.”
The Saskatchewan government may spend up to $15 million to settle a dispute with employees who lost money because they didn't know they could join a pension plan. From 1981 to 1999, some non-permanent employees were not told they could join the Public Employees Pension Plan. As a remedy, 33 payments were approved last week, ranging from $2,094 to $69,385. However, hundreds more employees and former employees are expected to come forward with claims over the next year. The province will review each file to ensure that claims are valid. In fact, of the first group that has submitted claims, about half have been turned down. For the past decade, the government has made it mandatory for all employees to join the Public Employees Pension Plan.
The Crown corporation that oversees New Brunswick's pension plans is under attack for paying incentive pay after being asked last December to freeze salaries and cancel bonuses. The New Brunswick Investment Management Corporation paid out $592,000 in incentive pay last year. The value of the corporation's net investment fell $1.6 billion during the same period. Critics say the provincial government should have met with the corporation and taken a stronger stance when asking it to cancel all bonuses. However, the corporation says the money paid to employees was part of the pay structure negotiated with them when they began working at the Crown corporation. Employees receive a base salary and individuals whose positions have a direct impact on investment returns have a portion of their salary linked to the investment returns. Although the value of the returns dropped last year, employees still received the additional money as the incentive pay is based on a four-year period. Last December, the provincial government froze salaries and cancelled bonuses for civil servants. The government also sent letters to Crown corporations asking that they do the same.
Teachers’ Private Capital, the private investment department of the Ontario Teachers’ Pension Plan, is purchasing CTVglobemedia Inc.’s remaining 7.7 per cent stake in Maple Leaf Sports and Entertainment (MLSE). This will boost Teachers’ ownership in MLSE – whose holdings include the Toronto Maple Leafs hockey team and Toronto Raptors basketball team – to 66 per cent. Lawrence M. Tanenbaum, the president of Kilmer Sports Inc. and chairman of MLSE, continues to be the second largest shareholder of MLSE with a 20.5 per cent stake. He purchased the other half of CTVglobemedia Inc.’s ownership position in a transaction that closed earlier this year.
Some may see the Supreme Court of Canada’s decision on costs in the Kerry Canada case leading to a “stifling” of employee legal challenges to their pension plans, says Christine Tabbert, of Fasken Martineau. Speaking at its ‘Landmark Pension Decision: What the Kerry Canada Decision Means to You’ seminar, she said the court ruled that costs are “quintessentially discretionary” as it failed to overturn a court of appeal decision ordering the employees to pay the expenses of the company. In this case, she said, the Supreme Court decided that the action taken was only in the best interests of the employees who made the legal challenge. As well, the decision means costs should not be paid out of funds since that is a penalty on the employer if they have to make up the shortfalls. She said that future legal actions will have to consider looking for ways to mitigate the risk that costs will be awarded against employee groups by, for example, showing that they are acting in the best interests of all of the plan’s beneficiaries. Fasken Martineau represented Kerry Canada.
Martin Currie Investment Management Limited has become a signatory to the United Nations Principles for Responsible Investment, a set of voluntary best-practice disciplines for asset owners and investment managers. Tim Hall, managing director of its investment team, says it “has long recognized the importance of a wide range of ESG factors when researching companies. We now want to incorporate these more systematically into our analysis.” Signatories commit to a number of conditions including incorporating ESG factors into investment analysis and decision-making processes and seeking appropriate disclosure on ESG issues by the entities in which they invest.Patrick Longhurst has been appointed to a two-year term on the Financial Services Tribunal. The president of Longhurst & Jack Inc., which provides education and financial advice to individuals approaching retirement, he spent 30 years as a consulting actuary specializing in the design, funding, and communication of major private and public sector pension plans. He retired in 2007 as a senior consulting actuary at Watson Wyatt. He is also a former member of the editorial advisory board at Benefits and Pensions Monitor.
Thursday, August 20, 2009
Optimism about the global economy among fund managers has soared to its highest level in nearly six years, says the Merrill Lynch ‘Fund Manager Survey.’ It reports that 75 per cent of survey respondents believe the world economy will strengthen in the coming 12 months, the highest reading since November 2003 and up from 63 per cent in July. The survey shows that investors are putting their money where their mouths are, with average cash balances falling to 3.5 per cent from 4.7 per cent in July, their lowest level since July 2007. Equity allocations have also risen sharply month-over-month, with 34 per cent of respondents overweight the asset class, up from seven per cent in July.
Plans offering automatic enrollment had an overall participation rate of 84 per cent in 2008, compared with just 60 per cent, says the Vanguard Group. Its report ‘How America Saves 2009’ also found that 20 per cent of plans have adopted automatic enrollment, up from five per cent in 2005. The report also found “continuous” participants – those who had a balance at both the beginning and end of 2008 – had a median decline of 14 per cent in their 401(k) account balances, while pre-retirees (aged 55 to 64) had a median decrease of 16 per cent. However, a combination of ongoing contributions and conservative asset allocations meant more than one-third of participants saw their balances rise or remain flat. About 20 per cent of participants posted losses of 30 per cent or more.
Philip Howell is CEO and superintendent of financial services for the Financial Services Commission of Ontario (FSCO). Previously, he was deputy minister of economic development for the Ontario government. Prior to that appointment, he was the deputy minister of tourism and before that he was the associate deputy minister of finance, responsible for the Treasury Board. During that stint in finance, he served as the interim CEO and superintendent of FSCO for 14 months.
Karen Seward, of Shepell-fgi; Janet Crowe, of TELUS; and Valerie Molloy, of WorkSafeBC; will discuss successful strategies to improve employee health at the ‘2009 CPBI Western Regional Conference.’ The panel will share demonstrated outcomes, ROI and methodologies, and highlights from reports on health coaching as well as how EAP utilization is connected to the level of support for and by supervisors. It takes place October 7 to 9 in Whistler, BC. For more information, visit http://www.cpbi-icra.ca/
Wednesday, August 19, 2009
Ontario’s Transparent Drug System for Patients Act 2006 brings to light a growing need for private plan sponsors to exercise their collective voice to put pressure on their providers to implement drug price control, says a Buck ‘Outlook.’ It cites an article in the Canadian Medical Association Journal that says the new drug formulary rules resulting from the act “upset the apple cart for other payers because its drug formulary had previously been used as the price point across the country.” Ontario’s legislation aimed to reduce the province’s public drug benefit plan costs by lowering the amount it will pay pharmacies for the generic form of drugs by 26 per cent. However, private drug benefit plans and employers have not been able to negotiate those kinds of savings. A report from the Competition Bureau Canada says private drug plans could save $600 million a year if they could buy generic drugs at competitive prices.
The value of pension programs corresponds to 33 per cent of base salary of presidents and chief executive officers at S&P/TSX 60 companies, says a Morneau Sobeco ‘Special Communiqué.’ It found13 of these companies do not seem to offer a pension plan to their president and chief executive officer. Among the 47 companies that do, 34 offer a Defined Benefit plan, while 23 offer a Defined Contribution plan. Ten companies offer both a DB and a DC plan.As the economy continues to work its way toward a recovery, employees are taking a “wait and see” approach with their 401(k) plans, says the 2009 ‘401(k) Benchmarking Survey’ by Deloitte, the International Foundation of Employee Benefit Plans (IFEBP), and the International Society of Certified Employee Benefit Specialists (ISCEBS). It found some organizations were forced to take action such as reduction or elimination of employer matching contributions. Employers also reported considerable participant activity regarding 401(k) accounts as 17 per cent indicated they have seen increased volumes of deferral rate changes, hardship withdrawals, loans, and other similar activities. As well, many plan sponsors are taking action to boost participation and contribution rates. These actions include tactics such as adding generational segmentation to their future retirement plan design and conducting a retirement readiness assessment. One-fifth of employers surveyed have implemented a re-enrollment campaign to help increase deferral rates and more than half (60 percent) are considering it.
Tuesday, August 18, 2009
The Pension Investment Association of Canada (PIAC) is pleased that federal and provincial finance ministers have held preliminary meetings to discuss pension reform. However, it urges governments to strive for harmonization of pension rules across Canada to resolve the legislative and administrative barriers that are hampering the existing pension system. It has also called on the various governments to eliminate the quantitative investment rules and move to the prudent person standard, which is in line with the approach taken by most other developed countries.
Up to 87 per cent of Canadian companies still don't have a contingency plan to deal with a situation like a pandemic, according to a recent survey by the Canadian Manufacturers& Exporters. A ‘Cowan Special Bulletin’ says public health officials are busy preparing for what could be a new wave of H1N1 flu cases as students return to school and the regular flu season begins in the fall. The case for a business pandemic plan is strong in the midst of what has become the world’s first pandemic in 40 years. In a moderately severe pandemic, the Public Health Agency of Canada predicts that between 15 per cent and 35 per cent of Canadians could become ill, 34,000 to 138,000 individuals may need to be hospitalized, and between 11,000 and 58,000 deaths could occur. The agency says businesses should plan for one-third to a half of their workers being absent for about two weeks at the height of a severe pandemic, which could last about eight weeks.
Half of UK companies with Defined Benefit pension plans expect to close them to all employees by 2012, says Watson Wyatt. It says of the 75 per cent of employers with DB plans already closed to new members, 48 per cent anticipate shuttering their plans completely within 36 months. The 16 per cent of plans currently open to new entrants is expected to fall to two per cent within three years. Of the companies with DB plans closed to new members, 28 per cent expect to keep the plan open to existing members on less generous terms.‘What is Your Alternative when it comes to investing?’ will be the focus of discussion at the Association of Canadian Pension Management’s 2009 National Conference. Terri Troy, of the Halifax Regional Municipality Pension Plan, and Marcel Larochelle, of UBS Global Asset Management (Canada) Co., will look at some of the key issues that plan sponsors need to examine with alternatives. The conference takes place September 15 to 18 in Montréal, QC. For more information, visit http://www.acpm.com/national.aspx
Monday, August 17, 2009
John Lockbaum is managing director of RBC Dexia Investor Services’ Canadian operations. Previously, he was senior vice-president and managing director at ING Wealth Management in Toronto, ON. Scott MacDonald is head, pensions, financial institutions, and client service, North America. In this key management role, he will provide strategic direction for the company’s pensions, insurance, and foreign financial institutions segments. Daryl Kletke is head, funds Canada. Previously, he spent seven years with Fidelity Investments in a series of progressively challenging roles, culminating with his role as vice-president, client service.
Richard Nadeau is managing director and vice-chairman of Desjardins Securities. Until recently, he was senior vice-president of TMX Group, responsible for managing listed issuers on the Toronto Stock Exchange. Christiane Bergevin is executive vice-president, strategic partnerships, office of the president of Desjardins Group. Most recently, she was senior vice-president and general manager, corporate projects, at SNC-Lavalin Group.‘The Kerry Case, Implications of the Supreme Court of Canada Decision’ will be the focus of the next CPBI Ontario Region session. Set for September 9 in Toronto, ON, a panel including Ari Kaplan, of Koskie Minsky LLP and counsel for the appellant committee of employees and former employees of Kerry (Canada) Inc.; Ronald J. Walker, of Fasken Martineau Dumoulin LLP and counsel for the respondent Kerry (Canada) Inc.; and Andrew Harrison, of Borden Ladner Gervais LLP; will discuss the decision. For more information, visit http://www.cpbi-icra.ca
Friday, August 14, 2009
Almost half (48 per cent) of large companies that have cut or suspended their matching 401(k) plan contributions expect to partially or fully restore their contributions within the next year, says a Watson Wyatt Worldwide survey. Of those, 67 per cent will go back to the contribution level held before the suspension, 12 per cent will do so at a lower level, and 21 per cent said the match will depend on the company’s earnings. Twenty-four per cent said they plan to reinstate or increase matching contributions within the next six months, compared to five per cent in a June survey by the firm.
More 401(k) participants increased their retirement account contributions than decreased them in the second quarter, says a survey of plans that are clients of Fidelity Investments. That marks a reversal from each of the prior three quarters, when more plan participants lowered their 401(k) contributions than raised them. It found 4.7 per cent of plan participants increased their 401(k) contribution rate in the second quarter, while three per cent decreased it. In contrast, 5.8 per cent of participants upped their contribution level in the first quarter, while 6.4 per cent decreased it.
Pension deficits have hit a significant number of top UK companies with 22 per cent of the FTSE 100 firms not having enough cash to pay out on existing liabilities, says research from KPMG. This is forcing many companies to consider whether to continue supporting Defined Benefit schemes. It is the first time ever that FTSE 100 companies are likely to spend as much on paying the pension promises to past employees as they are on contributions to current employees' pension plans.
The Court of Appeal correctly declined to award costs from the Kerry pension fund to the members’ committee that initiated the litigation, says a Morneau Sobeco ‘Special Communiqué.’ It says the Supreme Court of Canada decision in Nolan v. Kerry (Canada) Inc. backed the court of appeal decision not to award the costs on the grounds that the litigation was adversarial against the employer for the benefit of only Defined Benefit plan members, and not aimed at the due administration of the trust. More importantly, the SCC has made it clear that member groups and not pension funds face the risk of having to pay their own and the employer’s costs of litigation if the litigation is unsuccessful. The decision may put a chill on certain types of future pension litigation as potential plaintiffs and their counsel may consider more carefully litigation that is adversarial against the employer or for the benefit of only one class of members. While some pension litigation might not proceed as a result of this decision, the scope of future pension litigation may become broader and might include pension fund trustees and pension funds as parties.
‘New World. New Economy. New Future. Now What?’ is the theme of the NQI Performance Excellence Summit. It will explore how Canadian organizations from the private and public sectors should face this brave new world economy. It takes place October 22 in Toronto, ON. For more information, visit http://www.nqi.ca/
Patti Croft, chief economist of RBC Global Asset Management, and Craig Alexander, vice-president and deputy chief economist for TD Bank Financial Group, will provide a Canadian economic overview at the CPBI Ontario Regional Conference. The session is a practical examination of the economic factors that are currently affecting the pension plan environment. The conference takes place October 5 to 7 in Collingwood, ON. For more information, visit http://www.cpbi-icra.ca
Thursday, August 13, 2009
DBRS has chopped its rating on some of the $32 billion of restructured asset backed commercial paper (ABCP). It says the ratings reduction was necessary after the failure of some of the corporations linked to the bonds. This resulted in a "rapid deterioration" in the credit quality of some of the underlying assets resulting in "higher probabilities of default." Retail investors were refunded their money as part of a restructuring deal for ABCP in Canada. However, most of the $32 billion is held by companies and institutions that had no choice but to take the new bonds.
Manulife Adds To Retail Funds
Manulife Financial Corp has bought AIC Ltd.'s Canadian retail investment fund business.It says the purchase will boost its retail fund assets under management to $13.7 billion. Its mutual fund arm will manage all AIC funds in Canada, while AIC's investment management arm will continue to run 12 funds as an external manager under a new name. AIC will continue to sub-advise on a number of its flagship equity funds.
The median Canadian large cap manager return of 19.1 per cent during the second quarter of 2009 was the highest since the first quarter of 1987, says the Russell ‘Active Manager Report.’ However, the return was not quite high enough to beat the S&P/TSX Composite Index’s near-record second quarter return of 20 per cent. Only 38 per cent of large cap managers beat the benchmark during the second quarter, up slightly from 36 per cent in the first quarter. Information technology was the top-performing sector in the quarter (+43 per cent). However, the strength in the financials sector (+35 per cent) accounted for almost half of the index gain.
The Supreme Court of Canada Nolan v. Kerry (Canada) Inc. decision is not by any means a “carte blanche” for plan sponsors to charge expenses to the plan and to take contribution holidays using Defined Benefit surplus to fund the Defined Contribution plan component, say Priscilla H. Healy and John R. Varley, of Fogler, Rubinoff LLP. The court dealt comprehensively with the issue of whether and when plan expenses can be charged to the pension fund. It is now established that reasonable expenses of the administration of the pension plan, including the internal expenses of the plan sponsor in its role as administrator, may be paid from the plan fund where the plan does not prohibit such payments. If the plan is silent, the presumption is that the payment of expenses is permitted. The court found that use of surplus acceptable if the plan so provides and the members of the DC component are beneficiaries of the DB trust. This is irrespective of whether there is a different trustee or custodian for the DB and DC plan components.
The assets of the Canada Pension Plan fund were up $11.1 billion in the first quarter. The fund ended the first quarter of fiscal 2010 on June 30 at $116.6 billion compared with $105.5 billion at fiscal year end on March 31, 2009. Investment income made up $7.6 billion of the gain, with the remainder consisting of $3.5 billion in CPP contributions not needed to pay current benefits. The investment gains represent a 7.1 per cent increase.
The Bank of New York Mellon Corp. has bought Insight Investment Management Ltd. from Lloyds Banking Group PLC in a bid to tap into growing demand from pension funds for liability-driven investment strategies. Insight, with GBP80 billion under management, is one of the UK's biggest providers of liability-driven investment products. This strategy attempts to match pension plan liabilities by investing in long-duration bonds or using swaps or derivatives to hedge changes in interest rates and inflation. BNY Mellon plans to bring these kinds of products to countries where they are still relatively rare including the U.S., Japan, and Germany.
As companies contend with the business changes brought on by the recession, many have increased their employee communication efforts. However, as they prepare for an eventual rebound, few companies are planning to increase their communication with workers about pay, benefits, and business performance in general, says a forthcoming report by Watson Wyatt. Its ‘2009/2010 Communication ROI Study’ found over the next 12 months, only 27 per cent plan to increase communication about benefits and 19 per cent plan to increase communication to employees about pay. Leaders at different levels of their organizations indicate different goals for their communication efforts. Senior leaders are most apt to communicate to ease employee stress (49 per cent). The corporate communication function and line managers are most likely to focus their efforts on to improve employee engagement (49 per cent). Communications from HR are primarily designed to manage change (38 per cent).Activity in Canada’s venture capital market continued to fall in the second quarter of 2009, says the CVCA-Canada’s Venture Capital & Private Equity Association. The pace of venture capital deal activity in Canada continued to slow in the second quarter of 2009, with $179 million invested in total nationwide, down 42 per cent from the $309 million invested at the same time last year. Activity also contracted 34 per cent as compared to the first quarter of 2009, when $272 million was invested.
Wednesday, August 12, 2009
Alcohol addiction and family support mechanisms to treat it are major issues in Canada’s oil and gas industry, says a report by Shepell/fgi. It examined employee access of employee assistance programs in this industry from 2006 through 2008 and found that substance abuse, especially with alcohol, is a problem. The report showed a 481 per cent increase in EAP access for alcohol abuse over the three years. It also showed that employees in the industry accessed their EAP at a rate 34 per cent higher than the Canadian norm in 2006 and 40 per cent higher in both 2007 and 2008. Oil and gas employees, and their dependents, used their EAP at greater rates than the national norm for eldercare services, childcare services, addition counselling, nutritional counselling, and family counselling.
Buyout Deal Value Drops
Despite the slowdown, the actual number of reported buyout deals was relatively constant at 24 up slightly from the 21 such transactions in the same period last year, says Canada’s Venture Capital and Private Equity Association. The deals, however, were marked by significantly lower transaction sizes. The average size of disclosed private equity buyouts was only US$22.5 million in quarter two, down from the US$59 million average deal size in the first quarter. The lull in Canadian buyout investment was mirrored by the rest of the world. Private equity buyout investment worldwide totaled only US$34.6 billion in the first half of 2009, 22 per cent of the previous year’s first-half total.
Many Defined Contribution pension plan participants did nothing at all during the worst of the 2008 market turmoil, says a research report from the Vanguard Center for Retirement Research. ‘Inertia and retirement savings: Participant behavior in 2008’ shows during 2008, 16 per cent of participants in Vanguard-recordkept plans traded in their accounts while 84 per cent did not. The fact that DC participant activity during the height of economic disturbance was comparatively low proves that inertia continues to be the dominant decision-making approach in retirement savings. The report says "In response to exceptional market circumstances, most participants chose the path of least resistance and did nothing in 2008."
The business of securities lending is evolving towards a new paradigm as a result of the market events of 2008, says a BNY Mellon Asset Servicing research paper. ‘Resetting the Roadmap: Managing in a New Securities Lending Environment for Beneficial Asset Holders’ shows a greater attention to risk will translate into closer working relationships between asset holders and agent lenders. The agent, in some ways, will become more like an equity agency brokerage and less a utilization manager. As well, increased use of non-cash collateral has resulted in benefits arising from portfolio diversification, but has heightened concerns around loan pricing. While most institutions have already migrated towards a conservative portfolio or are moving in that direction, this has not meant a wholesale retreat from the market as only 31 per cent of funds surveyed changed their securities lending behaviour as a result of collateral losses.
CIBC Mellon Global Securities Services Company has been chosen by the Toronto Electrical Industry Benefit Administrative Services (TEIBAS) as asset servicing provider to the International Brotherhood of Electrical Workers (IBEW) Local 353 Trust Funds. In its role as asset servicing provider, CIBC Mellon will provide global custody, accounting services, and payment administration for IBEW Local 353's pension plan, health, and welfare plan and supplemental unemployment benefits plan. TEIBAS exclusively serves the 9,000 active and retired members of the IBEW Local 353.
The Caisse de dépôt et placement du Québec is repositioning its real estate group to focus on its core businesses. The adjustments are part of the action plan launched by the Caisse last April to concentrate on key operations and streamline its structure. The organizational and strategic changes include the integration of the Cadim division into the SITQ subsidiary and the cessation of investments in the mezzanine and other subordinated loans sector. It reported declines of $4 million in its real estate holdings and $1.7 billion in less liquid investments in the first half of 2009. The overall decline of $5.7 billion offset the five per cent return that the Caisse earned during that period.‘Infrastructure: Capitalizing On the Stimulus’ will be the focus of a Toronto CFA Society luncheon. Participants will hear from several companies in the infrastructure sector and come away with a better understanding of the investment opportunities. It takes place September 25 in Toronto, ON. For more information, visit http://www.torontocfa.ca/
Tuesday, August 11, 2009
Employers or administrators wishing to charge administrative expenses to the pension fund should carefully examine all governing plan documentation, both current and historical, to determine whether any potential barriers exist, says a Hicks Morley ‘FTR Now.’ The Supreme Court’s decision in Nolan v. Kerry (Canada) Inc. confirmed that reasonable pension plan administration expenses are chargeable to a pension fund, unless expressly prohibited by the governing plan documentation (past and present). It also establishes conclusively that there is no presumption that it is the employer’s obligation to pay plan expenses, unless expressly required by the governing plan documentation. For more information, visit FTR Now at http://www.hicksmorley.com/
Forty-one per cent of the large companies and financial institutions participating in a Greenwich ‘Market Pulse’ expect the global recession to come to an end in the next 12 months, but almost 55 per cent expect the downturn to last for at least another year. Canadian companies and institutions are the most optimistic, with nearly half expecting a global recovery within the year. Fourteen per cent of Canadian respondents think the global recession is already over.) The least optimistic are UK respondents where only 20 per cent expect global recovery in the next year; 56 per cent think the global recession will last another one to two years, and 16 per cent expect it to continue for three years or longer.
The CPP Investment Board (CPPIB) may invest up to $250 million in a joint venture that will focus on the development, acquisition, and management of institutional-quality commercial properties in Brazil. It will invest an initial $150 million that may be increased up to $250 million in the venture with Cyrela Commercial Properties SA Empreendimentos e Participacoes that will also include GIC Real Estate, the real estate investment arm of the GTBovernment of Singapore Investment Corp.The ‘Geopolitics of Investing’ will be examined at a Toronto CFA Society luncheon. Pierre Fournier, a geopolitical analyst with National Bank Financial, will look at geopolitics as an advanced indicator for the economy and the markets. It takes place September 16 in Toronto, ON. For more information, visit http://www.torontocfa.ca
Monday, August 10, 2009
The dismissal by the Supreme Court of Canada (SCC) of the appeal ‘Elaine Nolan et al. v. Kerry (Canada) Inc. et al’ will have a significant impact on the actions of employers in managing employee pension plans, says Fasken Martineau. The court ruled that plan expenses may be paid out of a pension fund and that where surpluses exist in the Defined Benefit component of a plan, the sponsor can use them to fund its contributions to the Defined Contribution component of the plan. In addition, the court awarded costs against the group of former employees who brought the litigation against the company. "The issues involved in the Kerry case have the potential to affect millions of Canadians and the ruling of the Supreme Court of Canada brings clarity to a number of complex, and yet critical, pension issues," says Ron Walker, a litigation partner at the firm who, along with Christine Tabbert, appeared on behalf of Kerry Canada before the Supreme Court of Canada. To see the decision, visit http://csc.lexum.umontreal.ca/
The Canadian Institute of Actuaries supports a proposal to the federal government to host a national summit on retirement income. Such a summit would formally take action to address critical long-term pension and retirement savings issues, it says. Canada’s actuaries have been promoting such a summit for several years and “this announcement clearly demonstrates that finance ministers, pension ministers, and premiers are in agreement that the challenges that have afflicted the country’s ailing pension system for many years need to be addressed on a national basis, and not in a jurisdiction-by-jurisdiction, piecemeal way,” says its president, Robert Howard. It says the outcomes of the summit should include an agreement on a timetable and road map to extend Defined Benefit pension plan coverage in the private sector, as well as a timeframe for harmonizing pension laws and regulations across the country.
Pension plan sponsors should carefully assess the implications of the government of Ontario’s temporary solvency relief measures, says Towers Perrin’s ‘Perspectives.’ It says as pension plans are long-term arrangements, sponsors should weigh a number of factors, including the short-term benefits of lower contributions versus longer term cash flow and benefit security considerations.
Knapp At Industrial Alliance
Friday, August 7, 2009The Supreme Court of Canada (SCC) has dismissed the appeal of the Elaine Nolan et al. v. Kerry (Canada) Inc. et al. This decision has the potential to impact Defined Benefit pension plans across Canada as it will provide much needed guidance on a number of important issues including the use of pension fund assets to pay for plan expenses; the use of pension plan surplus to fund employer DC contribution obligations; and the standard of review from decisions of the Ontario Financial Services Tribunal, involving the application of common law and trust principles to the interpretation of pension plan and trust documentation. The Ontario Court of Appeal’s June 2007 ruling said the introduction of a Defined Contribution component to the Kerry (Canada) Inc. pension plan did not create a second plan and thus found that cross-subsidization was not prohibited by the trust agreement. That court also ruled the employer was not responsible to pay the amounts that it had taken from the fund through the contribution holidays. This decision overturned previous decisions by the Ontario Superior Court and the Ontario Financial Services Tribunal that Kerry Canada could not be reimbursed from the fund of its pension plan for expenses related to the addition of a DC provision to the plan, nor could it use the actuarial surplus to pay employer DC contributions without amending the plan to make DC members beneficiaries of the trust holding DB assets. To see the decision, visit http://csc.lexum.umontreal.ca/
Ontario Premier Dalton McGuinty has another priority – the number of Canadians facing retirement without adequate income. He is calling for a summit on pensions, saying it's a national challenge that warrants a national conversation. A recent study has shown that by 2030, two-thirds of Canadians will not have enough retirement income to pay for their necessary living expenses. McGuinty says governments may have to create more incentives to persuade people to save for retirement. Other premiers are discussing setting up provincial public pension plans, which would top up the Canada Pension Plan for people without workplace pensions.
Mercer has released its Target-Date Fund Universes. Employers that sponsor Defined Contribution pension plans for employees now have access to an tool to monitor and compare the returns of Target-Date fund (TDF) products. “Target-date funds are a relatively new addition to the Canadian marketplace so the number of products with a long track record is limited,” says Oma Sharma, DC investment consulting leader. Its universes highlight material differences in performance from one TDF product to another. Target-date products are structured in series of funds with different maturity dates. Typically, each plan member selects the fund closest to his or her expected retirement date. The fund’s asset allocation automatically adjusts as the target-date approaches. Mercer’s seven target-date fund universes are called Retirement, 2015, 2020, 2025, 2030, 2035 and 2040.
The U.S. Court of Appeals for the Second Circuit has issued a written opinion on why it allowed Chrysler to sell its key assets to a group led by Italian automaker Fiat, rejecting the protests of Indiana state pension funds that held secured Chrysler debt. The pension funds argued that, as secured creditors, they had priority interests under the bankruptcy code in the property transferred in the sale. The court held, however, that the funds had transferred the power to consent to the sale to a trustee who had authority to act on behalf of all first-lien credit holders. The court also rejected the pension funds' suggestion that other debt holders were coerced into supporting the deal.
A thorny restructuring issue affecting umbrella operations has been addressed in detail by Ontario's Financial Services Tribunal, say Priscilla H. Healy and John R. Varley, of Fogler, Rubinoff LLP. If a single pension plan is made available to all employees of an organization which operates through separately-incorporated and independent "branches," and some of those branches become insolvent, there was some uncertainty as to whether the plan in question was a multi-employer pension plan (MEPP), or a single employer plan (SEPP). The Tribunal says that each branch has its separate obligations as "employers" with respect to those plan members who received their ordinary remuneration from that particular entity. If a member received remuneration from two of these branches, then the wind-up liability for that member's benefits could fall on both or either. In this case, the Victorian Order of Nurses, although the administrator of the plan and having the right to amend the plan, paid none of the remuneration for the employees of the four insolvent branches. The branches were the only ‘employers’ as regards to wind-up liability for their separate groups of ‘employees.’ The plan had never been administered as a MEPP.
Canadian companies and financial institutions' levels of support for a broad slate of reforms aimed at financial regulations are among the world's highest, says Greenwich ‘Market Pulse.’ Its survey of the world's biggest asset managers, corporations, banks, and pensions, including 32 in Canada, found Canadian companies and financial institutions expressed strong levels of support for many of the most important reform proposals currently being debated around the world. Almost half are in favour of the establishment of a government entity to regulate systemic risk, almost two-thirds favor major reforms of global derivatives markets and a full 83 per cent support tighter regulations for hedge funds.The Standard Life Assurance Company of Canada won six awards in the 2009 Insurance and Financial Communicators Association competition. Its ‘VIP Room,’ a dashboard-style website that provides members of group savings and retirement plans with easy access to information about their retirement investments, won a ‘Best of Show’ award. The firm also received three ‘Award of Excellence’ designations for its Health & Wellness Centre website, the Summary of Canadian Pension Legislation booklet, and Standard Life Mutual Funds Quarterly Review publication. Finally, its Retirement Calculator direct mail campaign and its on-demand rich media Focus on Funds microsite were recognized with ‘Honourable Mention.’
Thursday, August 6, 2009
Provincial finance ministers have agreed to review Canada's retirement system to look at all options to improve incomes of retirees. As well, they have endorsed the need to seek a compromise that bridges a gap between provinces that want to set up a new national pension plan for workers and those so far unwilling to endorse the proposal. A task force report for Alberta and British Columbia last year recommended creating a new pension scheme for workers who do not have a workplace plan. Ontario, however, feels the plan – which would be voluntary and layered on top of the existing Canada Pension Plan – needs more study. It believes this approach could benefit some workers, but might limit other savings options for workers and would not address other issues such as income adequacy for the elderly.
Most private Defined Benefit pension plans at large Canadian companies appear to be well funded, says research from DBRS. Its review of 70 DB plans with $149 billion in reported plan obligations and $141 billion in plan assets shows most are “in a relatively strong position, considering the poor equity market performance and falling interest rates that have affected returns and increased the size of total obligations.” Aggregate funding for companies reviewed in 2008 was approximately 92 per cent of pension obligations, a relatively moderate drop from the comparable 98 per cent level in 2007.
Companies and financial institutions around the world have expressed strong levels of support for many of the key components of financial regulation reform proposed by governments in the United States and Europe, says a ‘Greenwich Market Pulse.’ Its survey of 458 large corporations and financial institutions in North America, Europe, and Asia reveal strong – in some cases surprisingly strong – support for regulatory proposals ranging from the establishment of ‘systemic regulators’ and the mandatory separation of investment banking and commercial banking activities to the tightening of hedge fund regulations. Almost half of large companies and financial institutions would support the renewal of regulatory separation of investment banking and commercial banking activities within financial services firms. The general consensus is that risk-taking in the investment banking function of banks and other financial institutions caused the balance sheet problems that in turn disrupted loan markets. The survey results also reveal broad support for stricter hedge fund regulation. Overall, more than 60 per cent of large companies and 58 per cent of financial institutions participating in the survey are in favor of efforts to increase regulatory supervision and control over hedge funds.
The Canadian Health Care Anti-fraud Association has signed a formal memorandum of understanding with two like-minded organizations – the National Health Care Anti-Fraud Association and the European Healthcare Fraud and Corruption Network. All three organizations share the common goal of reducing and eliminating healthcare fraud in their respective jurisdictions, as well as globally. Healthcare fraud is a serious problem, with a staggering price tag estimated between $3 billion and $15 billion annually in Canada alone. Healthcare fraud schemes have become exportable and fraud trends are becoming increasingly similar from country to country.
The chairman of the U.S. House Financial Services Committee sees “no great need” to spin GE Capital off from General Electric Co. With the Obama administration introducing its proposed revamp of the U.S. financial regulatory system, some investors and analysts have been concerned that the proposal could compel GE to spin off GE Capital. However, U.S. Rep. Barney Frank says "To break up GE at this point, I think, would be a mistake." The company is in the process of downsizing its finance business in the face of falling profits, with a goal of making it more "safe and secure."
Small, entrepreneurial investment management firms maintained a performance advantage over larger, established firms through last year's historic market downturn, says research on emerging investment managers by Northern Trust. It says six studies of emerging investment manager performance spanning 16 years of stock market history have demonstrated that the smallest firms, collectively accounting for only one per cent of institutional market share, enjoyed a consistent advantage over industry leaders. The research update found one-third of firms in the top quartile of performance had less than $2.6 billion in assets under management. As well, small firms in aggregate outperformed the Standard & Poor's 500 Index six times out of eight in down market quarters. They outperformed the index by an average of 0.51 per cent per down-market period, the best of any of the groups studied.
Russell Investments Canada Limited has launched the Russell Canadian Dividend Pool (the Dividend Pool). The Dividend Pool features fully independent, third-party, investment managers. It offers broad diversification across two distinct investment management styles, 10 Canadian industry sectors, and dozens of individual holdings. Irshaad Ahmad, president and managing director, believes it can help Canadians address the growing need to combine consistent income with longer-term capital growth, particularly during their retirement years.
Employers help their workers look after their dogs are likely to find their employees are more loyal, says Camp Bow Wow. The dog kennel chain offers a ‘401-K-9’ program with day and overnight boarding services from more than 95 locations with another 115 additional sites under development around the U.S. and in Canada. Providing its services as an employee benefit can help employers attract and retain workers, the company says. The program requires no employer contribution and the company supplies an account manager to work with each client.
STRATA Benefits Consulting has expanded into Saskatchewan with the opening of an office in Saskatoon at the beginning of August. Rochelle Dobni joins the firm as a group benefits consultant and will work from the office.
Diane Pion is client services manager at Hewitt Associates’ Montreal, QC, office. More recently, she was director, benefits shared services, for the Canadian operation of a global life sciences company. In her new role, she will focus on maintaining strong relationships with Hewitt’s outsourced administration clients in Quebec.
September Interest Rate Assumptions
The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including September 2009 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains seven worksheets:
- Commuted Values – 2009 Basis
- Commuted Values – 2005 Basis
- Commuted Values – 1993 Basis
- Marital Breakdown – CSOP 4300 (March 2003)
- Marital Breakdown – CSOP 4300 (March 2003 – ALTERNATE)
- Annuity Proxy for Solvency Calculations for Non-Indexed Pensions and Fully Indexed Pensions
- Minimum Interest on Employee Required Contributions (including the 12-month average rates)
Wednesday, August 5, 2009
The decision of the court in the prosecution proceedings against the trustees of the Canadian Commercial Workers Industry Pension Plan will be of widespread interest because it relates to the required standard of care, say Priscilla H. Healy and John R. Varley, of Fogler, Rubinoff LLP. The trustees of the multi-employer plan were charged individually in June of 2006 with breaches of the Pension Benefits Act in connection with a massive loss in the pension fund. The allegation is that the trustees failed to exercise the care, diligence, and skill in the administration and investment of the pension fund that a person of ordinary prudence would exercise in dealing with the property of another person, failed to supervise the investment committee as agent of the board in a prudent and reasonable manner, and failed to comply with certain quantitative limits on permissible investments. There have been a number of other recent instances of regulatory and/or civil proceedings against the administrators of pension plans where there have been significant investment losses. These actions can be, if not avoided, at least minimized if proper plan governance procedures including chains of decision-making are established, maintained, and documented. Periodic governance audits of an employer's pension plans should be regarded as simply basic insurance for those responsible for the plan.
The majority of consumers worldwide either don't know if the recession will affect their retirement or don't believe it will (64 per cent), but 36 per cent are more pessimistic, says a study by ING DIRECT. The study of nine countries – Canada, the U.S., Australia, Spain, France, Italy, Germany, Austria, and the UK – shows of the global 'pessimists,' 35 per cent believe they will have to work an extra five years due to the recession, while 19 per cent expect they will have to work 10 years or more. The numbers are the most extreme in North America where one in three people who think the recession will negatively affect their retirement plans, expect to work an extra 10 years or more.
North American infrastructure projects and investments are burdened by cumbersome decision-making, despite concerted efforts by all levels of government to increase infrastructure spending, says a KPMG International survey. ‘Frontline Views from Private Sector Infrastructure Providers’ found that governmental effectiveness is the biggest concern. Because government decision-makers are perceived as viewing infrastructure too often through a political lens, they are also blamed for not taking the problems in this area seriously enough by failing to provide consistent, long-term leadership. Lack of a sense of urgency, frequent changes in public policy, and even a lack of an appropriate policy were all cited by more than a quarter of global survey respondents as leading public sector impediments in this area.
The European Commission’s draft directive on alternative investment fund managers could cost Europe’s pension fund industry up to €25 billion a year if implemented in its current form, says the Alternative Investment Management Association (AIMA). Under the directive, marketing of funds by managers will only be allowed with a special marketing passport. However, the directive also delays its introduction by three years and imposes significant obstacles (such as demonstrating regulatory and tax equivalence) to obtaining it. AIMA argues as it is currently drafted the directive will result in a major reduction in choice for Europe’s institutional investors and a big increase in costs and hence a significant reduction in returns. None of this is good for the competitiveness of the European financial services sector or indeed the economies of Europe as whole. AIMA is calling for a proper full impact assessment to determine whether the uncertain benefits of the directive justify the certainty of massive costs.
Newton Capital Management Limited has been awarded a global equity mandate for TD Asset Management Inc. Newton will become portfolio advisor to the TD Global Select Fund. The mandate is the largest sub-advisory assignment for Newton in Canada. It has been managing global mandates for 30 years and applies a single portfolio approach to running global equity portfolios. More than 75 per cent of its mandates are globally invested with more than $20 billion in global equity mandates.
Median asset levels in Defined Contribution plans in the U.S. dropped at least 15 per cent from year-end 2007 to mid-June 2009, reflecting the significant downturn in the economy, says an analysis by the Employee Benefit Research Institute. It found that among all families with a DC plan, the median (mid-point) plan balance was $31,800 in 2007, up 16 per cent from 2004. This dropped 16.4 per cent (to $26,578) from year-end 2007 to mid-June 2009. A significant shift in the plan type also occurred from 1992 to 2007, with the share of families with a retirement plan having only a Defined Benefit (pension) plan decreasing from 40 per cent to 17.4 per cent. The share of families participating in only a DC plan had the opposite trend, rising from 37.5 per cent in 1992 to 60.3 per cent in 2007. The percentage of families with both types of plans was unchanged from 1992 to 2007 at 23 per cent.Greg Stevenson is pension administration growth leader for Watson Wyatt Worldwide in Canada. He is responsible for business development activities with a focus on Canadian pension administration opportunities for current and prospective clients. He most recently served as director of Defined Benefit business at another consultancy.
Tuesday, August 4, 2009
Ontario has appointed 13 members to its Advisory Council On Pensions And Retirement Income. The members, who all have significant knowledge of pension issues, reflect a range of stakeholder perspectives. Together, they will provide ongoing advice to the minister on pension reform proposals and help keep the government informed on stakeholder viewpoints. The council members are Jennifer Brown, Dona Campbell, Patrick F. Flanagan, Jeffrey S. Graham, William E. Kyle, Dick McIntosh, Jim Murray, Mary Picard, Allan Shapira, Byron Spencer, Monica Townson, David Vincent, and Mark Zigler. Ontario’s Expert Commission on Pensions recommended the creation of the advisory council.
The Ontario Teachers’ Pension Plan (Teachers’) is urging Canadian securities regulators to disallow companies from voting newly issued shares acquired in private placements with the apparent purpose of swaying the outcome of takeover bids. It has asked securities commissions in Alberta and Ontario to preserve shareholders’ rights in connection with corporate mergers by disallowing tactics such as those used in Paramount Energy Trust’s proposed takeover of Profound Energy Inc.
Claymore Group Inc. and its associated entities including Claymore Securities, Inc.; Claymore Advisors, LLC; and Toronto-based Claymore Investments, Inc. will become wholly owned subsidiaries of Guggenheim Partners. Claymore Investments manages a family of 23 exchange traded funds and three closed-end funds.
California Governor Arnold Schwarzenegger is again talking about rolling back public employee pensions. He says he's motivated by the need to save money. California has a $63 billion in unfunded pension liabilities, an amount equal to roughly two-thirds of all annual general fund spending. Schwarzenegger initially included long-term pension reform into his negotiations with lawmakers to close California's $26.3 billion budget deficit. He later dropped his plan because he said it became a distraction. However, he now says he will press for pension reform after the budget deficit is resolved. His proposal would not change the pension system for current workers, but would lower benefits for new employees. The changes would save the state some $95 billion over 30 years.