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News Archives - October / November 2008

Friday, November 28, 2008

Solvency Relief Promised

Solvency funding relief to pension plans and a reduction to minimum withdrawal requirements for RRIF holders are among the proposals directed at the pension in the federal government’s ‘Economic and Fiscal Statement.’ The statement proposes doubling from five years to 10 years the time required for solvency payments for plans under federal jurisdiction. To get the extension, companies would need the agreement of pension plan members and retirees by the end of 2009 or they can secure of a letter of credit to cover the five-year difference. Based on what has happened so far, and under current rules, the decline in value of these plan assets would trigger substantial payments at the worst possible time for struggling companies,” says Finance Minister Jim Flaherty. This will give these companies “one more option they can use to cope with these extraordinary circumstances.” He also says that the government plans to make more permanent changes to pension legislation and plans to soon launch consultations on issues facing Defined Benefit and Defined Contribution pension plans. To help seniors cope with the eroded value of investments, it is proposing a one-time change to allow RRIF holders to reduce their required minimum withdrawal by 25 per cent for this tax year. For example, an individual required to withdraw $10,000 from their RRIF in 2008 would only need to withdraw $7,500.

Pay-direct Controls Costs

A variety of methods are being used by Canadian employers to control prescription drug benefit costs, says the International Foundation of Employee Benefit Plans ‘Employee Benefits Survey: U.S. and Canada: 2009.’ The use of a pay-direct drug card plan is the most frequently used approach. This technique is employed by 84 per cent of corporations, 60 per cent of professional service firms, 55 per cent of public employers, and 55 per cent of multi-employer plans. Other popular methods include discounting or limiting coverage of lifestyle drugs, the use of drug formularies, promoting the use of generic drugs, and three or more tiers for cost sharing. Popular benefits offered by respondents include vision benefits (91 per cent), hearing benefits (87 per cent), chiropractic coverage (86 per cent), orthodontia coverage (75 per cent), and mental health benefits (57 per cent).


Thursday, November 27, 2008

Solvency Clause Used Rarely

The solvency clause which is threatening to scuttle an Ontario Teachers’ Pension Plan group takeover of BCE Inc. is rarely used in Canadian deals. Four tests make up the solvency test. The most important are the cash flow test – which measures a company's ability to meet interest, debt, and other obligations – and the asset test – a measurement of whether the company could fulfill its obligations if it were to sell all of its assets. The asset test is the one that is threatening the BCE deal as its auditor is questioning whether or not it can cover an additional $32 billion in debt after the leveraged buyout. Reports indicate that BCE had the clause inserted in the agreement as part of its efforts to fend off legal challenges by bondholders.  

Balance Missing For Single Employer Plans

While the Ontario Expert Commission on Pension was hoping to achieve a balance for all stakeholders, it failed to do so for single employer pension plans, says Jeff Kissack, of Watson Wyatt Worldwide. Speaking at a Blake’s ‘Executive Breakfast Briefing: Final Report of the Ontario Expert Commission on Pensions,’ he cited a number of areas where he feels the report failed single employer plans. For example, he said the recommendation that single employer plans continue to fund on both a solvency and going concern basis may be based on sound logic. However, the current solvency rules need to be modified to take into account the needs of employers. The best way to secure benefits, he said, is to have solid, financially viable plan sponsors. There is no benefit security if an employer goes under. Other options that would have helped these plans include allowing the use of solvency gains to lower future contributions, not just reduce the amortization period. The PDF summary is now available HERE. For the full report click HERE.

Funding Issues Lacking

The recommendations on use of surplus in pension plan wind-ups, conversions, and mergers are, for the most part, welcome news to the pension industry. However, the report does not go far enough in dealing with the funding issues impacting Defined Benefit plans, says a Mercer Communiqué. It was hoped that the report would have gone further to assist single-employer DB plan sponsors by rebalancing the playing field so it does not bode well when the central recommendations of the report are the creation of new bureaucracies. Unless pension coverage is made mandatory, expanding pension coverage by means of such bureaucracies is simply putting the cart before the horse. The PDF summary is now available HERE. For the full report click HERE.

GST Mechanism Needs Improvement

Canada is about to introduce a single mechanism to deal with the GST borne on costs related to all pension funds, says PricewaterhouseCoopers. However, its ‘The hole story’ report says while the mechanism has the attractive features of simplicity and certainty, it could be further improved. A glaring defect is the proposed discrimination against employees of listed financial institutions which is ill-conceived and should be deleted. As well, it says consideration should be given to updating the test affording total relief to provincial government/agency administered plans, so as not to deny the relief to plans solely because of reforms giving rise to increased participation in their governance by plan members.

Employers Use Automatic DC Features

Employers offering a DC plan were more likely to offer an automatic feature which employers have utilized in recent years in an attempt to increase participation and account balances, says the International Foundation of Employee Benefit Plans ‘Employee Benefits Survey: U.S. and Canada: 2009’ Key Canadian Pension/Retirement Findings.’ Over half, 54 per cent, of respondents have implemented automatic enrollment and 35 per cent use target risk/lifestyle funds. Managed accounts and target retirement date/life cycle funds are each used by 27 per cent of respondents. The survey found that 40 per cent of Canadian respondents offered a Defined Contribution plan and 65 per cent offered a Defined Benefit plan. As expected, public employers were the most likely to offer a DB plan, followed by multi-employer plans, corporations, and professional service firms. For DC plans, the reverse was true.

Williams Heads PH&N

Damon Williams will become president of Phillips, Hager & North effective February 1, 2009. As well, his current role as head of institutional management will be expanded to include RBC Asset Management.

Agreement On Cross-country Tour

CAPSA’s cross-country meetings to outline the new proposed agreement with respect to the multi-jurisdictional pension plans continues next week. The sessions clarify the applicable rules and oversight of such systems. Sessions take place December 1 in Toronto, ON; December 2 in Fredericton, NB; December 3 in Halifax, NS; December 4 in St. John’s, NL; and December 5 in Calgary, AB. For more information, visit


Wednesday, November 26, 2008

Auditor Report Threatens BCE Deal

The planned privatization of BCE Inc. by an Ontario Teachers’ Pension Plan Board group may be in jeopardy because it failed a preliminary solvency test conducted for its would-be purchasers. BCE received a preliminary view from auditing firm KPMG that “based on current market conditions, its analysis to date, and the amount of indebtedness involved,” it would not be able to deliver a solvency opinion on BCE by the closing date of December 11. The delivery of the solvency opinion is a condition to the completion of the acquisition. Unless things change by that date, BCE warned, “the transaction is unlikely to proceed.” However, BCE is disputing some of the auditor’s findings. For example, the auditor says BCE would take on an additional $32 billion in debt after the leveraged buyout. However, BCE disagrees that the addition of this debt would result in it not meeting the technical solvency definition.

New Requirements Add Cost To Plans

It is hoped that the government will not unilaterally impose new requirements outlined in the Ontario Expert Pension Committee report, no matter how noble and virtuous these may be, on the already full shoulders of private sector plan sponsors without allowing
them to mitigate their costs, says Morneau Sobeco’s ‘News & Views.’ It says additional minimum benefit requirements (such as mandatory indexing and immediate vesting), additional minimum funding requirements (such as the new five per cent provision for adverse deviation), and additional plan governance requirements (such as the pension advisory committee) all imply additional costs to plan sponsors. It is unfair to change the ‘rules of the game’ mid‑course, it says.
The PDF summary is now available HERE. For the full report click HERE.

Firms Offer Financial Education Programs

Amidst the global economic crisis, Canadian workers are finding help in managing their money from their employers, says an International Foundation of Employee Benefit Plans survey. ‘Employee Benefits Survey: U.S. and Canada: 2009’ found that 47 per cent of Canadian corporate respondents offer financial education/literacy programs to their workers. This was followed by 39 per cent of professional service firms, 36 per cent of public employers, and 12 per cent of multi=employer plans. “Canadian workers are feeling uneasy given the global economic turbulence,” says Julie Stich, senior information/research specialist. “If the situation persists through 2009, we may see the percentage of employers offering financial education programs increase as they try to help their employees deal with the crisis.”

Caisse Adjusted Currency Hedging

With the Canadian dollar dropping, the Caisse de dépôt et placement du Québec “adjusted its currency-hedging operations in the context of the Canadian dollar's instability and closed out certain futures contracts that could have created the need for additional capital in a down market,” says a report in the Globe and Mail. It also sold ‘liquid securities’ last month as a move meant to preserve capital. It says that “like all the world's large institutional investors, [the Caisse] has to adjust its strategies in response to a financial crisis whose course over the short term is unforeseeable.” The fund will not reveal its performance until year-end.

PIAC Calls For Stability Of Retirement System

The Pension Investment Association of Canada (PIAC) has written the finance ministers across the country asking them to take action to ensure the stability of Canada’s retirement system. PIAC is calling on all governments to take a number of steps including, in the short term, providing temporary relief for a five-year period to plan sponsors in the currently unstable and fragile market environment by extending the amortization of solvency deficits to 10 years for all pension plans and using a solvency discount rate based on AA rated corporate bond yields that has a similar duration to that of the pension plan liabilities. In the long term, it suggests that governments ease solvency funding requirements and address risk asymmetry in the rules regarding surplus entitlement by providing plan sponsors the flexibility to use Letters of Credit, permitting plan sponsors to establish special purpose accounts that are independent from the main pension trust; and researching the feasibility of allowing pension plans to have reduced solvency funding requirements based on the credit worthiness of the plan sponsor.

ABCP Restructuring Delayed By Complexity

The Pan-Canadian Investors Committee for Third-Party Structured ABCP will not complete the proposed restructuring of the third-party ABCP market in Canada by the end of November. The delay is principally due to the complexity of the restructuring, the large number of participants involved in the process, and current market conditions. Despite this delay, the committee has made significant progress over the course of the past several weeks toward settling issues and completing the required documentation to implement the restructuring.

Almeida-Côté Powerful Woman

Iris Almeida-Côté, chief executive officer of the Canadian Pension and Benefits Institute (CPBI), has been recognized as one of ‘Canada's Most Powerful Women: Top 100’ by the Women’s Executive Network. She was also awarded the ‘Prix d’Excellence – Femmes d’affaires du Québec 2008’ by the Québec Business Women’s Network. The award acknowledges her 27 years of management experience and national and international accomplishments.

Market Conditions Closing Hedge Funds

Many hedge funds will be forced to close and there will be significant consolidation among the remaining due to current market conditions and unprecedented changes to the regulatory landscape, says Watson Wyatt. However, the best managers in the industry will emerge better positioned to exploit investment opportunities characterized by greater market dislocations and lower prices and this will be made easier by the absence of proprietary trading desks. It asserts that long-term investors are likely to be the beneficiaries of this evolution, mainly through improved fee structures that better align interests. In addition, it suggests that certain hedge fund strategies will not perform as well as they have historically, given a fundamentally changed investment environment.

TFSA Interest Uneven

Initial interest in Tax-Free Savings Accounts (TFSAs) is not evenly spread across the country, says the fourth annual Fidelity Canada ‘Retirement Survey.’ It shows that 44 per cent of British Columbians who are aware of TFSAs, plan on opening this new account compared to 36 per cent of Ontarians and 35 per cent of Quebecers.  In contrast, only three-in-10 from the Prairie provinces and one-in-four Atlantic Canadians are likely to open a TFSA. The types of investment or savings vehicles Canadians plan on holding in their TFSAs include equity-driven investments including mutual funds and individual stocks. Guaranteed Income Certificates (GICs) were another popular choice while keeping cash in their TFSA and investing in bonds were less popular choices.     

Mental Health Tool Earns Innovation Award

A web-based mental health tool nationally endorsed by family physicians and now in use by 300,000 Canadian employees and their families has earned Toronto psychiatrist Dr. Sam Ozersky the ‘2008 Community Based Physician Innovation Award.’ Dr. Ozersky, president and CEO of Mensante Corporation and senior consultant at the University Health Network’s Mood Disorders Clinic, led the development of FeelingBetterNow which uses medical best practices to assist individuals and their physicians in the detection, diagnosis, treatment, and follow-up of mental health disorders. It can be purchased only as a group program by government for its citizens and large organizations wanting to help employees stay at work and return to work sooner.

Limited Early Access Attractive To Some

Allowing limited early access to pension funds under specific circumstances such as in times of financial hardship is especially attractive to at risk groups including women; low income individuals; and younger people, says a Hewitt ‘Monitor.’ It cites a UK Pensions Policy Institute which also says, however, while early access can increase aggregate pension savings over the longer term, actual pension funds are negatively impacted when people fail to increase contributions or repay loans. Early access can also increase the scope for tax avoidance, and generate greater complexity and costs in pension fund administration.


Tuesday, November 25, 2008

Proposal Clarifies Pension Division

Ontario's proposed family law legislation would clarify how and when pensions are divided when marriages break down. The changes would reduce some of the strain of family court proceedings by saving court time and the cost of hiring experts, says Louise J. A. Greig, with the pensions and benefits department at Osler, Hoskin & Harcourt LLP. The proposed legislation would allow for a simple way for separating couples to find out the value of the pension benefits to which they are entitled and allows pension plans to pay out the non-member spouse's share. The changes follow the general direction of expert advice provided by the Law Commission of Ontario on this issue.

Credit Crisis Highlights Flaws

The credit crisis has highlighted several systemic flaws, says Colin Bugler, of RBC Capital Markets. Speaking at the AIMA Canada session on the implications of the credit crisis on securities lending and prime brokerage, he said most prime brokers have taken some action to cope with model flaws which have resulted in higher stock borrow fees and lenders demanding higher quality collateral. The impact of these and other actions on hedge funds include a re-assessment of risk and reward by beneficial owners and portfolio managers.

Private Sector Share Rising

The private sector’s share of spending on healthcare will rise to 36 per cent over the next 10 years, says Sal Cimino, manager of pharmacy and professional services at Green Shield Canada. Speaking on ‘The Benefit Landscape: What is coming . . . and how it will impact plan sponsors and plan members’ at a CPBI Ontario region seminar, he said currently the cost to the private sector is around $48 billion or 30 per cent of the total healthcare spend. However, he expects the government to shift more cost to the private sector by delaying access to drugs under government plans, decreasing the length of hospital stays thereby increasing the cost for homecare, and even introducing income testing to qualify for government assistance.

Salary Hikes Scaled Back

Approximately 50 per cent of survey participant in Mercer’s ‘2009 Compensation Planning Survey’ plan to reduce salary increases for 2009. Responding to the weakening economy, employers report they will reduce planned increases by 0.75 per cent to approximately three per cent from the national average 3.8 per cent increase. Reductions are planned across most employee groups, industry sectors, and geographies.

Customized Reporting Offered

Northern Trust has launched a customized reporting solution exclusively for investment consultants, seamlessly integrating client-specific reporting on its web portal, Passport, so that consultants are able to better serve shared clients. Passport’s entire library of standard and customized reporting is available to consultants to meet the needs of clients. Client statements and reports can be scheduled to run automatically daily or monthly with the ability to create reports with as much or as little detail as needed.  

NYLIM Forms Madison Square

New York Life Investment Management’s Equity Investors Group (EIG) will become Madison Square Investors LLC on January 1, 2009. The firm will remain a wholly-owned subsidiary of New York Life Investment Management (NYLIM). EIG currently consists of several quantitative investment teams organized by style – core, growth, and international – in various capitalization ranges. At the independent boutique, the investment teams will continue to offer both traditional and alternative solutions for institutional investors, including 130-30 and absolute return strategies.

Hamilton Joins Panel

Malcolm Hamilton, of Mercer, has joined a CPBI Ontario region panel looking at the recommendations of the Ontario Expert Pension Commission. The event is set for December 2 in Toronto, ON. He joins Josephine Marks, managing director, pension assets – Scotia Bank; Janet Rabovsky, practice leader, investment consulting – Watson Wyatt; Jeff Sommers, a partner in the pension and employee benefits group at Blakes; and Gretchen Van Riesen, interim head of M&A and global head of pensions and benefits, RBC. For more information, visit


Monday, November 24, 2008

Actuaries Want Tangible Recommendations

Canada's actuaries are commending the extensive work done by the Ontario Expert Commission on Pensions. Michael Hale, president of the Canadian Institute of Actuaries, says, however, while the report has expressed the need to help create a more positive environment to halt the decline in Defined Benefits plans and encourage their growth, the actuaries would have preferred to see more tangible recommendations in the report to this effect. The actuarial profession notes that positive long-term elements of the report include support for co-operation and harmonization of regulation among Canadian jurisdictions, encouraging the work to secure needed changes to federal tax, and insolvency legislation and eliminating some uncertainty in the laws applicable to pension plans. The PDF summary is now available HERE. For the full report click HERE.

Report Balances Stakeholder Interests

The Ontario Expert Pension Commission report shows a clear intention to balance the interest of all stakeholders, says Evan Howard, a partner at Osler, Hoskin & Harcourt LLP. He says while the report “got it right,” whether the government will act on it, “only time will tell.” There is definitely some give-and-take in the report on some “traditional hit-button topics” such as surplus and partial wind-ups, which should be welcome news for both employees and employers,” he says. As well, he calls the recommendation that grow-in benefits be provided to all voluntary terminations a big plus for employees. The PDF summary is now available HERE. For the full report click HERE.

Caisse Denies Liquidity Problems

The Caisse de dépôt et placement is denying reports that it is facing liquidity problems. Unconfirmed rumours say the Caisse may have lost as much $30 billion as a result of market conditions and holdings in the asset-backed commercial paper market. Coupled with rumours it removed 10 equity portfolio managers amid an internal financial crisis, its financial situation has become an issue in the Quebec election campaign. While regulations prevent the pension fund from revealing its financial position until its annual report in February, it says it is maintaining its historic liquidity level of about $20 billion. The fund manages about $155 billion in net assets.

Workplace Health Smart Business

Investing in workplace health is smart business, says a province of Nova Scotia and Creative Wellness Solutions four-year Healthy LifeWorks project. The first Canadian study to address the business case for workplace health was implemented in 2004 to improve the health of Nova Scotians and reduce the risk of chronic disease. More than 400 employees from the Department of Justice participated in the study which measured individual health, musculoskeletal health, and organizational health. The project showed significant improvements to employee health including a 19 per cent improvement in nutrition scores, as well as a nine per cent reduction in the average number of lifestyle risk factors such as smoking and cholesterol level.

Costs Payable Out Of Pension Fund

The Court of Appeal has held that all costs in Burke v. Hudson's Bay Company should be paid from the pension fund because the legal issues involving the appropriate division of actuarial surplus were novel and the litigation was aimed at ensuring the proper administration of trust funds in an ongoing plan, says a Hewitt ‘Monitor.’ In addition, if successful, the action would have benefited all of the transferred employees, not a particular sub class of members.

T. Rowe Expands Lineup

T. Rowe Price has expanded its institutional global investment lineup by launching global large cap equity and global real estate strategies. The global large cap equity strategy seeks long-term capital appreciation by investing in the common stocks of larger, established companies domiciled throughout the world, including those in developed and emerging markets. The global real estate strategy seeks long-term growth through capital appreciation and current income by investing at least 80 per cent of its net assets in equity securities of real estate companies throughout the world.

TFSAs Require New Systems

The new Tax Free Savings Account (TFSA) will require financial institutions to develop new systems and processes to support it. As a result, Univeris will offer a turnkey module to manage TFSAs. It allows financial institutions to be up-and-running on January 1, 2009. The TFSA module is integrated with its EWMS platform allowing its clients to have a single platform to manage TFSAs.


Friday, November 21, 2008

'Pension Champion’ Needed

Ontario needs a ‘Pension Champion,’ says the Ontario Expert Pension Commission. Its report – ‘A Fair Balance: Safe Pensions/Affordable Plans/Fair Rules’ – calls for a ‘Pension Champion,’ an agency that would assume responsibility for areas such as thinking creatively about new pension strategies and for working with stakeholders to improve the pension system. The report also calls for pension legislation which uses both rules-based and principle-based approaches to facilitate the development of new plan design. For example, it would allow for the creation of single employer plans which have the same latitude as multi-employer plans to increase contributions or decrease benefits to meet the pension obligation. It also advocates the elimination of surplus distribution during partial wind-ups. Terminated plan members who leave their assets in the plan would, however, be entitled to any future surplus distributions. The government is accepting written submissions on the report until February 27, 2009. The PDF summary is now available HERE. For the full report click HERE.

SIO Supports Disclosure Recommendation  

The Social Investment Organization supports the recommendation of the Ontario Expert Commission on Pensions to create disclosure on pension plan policies regarding socially responsible investment. Noting that plan members and trustees have increasingly asked for information on the socially responsible investment of plan assets, the commission recommends that "plan statements of investment policy should reveal whether, and if so, how, socially responsible investment practices are reflected in the plan's approach to investment decisions." The recommendation would bring Ontario law “up-to-date with many other jurisdictions in the world, including the UK, France, Germany, Belgium, and Sweden," says Eugene Ellmen, executive director of the Social Investment Organization. However, he was disappointed that the commission did not recommend mandatory disclosure of the proxy voting policies of pensions and their annual votes on shareholder resolutions at corporate annual meetings.

Caisse Shifts To Index For International Portfolios

The Caisse de dépôt et placement du Québec has adopted index-based management rather than active management of the international equity portfolios managed at its Montréal, QC, office. The Caisse stated that the decision was not related to the current financial crisis or to ABCP, it was the result of an evaluation started several months ago. The returns obtained to date do not justify the greater effort required for active management as opposed to an index-based approach. The value of the in-house international equity portfolios that will now be managed on an index basis represents about nine per cent of the assets managed by the equity markets group and about 2.9 per cent of depositors' net assets, as at December 31, 2007. 

Maturing Of DB Creates Opportunity

The maturing of Defined Benefit pension plans is creating opportunities for Canadian money managers with liability driven investment strategy products, says Rob Vanderhooft, president and CIO of Greystone Managed Investments. Taking part in the ‘President's Panel’ at the Investment Counsel Association of Canada’s ‘2008 Annual Conference,’ he said extension strategies such as 130/30 are also garnering attention, although the dollars coming in aren’t flowing in as quickly as they are in the U.S. Real estate, infrastructure, and mortgages also offer interesting opportunities for institutional investors, he said.

Canadians More Conservative

Canadians over the age of 40 are taking a more conservative approach to retirement planning due to the recent financial turmoil, says the annual Desjardins Financial Security ‘Rethink Retirement’ survey. According to the survey, Canadians are willing to make compromises to save for retirement and are being more selective about where they place their retirement savings. This is in sharp contrast to previous survey results which indicated that most Canadians were confident in their financial goals for retirement, regardless of market volatility. 

Petroff Succeeds Bertram

Neil Petroff will succeed Robert Bertram as executive vice-president, investments and chief investment officer, at the Ontario Teachers’ Pension Plan at the beginning of 2009. He joined Teachers' in 1993 and has been a member of the executive management team for 13 years. Bertram plans to retire at the end of the year.

Mintz Speaks At Behind The Spin

Dr. Jack Mintz, Palmer professor of public policy at the University of Calgary, will speak at the next Fraser Institute ‘Behind the Spin Fall 2008 Series. He will address the ‘Global Financial Crisis: The Impact and Implications for Canada.’ It takes place November 24 in Toronto, ON. For more information, email
or call 416-363-6575 x 221.


Thursday, November 20, 2008

Managers Need To Spend More Time With Clients

Asset managers are not spending enough time with their institutional clients, says Jonathan Tetrault, of McKinsey & Company. Speaking at the Investment Counsel Association of Canada´s ‘2008 Conference and Annual Meeting,’ he said managers need to invest more time trying to understand the fundamental objectives of their clients. He also said they need to adjust and enrich their offerings to provide customized solutions as clients are seeing too much overlap in the products on the market today. The industry is entering a “new era,” he said, and the winners will be the ones who can rapidly respond to the needs and preferences of their clients.

Halifax Master Trust Picks Northern Trust

Northern Trust has been named trustee and custodian for the Halifax Regional Municipality Master Trust, which includes two pension plans with combined assets of approximately $1 billion. Northern Trust will provide custody and benefit payments. Terri Troy, chief executive officer, said “We are very pleased with our decision to partner with Northern Trust and feel that there is a good cultural fit.”

Global Regulator Faces Challenges

When someone sells a mortgage to a crack addict in California and it ends up causing a bank in Iceland to fail, that needs to be addressed, says Richard Marshall, a partner in the investment management and securities litigation groups at Ropes & Gray LLP. Speaking at the Investment Counsel Association of Canada´s ‘2008 Conference and Annual Meeting,’ he said global markets have become so connected that the sub-prime mortgage crisis in the U.S. has created this kind of scenario. However, he warned that calls for a single global risk management regulator to address this kind of issue raise other challenges such as how to preserve national competitive advantages.

CPBI Looks At Expert Pension Report

A CPBI Breakfast Seminar will look at the recommendations of the Ontario Expert Pension Commission. The event is set for December 2 in Toronto, ON. An expert panel of Josephine Marks, managing director, pension assets – Scotia Bank; Janet Rabovsky, practice leader, investment consulting – Watson Wyatt; Jeff Sommers, a partner in the pension and employee benefits group at Blakes; Gretchen Van Riesen, interim head of M&A and global head of pensions and benefits, RBC; and a pension actuary will highlight and critique the major issues. For more information, visit


Wednesday, November 19, 2008

Briefing Slated On OECP Report

The Ontario Expert Commission on Pensions (OECP) will conduct a briefing on the status of the report this Friday. Harry Arthurs was appointed by the province two years ago to conduct the first review of its pension law in two decades. While Arthurs is the commission, he was advised by Bob Baldwin, a consultant and former research director at the Canadian Labour Congress; Kathryn Bush, a lawyer at Blake, Cassels and Graydon; Murray Gold, a lawyer with Koskie Minsky; and Ian Markham, a pension consultant at Watson Wyatt Worldwide.

GM Pension Shortfall Financial Headache

General Motors of Canada Ltd. pension funds had a shortfall of $4.5 billion last November, before the stock market collapse, which could create a massive financial headache for the Ontario government and pension cuts for retired employees if the company falls into bankruptcy protection, says a report in the Globe And Mail. Its pension fund difficulties would complicate any Canadian moves to join U.S. efforts to support the struggling auto sector.

Crisis Triggers Investment Reviews

The financial and economic crisis will have a significant impact on asset allocation and trigger a comprehensive review of investment managers, says a bfinance survey of pension funds in Canada, the UK, Germany, Switzerland, and Sweden. Almost two-thirds of respondents (63 per cent) indicated that they are currently reviewing their investment strategy and 65 per cent intended to do so before the end of the year. The survey indicates that in reviewing their portfolios, pension funds are considering adjustments to their asset allocation including an overall decrease in long-only equities over the next year; a short-term increase in fixed income; an increase in private equity, property, currency, infrastructure, multi-asset (dynamic asset allocation) over both the short- and long-term. As well, although there is no clear short-term trend for hedge funds, commodities, GTAA, and SRI equities, exposure to all four asset classes is expected to grow significantly over the next three years.

Alberta/BC Panel Submits Report

The Alberta/British Columbia Joint Expert Panel on Pension Standards has submitted its report on the reform of pension standards legislation in the two provinces to the Alberta minister of finance and enterprise and the British Columbia minister of finance, says Ian J.F. McSweeney, of Osler, Hoskin & Harcourt LLP. The panel has briefed the two ministers on its recommendations and it is hoped that the respective governments will release the final report in the near future. Appointed on October 2007, the panel was asked by the two governments to conduct a full and independent public review of the Employment Pension Plans Act (Alberta) and the Pension Benefits Standards Act (British Columbia).

Conflicts Of Interest Primary Concern

Conflicts of interest is an area of primary concern, especially in the wake of the sub-prime crisis and concerns about conflicts at credit rating agencies, says the CFA Institute Centre for Financial Market Integrity’s ‘2008 Financial Market Integrity (FMI) Index.’ The index furthers the global discussion about financial market integrity and represents investor concerns about the level of integrity, the effectiveness of regulation, and the strength of investor protections that they face in their respective markets. More than 2,000 CFA charter holders in Canada, Hong Kong, Japan, Switzerland, the United Kingdom, and the United States were surveyed. The survey also found that respondents outside of the U.S. were more critical of U.S. market integrity, rating overall ethical behaviour of market participants and effectiveness of capital market systems 10 per cent lower than those inside the U.S.

Consumer-directed Plan Participants In Better Health

Enrollment in consumer-directed or high-deductible health plans eligible for a tax-preferred savings account increased to 9.8 million adults this year, with participants more likely to have higher incomes and be in better health than those with traditional health coverage, says a survey by the Employee Benefit Research Institute (EBRI). In addition, the survey found that those in consumer-directed and high-deductible plans exhibited more cost-conscious behaviour in their healthcare decision-making than individuals with traditional health insurance. Consumer-directed plans, which involve high deductibles coupled with tax-favoured savings accounts that consumers can use to pay for their care out-of-pocket, are intended to make consumers more active participants in decisions about their healthcare, including cost issues.

Venture Capital Activity Slows 

Activity in Canada’s venture capital market continued at the slower pace in the third quarter that has been apparent since the first half of the year, says a statistical report by Canada’s Venture Capital & Private Equity Association (CVCA) and Thomson Reuters. Nationally, a total of $372 million was invested between July and September, lagging by 26 per cent the $501 million invested at the same time in 2007. The number of Canadian-based firms securing venture capital was also reduced on a year-over-year basis. The number of companies financed totalled 123 during the third quarter, or 12 per cent fewer than the 140 companies financed one year ago.

FTSE Expands Environmental Series

FTSE Group (FTSE) has expanded its Environmental Opportunities Index Series with the addition of nine new indices. Launched in July 2008, the series is derived from the FTSE Global Equity Index Series and includes companies with at least 20 per cent of their business derived from environmental markets and technologies. The expansion of the index series offers additional granularity by identifying and segmenting the renewable energy, energy efficiency, water, and waste management markets and will appeal to investors seeking to access the growing low-carbon economy.   

Manager Selection Examined

The ‘Fund Manager Selection & Oversight Conference’ will take place February 25 to 27 in Toronto, ON. Topics include selecting your manager and the importance of good governance following the market downturn and monitoring managers in face of a global recession. For more information, visit


Tuesday, November 18, 2008

Deflation Scare Likely

The world’s developed economies are likely to face a deflation scare over the next 12 to 24 months which suggests that interest rates are likely to stay low for some time, says BCA Research. Its research on past real estate bear markets and subsequent banking sector stress throughout Europe, the United States, and Japan indicates that these episodes always lead to a recession followed by a multi-year period of sub-par growth. In turn, that excess supply helps dramatically drive down core consumer price inflation in the years that follow.

Deficit Relief Measures Coming

Although the specifics are not known, it is likely that funding relief measures will be available for Quebec and federally-regulated pension plans, says a Mercer ‘Communiqué.’ However, it is unclear whether the measures will apply to all Defined Benefit pension plans or only to those facing “major financial difficulties.” In the absence of relief measures, the additional contributions required from employers may jeopardize the future of some of their businesses. The federal minister of finance has indicated that his department is reviewing options to provide funding relief to DB plans such as the 2006 temporary funding relief measures which allowed the consolidation of solvency deficits. The Quebec government is contemplating special rules including consolidation of solvency deficiencies and faster use of actuarial gains.

Cost Prevents Longevity Measures

While U.K. pension trustees consider longevity the second most important risk after investment risk, few have implemented longevity hedging strategies, says a survey by Aberdeen Asset Managers and the University of Edinburgh Business School. Trustees are familiar with strategies to hedge or offload longevity risk – such as buyouts, longevity bonds, and longevity derivatives. However, they say the complexity, costs, and a lack of products prevent them from using these strategies.

Financial Health Concerns Canadians

While 10 years before retirement, 61 per cent of Canadians worried about outliving their money, 10 years into retirement only about one in five retirees were still worried, says a Russell Investments Canada survey. “There is a significant gap between what Canadians think about their financial health once they are truly retired, compared to how they feel before actually getting there,” says Irshaad Ahmad, president and managing director. The survey looked at 11 different variables that asked Canadians to assess concerns about their financial health in retirement.

Hedge Funds Down In October

The final performance for the Credit Suisse/Tremont Hedge Fund Index was a 6.3 per cent drop for October. The index’s negative performance was driven primarily by losses in the emerging markets and fixed income arbitrage sectors. Fund deleveraging continued to be a key theme in October, as volatility created a difficult trading environment for hedge funds.

Manulife Offers TFSAs

Manulife Financial is now offering Canadians multiple options to start saving money to contribute toward their Tax-Free Savings Accounts (TFSAs). Financial advisors across Canada can sign up clients now for TFSAs with Manulife Bank or Manulife Investments to accept contributions immediately on the first business day of the year – January 2, 2009. TFSAs were introduced in the federal government's February budget and provide a tax shelter for savings since investment income drawn from TFSAs is not subject to interest, dividend, or capital gains taxes. Savings can be withdrawn at any time.

Conference Focuses On Canadian Health And Wellness

The ‘Canadian Health and Wellness Innovations Conference’ will explore cost control trends as well as the latest advances in alternative treatments to supplement traditional healthcare. The International Foundation of Employee Benefit Plans event will be held February 8 to 11 in Victoria, BC. Attendees will learn new approaches to managing healthcare costs and will gain a thorough understanding of the components of cost drivers. For more information, visit

Durand Discusses Prevention Facts

‘The Power of Prevention within a Benefits Program’ will be the focus of a Benefits Breakfast Club session November 27 in Burlington, ON. Dr. Nancy Durand, an assistant professor in the department of obstetrics and gynecology at the University of Toronto, will explore the medical facts, the business case, and the future of prevention as it affects employers, and employees. For more information, visit

Economists Examine Credit Crisis

‘Crisis, Interventions & The Financial Services Industry’ will be the focus of an IFIC session December 4 in Toronto, ON. Don Drummond, senior vice-president and chief economist of TD Bank Financial Group; David Laidler, professor emeritus at the University of Western Ontario and fellow in residence at the C.D. Howe Institute; and Paul Masson, research fellow and adjunct professor, Rotman School of Management, University of Toronto; will discuss the credit crisis and the regulatory changes that are likely to occur over the next few years. For more information, visit


Monday, November 17, 2008

Canadian Response To Crisis Good

Canadian policy responses to the credit crisis rate as “so far, so good,” says a study by the C.D. Howe Institute. ‘International Policy Responses to the Financial Crisis: A Canadian Perspective’ says a Canadian priority should be to retain the inflation targeting framework underpinning its monetary policy and encouraging other nations to adopt it. Global stability could be improved if there were agreed principles on national monetary policies focused on inflation control and targeting. It also outlines areas for multilateral agreement on principles underpinning the monetary framework and on regulatory oversight.

Turbulence Hits Pension Funds Hard

The current financial crisis is creating extreme uncertainty and potentially huge increases in 2009 contribution requirements for Canadian sponsors of Defined Benefit plans, says Watson Wyatt Worldwide. Since August 2008, the solvency position of the typical pension plan in Canada has worsened considerably, driven primarily by decreases in asset values. As a result, many plan sponsors will have to make much higher contributions in 2009 to fund the additional deficiencies which are generally required to be funded over five years. As a result, it says governments across the country need to provide temporary relief to employers from potentially large, unexpected contributions to their pension plans at a time when they can least afford it. David Burke, retirement practice director of its Canadian offices, says “extended amortization periods for funding solvency deficits are important at this time.”

Empire Guarantees Retirement Income

Empire Life has launched Class Plus, an income and investment solution for individuals about to retire, in the early retirement years, or investing for retirement. It protects retirement savings from market downturns. In addition to contributions from the individual, it provides an annual bonus in any years where a withdrawal is not made. And, in retirement, annual payments are made which may be adjusted every three years if the market performance has increased the value of the portfolio.


Friday, November 14, 2008

Healthcare Spending On The Rise

Canada's healthcare spending is expected to reach $171.9 billion in 2008, or $5,170 per person, says the Canadian Institute for Health Information (CIHI). This represents an increase of $10.3 billion over estimated expenditures for 2007, or a growth of 6.4 per cent. Since 1997, the public- and private-sector shares of total health expenditure have remained relatively stable with governments accounting for 70 per cent of total spending and the private sector (including privately insured and out-of-pocket expenses) for 30 per cent. In 2008, public-sector healthcare spending is expected to reach $120.3 billion in 2008 (70 per cent of total spending), compared to $51.6 billion spent by the private sector (30 per cent of total spending). Prescribed drugs and dental care account for the largest shares of private healthcare spending, while hospitals and physicians represent the largest shares for the public sector.

Financial Plan Only Half A Plan 

Having a solid financial plan for retirement is only half a retirement plan, says Peter McLaughlin, an author and lifestyle expert whose peak performance program has been taught to IBM, Microsoft, American Express, and other Fortune 500 companies. Speaking at an ‘Empire Life Retirement Symposium,’ he said while retirement planning is “front and centre these days,” the physical and emotional side of retirement is just as important. While new investment products such as guaranteed minimum withdrawal programs are now coming on the market to help baby boomers prepare financially for a longer retirement, plans also need to be made to ensure they have the health to enjoy it.

Options Hurt Inexperienced Investors

Too many investment choices in a 401(k) plan may lead inexperienced investors to take on more risk than they would with fewer options, says a Rutgers School of Business, University of Texas-Austin, and University of Pittsburgh study. It found that employees without extensive investment knowledge will choose a heavier concentration of stocks in their portfolio when confronted with more fund options. They ended up doubling their allocations to stocks to 60 per cent and decreased bond fund allocation from 26 per cent. However, more investment options had no significant effect on people who said they had investing knowledge.

Upbeat Future For Pension Plans

Despite volatile investment markets, the freezing and terminating of Defined Benefit plans, and limited formation of new plans, Diversified Investment Advisors’ ‘Prescience 2013: Expert Opinions on the Future of Retirement Plans’ study says experts are upbeat about the industry’s future over the next five years. The study attributed this positive outlook in part to the cultural shift from a voluntary benefits approach to automation. Another contributing factor is market growth spurred by employee realization that they need to save more money for retirement than originally planned in light of market instability and inflation. Experts were "especially optimistic" about the future of 401(k) plans as more employees become eligible and eligibility periods shorten. 

Private Equity Buyouts Steady 

There have been 29 disclosed, completed, and pending buyout transactions in Canada year-to-date for a value of $6.4 billion. As such, buyout industry investment levels are consistent with those in all of 2006 when there were 40 such deals for a total of $8 billion, says Canada’s Venture Capital and Private Equity Association along with research partner Thomson Reuters. For the third quarter and year-to-date period ended September 30, disclosed deal values totaled $2.5 billion, up from the $1.6 billion recorded in Q2 2008 and down slightly from the $2.8 billion invested in Q3 2007.


Thursday, November 13, 2008

Court Puts Reasonable Back Into Duty To Accommodate

The Supreme Court of Canada may have put ‘reasonable’ back into the duty of employers to accommodate employees in the workplace, says Sarah Crossley, of Ogilvy Renault. Speaking at its ‘Putting the ‘Reasonable’ Back into Reasonable Accommodation’ session, she said the court’s decision in Hydro Quebec v Syndicat des employé-e-s de techniques professionnelles et de bureau d’Hydro Québec, section locate 2000 suggests that the purpose of the duty to accommodate is to ensure that an employee who is able to work can. As well, previously courts often looked at just the details at the time of termination, not at all the efforts by an employer to accommodate. In the Hydro case, the court looked at all the efforts by the employer to accommodate the employee in question. This underlines the importance, said Crossley, of documenting all measures taken to accommodate employees. The court also ruled that while employees had the right to expect to be paid under the employment contract, the employer has the right to expect them to work.

Extraordinary Valuation Levels Developing

While a poor stock market environment in the near term can be expected, extraordinary valuation levels are developing was the message at a GE Asset Management ‘View on U.S. Markets’ session. Thomas Lincoln, senior vice-president and portfolio manager, U.S. large cap equities, said the market may be nearing its bottom in the U.S. He noted that valuation spreads are at historically high levels. While this means the markets are stressed, it is also co-incides with market bottoms. However, free cash flow yield is at all-time high levels and many corporations are entering this recession with relatively strong balance sheets and strong free cash flow generation. This could mean that interesting merger and acquisition activity could be seen once the economy starts to recover.

CPP Returns Negative

The CPP Fund ended the second quarter of fiscal 2009 with assets of $117.4 billion, reflecting investment returns of negative 7.5 per cent for the first six months of the fiscal year and negative 8.5 per cent for the second quarter. The fund declined $5.3 billion in value for the fiscal year to date and $10.3 billion since the previous quarter. However, its four-year annualized investment rate of return through September 30 was 6.6 per cent, which has resulted in $22 billion of investment income for the fund over the four-year period. Fiscal year-to-date, its decline of $5.3 billion was primarily due to a negative investment return of 7.5 per cent, representing negative $9.5 billion, partially offset by a net inflow of $4.3 billion in CPP contributions not needed to pay current pension benefits.

CFA Seeks Comments On Risk Management

The CFA Institute Centre for Financial Market Integrity is seeking public comment on a proposed risk management requirement to its ‘Asset Manager Code of Professional Conduct (AMC).’ The comment period ends January 15, 2009. The proposal establishes a more detailed risk management process that identifies, monitors, and analyzes the risk position and exposure of a manager. This new provision provides asset managers with guidance that addresses many of the risk management concerns that have risen from the current market crisis. To access the invitation to comment and the code, visit

Impact Of Credit Crisis On Securities Lending Examined

The implications of the credit crisis on securities lending and prime brokerage will be the focus of an AIMA Canada luncheon November 24 in Toronto, ON. The discussion will include James E.R. Slater, of CIBC Mellon; Chris Guthrie, of Hillsdale Investment Management; and Colin Bugler, of RBC Capital Markets. The panel will provide insight on topics such as how the credit crisis has changed the landscape for the securities lending and prime brokerage industry and what this means for alternative investors. For more information, visit


Wednesday, November 12, 2008

Plans Hit New Funding Low

Corporate pension plan funding levels in Canada are at an all-time low, says a Desjardins Securities’ review of companies in the S&P/TSX composite index. It concludes that a typical pension fund has seen the value of its assets decline an estimated 15 to 20 per cent as a result of the market performance of stocks and bonds. It says company plans have assets worth just 72 per cent of their obligations for pensions and post-retirement benefits such as dental or drug plans. This is lower than the 77 per cent level of 2006.

Equity Markets Nearing Bottom

There are encouraging signs that equity markets are nearing a bottom and that the final days of 2008 will pass without another meltdown, says a report from CIBC World Markets. "We are cautiously optimistic that we can ride out the balance of the year without any further systemic shocks," says Jeff Rubin, CIBC World Markets chief economist and chief strategist, in his latest ‘Canadian Portfolio Strategy Outlook Report.’ The sources of his optimism include the London interbank offered rate or Libor, the interest rate at which banks lend money to each other. Libor has been reversing from summer-end highs in response to central banks aggressively cutting interest rates and infusing billions of dollars in cash and guarantees. The result is that "interbank lending is once again showing encouraging signs of life" after recording no growth during the spring and summer, says Rubin.

Employers Revise Salary Budgets

Current economic conditions have employers in many parts of Canada reconsidering the salary increase budgets they formulated only a few months ago, says a survey by Hewitt Associates. Its online survey reveals that 36 per cent of the respondents will decrease their earlier salary increase budget for 2009. On average, these organizations had intended to provide salary increases of 3.8 per cent in the coming year. They have now dropped their projections a full percentage point to 2.8 per cent. When respondents were asked to provide reasons for the reduction, almost three-quarters responded that it was due to market conditions in general. Others highlighted conditions in their industry and/or at their particular organization.

Global Environment 60 Index Launched

KLD Indexes and Jantzi Research, Inc. have introduced the Global Environment 60 Index. It was developed to support investment strategies that help build a more sustainable global economy. Claymore Investments Inc. already plans to offer an exchange-traded fund to individual and institutional investors based on the index.

Preparing Business For Health Risks

Preparing Your Business for Public Health Risks’ will be the focus of a breakfast seminar February 9, 2009, in Toronto, ON. Featured speakers include Dr. David McKeown, chief medical officer for the city of Toronto, and Gary J. Gabet, manager of human resources and health and safety for Maple Leaf Foods. Topics will include communicating health risks to your employees. For further information, visit

Investment Leaders Discuss Trends

The Investment Counsel Association of Canada (ICAC) will bring together a number of leading speakers to discuss global financial market trends and how institutional investors should prepare for an uncertain future. Entitled ‘Thinking Globally, Acting Locally,’ it takes place November 19 in Toronto, ON. Speakers include Don Drummond, senior vice-president and chief economist at TD Bank; Warren Jestin, senior vice-president and chief economist at Scotiabank; and Rob Badun, president of AGF Asset Management. For more information, visit


Tuesday, November 11, 2008

CAPSA Issues Final Report On Model Pension Law

The Canadian Association of Pension Supervisory Authorities’ final report on regulatory principles for a model pension law contains more than 70 per cent of the original principles released in 2004, says a Hewitt ‘Monitor.’ However, it also now seeks to balance the protection of pension plan members' rights with the need to simplify regulatory requirements. Part II of the report contains non-contentious principles for common pension standards dealing with issues such as plan amendments, funding, investments, pension fund assets, and vesting. Part IV contains research papers on principles requiring further development such as phased retirement and a simplified pension plan.

Plans Moving Into Infrastructure

Some of the largest pension plans in the U.S. are restructuring their entire portfolio to fit an initial foray into infrastructure, says a Dow Jones Indexes ‘Global Markets Insight.’ A large portion of other plan sponsors have been advised to bulk up their infrastructure allocations within the next year and this trend has been fueled by an investment community desperately searching for alternative investments, a movement doesn’t seem to be slowing. Meanwhile, experts estimate that infrastructure spending will average $2 trillion through 2015. This is due to the fact that emerging markets are building and expanding rapidly, while developed markets are upgrading their existing infrastructure.

Institutions Want ‘Traditional’ Alternatives

Institutional investors want alternative investments that aren’t too different from traditional investments, says a survey by Morningstar, Inc. and Barron's. It found the top three reasons to hesitate to invest in alternatives are a lack of liquidity, understanding, and lack of transparency. A third of institutional investor respondents thought that alternative investments would become as important as traditional investments over the next five years, while 17 per cent thought they would become somewhat more important, and 13 per cent “much more important.”  On the other hand, nearly a quarter thought they would become much less important.

Financial Impact Of Preventable Diseases Examined

Healthcares medical facts, the business case, and the future of prevention as it affects employers and employees will be the focus of a Connex Health session November 27 in Burlington, ON. Dr. Nancy Durand, an assistant professor in the department of obstetrics and gynecology at the University of Toronto and an advocate for preventative healthcare, will share insights into the personal and financial impact of preventable diseases in the working population. For more information, visit


Monday, November 10, 2008

Canadian Pension Plans Need Relief

Financial Executives Canada (FEI Canada), the professional membership association for senior financial executives, is calling upon the prime minister, first ministers, and finance ministers to collectively take immediate and decisive action to stave off further economic erosion by helping Canadian companies weather the challenges they are facing with their Defined Benefit pension plans. It notes that without immediate action, short-term funding at the precise time of depressed stock values and low long-term evaluation rates, will only serve to add yet another potentially unbearable cash drain for many pension plan sponsors. It is recommending that the pension solvency funding period be increased from five years to the lesser of the remaining active service life and the long-term funding period of 15 years. The association notes that adjusting the funding period for solvency deficits will allow pension plan sponsors to adjust cash flows over a defined period in order to make these payments without disrupting their capital investment activities.

CPPIB Halts Securities Lending

The Canada Pension Plan Investment Board (CPPIB) stopped its securities lending program as the credit crisis gained steam in September, says a report in the Globe and Mail. Under securities lending programs, funds lend stock from their portfolios to short sellers who sell the shares into the market. Its decision was motivated by problems with the credit market as it had grown worried about the reliability of borrowers and the collateral they were pledging for share loans. The fund will reconsider resuming the program if credit market risk returns to normal levels.

Quebec Acts On Financial Crisis

The government of Quebec has announced various pension measures to address the global financial crisis and its impact on the province, says a Hewitt ‘Monitor.’ The government is proposing a new series of initiatives to ensure the solvency of supplemental pension plans which will take into account the financial situation of companies and the interests of workers and pensioners. For example, the solvency deficiency amortization period could be lengthened from five to 10 years. As well, Quebec has stated its commitment to apply, effective December 31, 2008, the actuarial standards that the Canadian Institute of Actuaries plans to bring into force in 2009 for all Defined Benefit pension plans, provided they reduce plan deficits.

Actuary Thoughts On DB Plans Examined

‘Defined Benefit Pension Plans: What Are Actuaries Thinking?’ is the focus of a CPBI Winnipeg breakfast Thursday, November 20. Tyler Smith, an actuary and leader of the retirement, risk, and finance business at Mercer (Canada) Ltd., will discuss potential changes to pension plan funding commuted value standards as well as the impact these changes could have on sponsors, members, and administrators of Defined Benefit plans. For more information, visit


Friday, November 7, 2008

Public Sector Served Better

Access to retirement saving room is inequitably distributed between public and private sector workers, says a C.D. Howe Institute study. ‘A Pension in Every Pot: Better Pensions for More Canadians’ says Canada’s retirement saving system serves some workers well and others not, depending on whether they have a career in the public sector or in the private sector. It argues that tax and pension legislation should be reformed to allow all workers to join pension plans and to replace the current system of annual contribution limits with a more equitable lump-sum, lifetime accumulation target of $1 million – or more.

Retirement Security A Priority

Retirement security of Canadians should be a priority agenda item at the November 10 meeting of First Ministers, says CARP, a group devoted to enhancing the quality of life for aging Canadians. In a letter to the prime minister and all provincial premiers, it says recent stock market turmoil has had a “disastrous effect” on millions of retirees, reducing their savings precipitously. The organization requests that a pension summit be called to closely examine Canadian retirement security and recommend solutions to counteract any threats related to it. It also calls for additional measures in the short, medium, and long term. In the short term, it recommends a two-year moratorium on mandated minimum RRIF withdrawals, so that retirees are not forced to draw down their tax deferred investments or sell them in a depressed market. In the medium term, it says pension fund managers should be required to reduce ‘exorbitant’ executive salaries and create sufficient reserve funds when the economy is strong to eliminate shortfalls when values decline. In the long term, it calls for the creation of a Universal Supplementary Pension Plan that would provide a cost-effective, transparent saving mechanism to all Canadians, particularly those without access to workplace pensions or private savings.

MJPP Proposal More Detailed

CAPSA’s ‘Proposed Agreement Respecting Multi-Jurisdictional Pension Plans’ is a significantly more detailed document than the current memorandum, says a Hicks Morley ‘FTR Now.’ If adopted by the various governments, it has the potential to clarify some previously muddy waters with respect to the administration and regulation of MJPPs. However, at this point, it does not represent the official position of any provincial or federal government. Legislative amendments may be required in some jurisdictions if the agreement is to be ratified and implemented. CAPSA has been working for some time towards a revised agreement addressing numerous jurisdictional issues that have arisen for MJPPs in recent years.

Commuted Value Changes Have Financial Impact

Proposed changes to the Actuarial Standards Board’s current standards of practice for pension commuted values will have a financial impact on terminating members and solvency liabilities for sponsors, says an Eckler ‘Special Notice.’ Members who terminate after the effective date of the proposed changes will receive a commuted value that is on average 10 per cent less than the commuted value calculated under the current standard. Generally speaking, the younger the member, the larger the percentage decrease in the commuted value. Solvency liabilities reported in the first actuarial valuation done after the new standard takes effect will be less for active members assumed to take a commuted value on wind-up, potentially reducing the special payments a plan sponsor would otherwise be required to make. The board intends to publish final standards by the middle of December, following a one-month comment period.

Worst Month For Stocks

The worst month for stocks in more than 20 years sent funding ratios for the typical U.S. corporate pension plan down 3.7 percentage points, says BNY Mellon Asset Management. Year to date, funding ratios for typical plans have declined approximately 7.7 per cent. This was the largest decline in funded status for a single month since BNY Mellon started tracking pension funding in March 2005 and the results would have been worse if equities hadn't rallied during the last week of October. A funding ratio is the difference between what a pension plan is obligated to pay out and the assets it holds.

UK Workers Will Rely On DC

With two-thirds of UK final salary plans closed to new employees and many small corporate plan sponsors looking to get out of the pension business entirely, the day is fast approaching when the majority of UK workers will rely on Defined Contribution plans as their primary — and in many cases only — retirement savings vehicle, says Greenwich Associates’ ‘2008 United Kingdom Pension Fund Study.’ DC plans currently hold approximately five per cent of total UK retirement assets, but plan sponsors expect that share to jump to more than 20 per cent by 2018. Although virtually all corporate plan sponsors in the United Kingdom offer DC plans to their employees, about one in 10 say they plan to open a new plan within the next two years. The reason is as the final salary system begins to fade, plan sponsors are realizing that some existing DC structures might not be up to the task of fully funding their employees’ retirements.


Thursday, November 6, 2008

Abolish Age-related Limits

Ottawa should abolish the age-related limits on saving and forced distributions from RRSPs, says William Robson, president and CEO of the C.D. Howe Institute. In an opinion piece in the Globe and Mail on how the Income Tax Act is squeezing seniors, he says Canadians are living longer and those who wish to continue saving should not face barriers to doing so. The purpose of the current rules, he says, is to accelerate tax collections since older people cannot deduct their retirement savings from taxable income as other Canadians do. Bringing tax-deferred saving into income makes them pay tax and often subjects them to clawbacks of seniors' benefits. He suggests the federal government could raise the age at which seniors must wind up their pension plans and RRSPs to 73 or 75 from the current 71.

RRSPs Up In 2007

Just under 6.3 million tax filers contributed to registered retirement savings plans (RRSP) in 2007, up 1.6 per cent from 2006. Their contributions rose by 5.3 per cent to $34.1 billion. These data are based on tax returns filed for 2007. Almost 88 per cent of tax filers were eligible to contribute to an RRSP for the 2007 tax year, the same proportion as in 2006. Of this group of eligible tax filers, 31 per cent actually made contributions, unchanged from 2006. The median contribution was $2,780.

Have Final Salary Plan Closures Hit A Plateau?

The proportion of U.K. final salary plan closures was unchanged from 2007 to 2008 after several years of consistent increases, says Greenwich Associates’ ‘2008 United Kingdom Pension Fund Study.’ The slowdown in plan closures could be a function of extreme market volatility in the second half of 2007, which might have prompted some plan sponsors to postpone major strategic decisions such whether to close plans to new employees. It does appear, however, that the U.K. market is at least approaching a natural ceiling for plan closures and that future closures will occur at a much slower rate. “There is no doubt that most of the companies that wanted to close their plans and felt they were able to do so have done so,” says Rodger Smith, a Greenwich Associates consultant.

Kohler Joins Cordiant

Florian Kohler is a senior project manager at Cordiant. He previously worked as an investment manager for the Swiss Investment Fund for Emerging Markets.


Wednesday, November 5, 2008

Work Group To Look At Pension Issues

Canada's actuaries enthusiastically support the addition of pension issues to the national agenda by Federal Finance Minister Jim Flaherty. The Canadian Institute of Actuaries hopes this move will lead governments even closer to organizing a National Pension Reform Summit in early 2009. Finance ministers have agreed to set up a Work Plan Group to look at pensions and issues related to pensions. These could include the possibility of governments backstopping Letters of Credit, softening mark-to-market rules, and extending the timeframe for plan sponsors to restore the full-funded position of their pension plans in order to help them secure pension benefits for plan members.

Hamilton Against Locking In

Malcolm Hamilton is totally opposed to the locking in of pension funds. The Mercer consultant told the ACPM Ontario Regional Council’s ‘impACT 2008: Emerging Pension Issues: Four Easy Pieces’ that philosophically he doesn’t believe the government should be allowed to “tell us how to spend our money or manage our retirement savings.” He noted that other retirement savings vehicles such as RRSPs and TFSAs have no locking in provisions. Peter Gorham, of Morneau Sobeco, argued against unlocking retirement savings. He argued that unlocking retirement savings is bad public policy because cash is a ‘great tempter.’ The promise of immediate cash can overcome common sense, he said.

Strategic Plans For All Generations Discussed

Recent surveys now indicate that benefits and retirement savings are among the top five features Gen-Y workers are looking for in an employer, after having fun, growth opportunities, and salary, said experts at a Buck Consultants breakfast seminar, ‘Strategic Directions For Your Benefits Program.’ But is it possible to develop a plan that addresses all generations? Speakers stressed the importance of considering an organization’s unique brand, needs, and goals when developing a strategy and how to deliver a plan that is simple, portable, and flexible for today’s multi-generational workforce. For example, instead of relying on a Defined Benefit plan that appeals to mostly boomers, or a CAP plan that appeals to Gen X and Y, why not consider a hybrid plan which blends the best of both worlds or group TFSAs?

Linking DB To Phased Retirement Difficult

Linking existing Defined Benefit pension plans to phased retirement programs is difficult, says Gerald Swartz, a professor at the Ryerson University School of Business. Speaking at the ACPM Ontario Regional Council’s impACT 2008: Emerging Pension Issues: Four Easy Pieces,’ he said it is easier to link these programs to Defined Contribution pension plans. Where DB plans exist, he says, formal phased retirement programs may call for the use of a separate DC plan on top of the DB plan. He also reminded plan sponsors that mandatory retirement is rapidly coming to an end and they need to be proactive and develop phased retirement programs.

Standard Life Offers Group TFSAs

The Standard Life Assurance Company of Canada will offer group savings and retirement plan sponsors the opportunity to include tax-free savings accounts (TFSAs) as part of their programs starting January 1, 2009. TFSAs allow the accumulation of up to $5,000 per year of after-tax money that can be used whenever and for whatever purpose the investor chooses without paying tax on the income earned. They can be used to complement other retirement savings vehicles such as RRSPs or in place of non-registered plans for shorter-term goals. Sponsors can include TFSAs as part of their group savings and retirement programs and choose from any of the funds included in their plans to ensure that members continue investing in funds that meet the objective of their group plan.

Cordiant Signs UN Principles

Cordiant has become a signatory to the United Nations’ Principles for Responsible Investing. David Creighton, its president and CEO, says “Cordiant has been an advocate for responsible investing since we launched operations a decade ago. The belief that screening investments for environmental, social, and governance issues makes fundamental business sense has been a hallmark of our investment philosophy.”

Pension Risk Cannot Be Viewed In Isolation

Pension risk cannot be viewed in isolation of the risks faced by companies, says Philip Morse, of Towers Perrin. He told the ACPM Ontario Regional Council’s ‘impACT 2008: Emerging Pension Issues: Four Easy Pieces’ that key pension risks faced by Defined Benefit pension plan sponsors include equity risk and interest rate exposure as well as risks from inflation, longevity, and plan design. Management of pension risks needs to complement the management of risks on the corporate level. For example, he said that companies must ensure they have sufficient cash to operate during times when credit may not readily be available. A return focused investment strategy for the pension plan may end up requiring a company to make a cash contribution to the pension plan when they can least afford it.

Assets Moving Into Fixed Interest

Despite the magnitude of last year’s move from equity to fixed interest, the results of a Greenwich Associates study suggest that the U.K. plan sponsors entered into the tumultuous second half of 2008 with every intention of continuing this shift. Assets shifting out of equities are moving primarily into fixed interest, but not into domestic bonds. Although fixed interest allocations overall increased to 30 per cent in 2007 from 28.9 per cent in 2006, allocations to U.K. fixed interest fell to 7.2 per cent from 8.2 per cent. Meanwhile, institutions reported increases in allocations to corporate/credit bonds and international fixed interest.

Spindler At CPPIB

Rob Spindler is vice-president, head of tax services, at the CPP Investment Board. He was most recently a senior partner at KPMG leading its M&A tax transaction services group.

Session Looks At Benefits

'The Benefit Landscape – What is coming ... and how it will impact plan sponsors and plan members’ is the focus of a CPBI Ontario Region breakfast session November 24 in Toronto, ON. Sessions will include a pharmacist’s perspective on the current healthcare environment with Sal Cimino, manager of pharmacy and professional services at Green Shield Canada; and rewards programs in an ever-changing business environment with Marg French, of Mercer. For more information, visit


Tuesday, November 4, 2008

CPPIB Expands Real Estate

The Canada Pension Plan Investment Board has expanded its real estate portfolio with $1.4 billion in new investments. The pension fund has invested in four real estate funds including a Morgan Stanley global fund and a Blackstone European fund. As of June 30, 2008, real estate made up 5.6 per cent of the CPPIB’s assets. Its total real estate commitment is $8.4 billion.

Private Equity Will Need Discipline

Successful private equity managers of the future will be those that can remain disciplined through this uncertain period by carefully getting transactions done while avoiding strategy drift, says Watson Wyatt. These managers will also succeed if there is an understanding that financial engineering has become a commodity and that multiple expansion is no longer a return driver that private equity managers can rely on to generate returns. In a research paper, the firm says banks will remain very cautious in underwriting new debt packages and increases in required equity to finance transactions could decrease returns.

European Investors Diversify

Extreme volatility in global financial markets has not dissuaded institutional investors in continental Europe from carrying through on plans to diversify their investment portfolios in the medium term, says Greenwich Associates’ ‘2008 Continental European Investment Management Report.’ It reveals that institutions made significant cutbacks in their allocations to European equities and government bonds last year, while shifting assets to emerging markets equities and other international stocks. Though further diversification, especially in equities, has slowed down significantly and favour has shifted to cash and bonds due to current market conditions, institutional investors in continental Europe are expecting to pursue their plans to diversify once market conditions become less volatile.

Cordiant Launches Loan Fund

Cordiant, a manager of emerging market private sector investments, has launched the Cordiant Emerging Loan Fund IV (CELF IV). Like its three predecessor funds, it offers institutional investors an opportunity to invest in a diversified pool of carefully selected emerging market private sector loans. The fund aims to generate superior risk-adjusted and inflation-linked returns by partnering with institutions.

Liptrap Joins Morneau

Stephen Liptrap is executive vice-president of human resources and organizational development at the Morneau Sobeco Income Fund. He has more than 20 years of senior executive business and HR management experience in large Canadian-based organizations.


Monday, November 3, 2008

Caisse Adjusting Strategies

Like all institutional investors, the Caisse de dépôt et placement du Québec must adjust its strategies to cope with the global financial crisis whose scope and effects are still uncertain. "This uncertainty has prompted the Caisse to manage with strategies that emphasize caution, preservation of capital, and risk reduction," says Richard Guay, president and chief executive officer. The Caisse has sufficient liquidities to fulfill all its commitments to its depositors and business partners. It also says that deposits exceeded withdrawals and would continue to do so for many years. The stock market decline has increased the weighting of all the other asset classes. To avoid accentuating this imbalance, the Caisse decided early in October 2008 to subject its private equity and real estate operations to a new approval process and to manage new investments in these areas with greater parsimony.

Freezing DB Plan Can Increase Costs

Freezing a Defined Benefit pension plan in favor of a Defined Contribution plan will involve increased costs, reduced benefits, or a combination of both, says a National Institute on Retirement Security research brief. ‘Look Before You Leap: The Unintended Consequences of Pension Freezes’ says that freezing a DB plan and moving to an DC plan can increase costs to employers and/or taxpayers due to higher costs of operating two plans, erosion of economic efficiencies, and front-loaded contribution requirements. As well, it can further exacerbate retirement insecurity concerns which, in turn, can hamper worker recruitment and retention effort, result in higher turnover rates, create labor shortages, increase training costs, and lower productivity levels.

December Commuted Value Interest Rate Assumptions

The interest assumptions required to calculate commuted values for an event which occurs in any month up to and including December 2008 are now available at An Excel spreadsheet on the website contains six worksheets:


Friday, October 31, 2008

Feds Review Funding Options

Canada is reviewing options to adjust pension funding obligations, says its finance minister. Jim Flaherty says falling stock and bond prices have driven down asset values in corporate pension plans prompting some plan sponsors to seek relief from funding rules. His department is looking at options for federal rule changes, including extending the time period over which companies would need to put in more money. One option that Ottawa previously allowed was for plans to extend their funding payment periods to 10 years from five, if members and retirees agreed, or if the difference was secured by a letter of credit.

No Benefit Changes For Eligible Members

There will be no major changes to pension benefits for plan members eligible to retire in the next five years, says Michael Baker, Nova Scotia finance minister and minister responsible for the Public Service Superannuation Act. He says they may need to make changes to pension contributions or benefits to improve the funded status of the pension plan over the long term. However, the minister has committed that the pension benefit of any member of the Public Service Superannuation Plan who is or becomes eligible for an unreduced pension on or prior to March 31, 2014, will remain unchanged. In addition, no changes will be made to the date of the eligibility to retire for these employees.

German Institutions Shifted Out Of Stocks

German institutional investors cut their exposures to European and international stocks and shifted assets to bonds and cash in the months leading up to the onset of the current global market crisis, says Greenwich Associates' ‘2008 German Investment Management Study.’ Amid the current difficult conditions, German institutions made a series of moves seemingly out of step with their counterparts across most other European regions. Throughout Europe, institutions increased their overall equity allocations last year by shifting significant assets into international stocks, even as they reduced their exposure to European equities. In Germany, institutions cut overall equity allocations by three percentage points from the end of 2006 to end of 2007 and shifted assets into fixed income and short-term investments. German allocations to domestic equities declined to nine per cent of total assets in 2007 from 11.3 per cent in 2006. Meanwhile, allocations to European bonds increased to 63.3 per cent in 2007 from 62.8 per cent.


Thursday, October 30, 2008

Active Managers Beat Benchmark

The extreme market environment in the third quarter of 2008 highlighted the strengths of active management with 65 per cent of large cap Canadian equity active managers beating the benchmark, says the Russell Investments ‘Active Manager Report.’ This was up from 41 per cent in the second quarter, up from 20 per cent in the first quarter, and the highest since the first quarter of 2007. In comparison, it found that, on average, 54 per cent of active managers have historically beaten the benchmark over the nine-year period in which data has been collected.  The S&P/TSX composite index return was negative 18.2 per cent in the third quarter, but the median large cap manager returned negative 17.2 per cent.

Credit Crunch Hits U.S. Harder

Access to bank funding is less severely curtailed for European companies than it is for their peers in the United States, says a Greenwich Associates ‘Market Pulse.’ The research results indicate that one half of the U.S. companies surveyed in September said their access to funding for ongoing operations had been significantly reduced. U.S. companies were also much more likely than European corporates to say their access to hedging products had diminished as a result of the crisis.

Muldowney Relinquishes Responsibility

Peter Muldowney, who has led Mercer’s investment consulting business in Canada since 2005, has decided to focus more time on client consulting and his role as head of global strategic marketing for investment consulting, relinquishing day-to-day management responsibility in order to focus on high-level strategic issues and client work. Yvan Breton, formerly head of investment consulting in eastern Canada, will succeed Muldowney as Canada business leader for investment consulting. Laurier Perreault, formerly director of consulting for Canada investment consulting, is now Canada business leader for investment management. Jaqui Parchment, formerly head of investment consulting in central Canada, succeeds Perreault. Jean Michel is eastern market business leader and Rob Stapleford is central market business leader.


Wednesday, October 29, 2008

Borealis Cuts Teranet Offer

The board of Teranet Income Fund is reviewing the revised bid from Borealis Infrastructure Management Inc. Borealis is cutting its offer price for Teranet to $10.25 a unit from its earlier offer of $11. The investment arm of the Ontario Municipal Employees Retirement System pension plan has been pursuing Teranet, which holds exclusive rights to Ontario's electronic land registry, for some time. However, with worsening market conditions, a weaker outlook for real estate, and the debt available for deal-making scarce and expensive, Borealis believes $10.25 per unit is a more “appropriate” offer price.

Employer Right Altered

A recent Ontario Court of Appeal decision may restrict the right of employers to fundamentally alter employment contracts, including pension, benefit, and compensation arrangements – even with adequate notice, says a Hewitt Research Advisory. Despite the fact that the Wronko case deals with an individual, it has potential implications in a group setting. Prior to the Wronko decision, employers often made substantial changes to pension and benefits programs with little fear of triggering a constructive dismissal, as long as they provided adequate notice. Going forward, employers will need to assess whether the contemplated change constitutes a fundamental alteration to the employment contract, a task that is complicated in the group setting by the fact that what may be considered a fundamental change for one employee may not be for another. If the change could be considered substantial, legal advice should be sought.

Ex-pat Benefits A Priority

Benefit provision for expatriate employees is a medium or high business priority for 86 per cent of companies, says Mercer’s ‘2008/2009 Benefits Survey for Expatriates and Globally Mobile Employees.’ The majority of companies surveyed keep their expatriates in host or home country retirement plans. However, 32 per cent offer international plans – an increase from 23 per cent in 2005. Close to three-quarters (73 per cent) of companies with an international plan restrict eligibility to certain expatriates who cannot be kept in the home or host plan. In addition, the majority of respondents provide medical benefits for their expatriates, whether via international plans or via home- or host-country plans.

European Companies Getting Credit

Although all signs point to recession in Europe, a new Greenwich ‘Market Pulse’ shows that most companies in the United Kingdom and on the continent currently are able to obtain the credit they need to finance their operations. Access to bank financing, while certainly constrained, appears to be less severely restricted in Europe than in the United States. The study results suggest that historic actions on the part of national governments and central banks around the world to inject liquidity into financial markets and restore the flow of credit are beginning to have their desired effect in terms of preserving companies’ access to funding.

FTSE Announces New Global Partnership

KLD Research & Analytics, Inc., a provider of environmental, social, and governance (ESG) research and indexes, and FTSE have formed a strategic partnership to offer a comprehensive suite of ESG indexes.  FTSE will collaborate with KLD on the conception, design, and worldwide marketing of co-branded ESG indexes. 

Swan Heads Treasury Services

Cheryl Swan is vice-president, head of treasury services, for the CPP Investment Board. She has more than 16 years of experience in the financial services sector and was most recently vice-president, corporate segment finance, at TD Bank Financial Group.

Trustee Course Comes To Winnipeg

The Centre for Employee Benefits at Humber College will present its trustee development program in Winnipeg, MB, this November. The program runs three full days, November 24 to 26, and satisfies the CAPSA recommendation for education.  Continuing education credits are also available through this program. Registration for the Winnipeg dates will be available on the Humber College website by the end of this week.


Tuesday, October 28, 2008

Regulators Review Capital Levels

Canadian regulators may give insurers some breathing room because of the pressure plunging stock markets are putting on their capital levels. The Office of the Superintendent of Financial Institutions is reviewing the capital rules that apply to insurers' segregated funds business. These investment products act like personal pension plans, where the insurer offers guaranteed payouts down the road. All of the Canadian life insurers have reported capital ratios that are well above the minimum requirements. However, OSFI is reviewing the rules that dictate how insurers use their own models to come up with the necessary capital levels for their segregated funds business to ensure the rules remain appropriate in the current environment.

Economic Crisis Impacting Compensation Outlook

Although talent retention and recruitment remain top priorities, the sudden impact of flailing markets will shift compensation strategies across Canada, said experts at the ‘2008 Compensation Outlook’ conference. Prem Benimadhu, vice-president, governance and human resource management for the Conference Board of Canada, says employers will more carefully reward performance and that employees will become less confident due to the financial crisis – meaning less “job hopping” looking forward. Marc Ullman, principal for Towers Perrin, offered compensation survival tips for weathering the storm such as differentiating rewards for top performers; optimizing rewards based on employee preferences to drive engagement; or positioning pay for performance as a central business process.

Desjardins Winds Down Products

Desjardins Group is winding down its hedge fund-linked products in an effort to deal with problems in guaranteed investments caused by the economic downturn. It is shutting down ‘principal-protected notes’ (PPNs). The products bought hedge funds to offer its customers the upside of markets, along with a guarantee they would get back 100 cents on the dollar.

DC Assets Fall In UK

UK Employees investing for retirement through Defined Contribution pension arrangements have seen the value of their assets fall by more than 28 per cent in the last 12 months, says data from Aon Consulting. The indications are those close to retirement will subsequently have to work longer.

Crisis Alters Landscape

A relatively small handful of banks have the opportunity to significantly expand their reach among companies and institutions in Europe as financial markets seek to regain their footing in the midst of historic crisis, says a Greenwich Associates ‘Market Pulse.’ It asked which banks were poised to reap the largest gains in market position as a result of the crisis. Half of the participants named JPMorgan as having the most potential to expand and almost 30 per cent cited HSBC, followed by 27 per cent for BNP Paribas. However, it is an open question as to whether gains in market position by these or other banks will be transitory in nature or whether they will prove sustainable. Many of the survey respondents predicting that firms like JPMorgan will gain market position are institutional investors who see these banks as better positioned from a capitalization perspective to resume their business in fixed income and equity capital markets.

Jiwani Looks At CAPSA Proposal

Nurez Jiwani, of FSCO, will be one of the presenters at an ACPM event on the proposed agreement for multi-jurisdictional pension plans. CAPSA recently released the proposal which would clarify the applicable rules and oversight of such systems. The session takes place November 25 in Montreal, QC. For more information, visit


Monday, October 27, 2008

BC Creating DC Pension Opportunity

The government of British Columbia will create a private sector pension opportunity for the 75 per cent of private sector workers in the province without access to group pension plans, says the Hewitt Monitor. It will be a privately financed Defined Contribution plan and be available to employers, employees, and self-employed people on a voluntary basis. By pooling contributions and managing them under a single plan, the government hopes to maximize investment earnings, lower administration costs, reduce risk, and give people access to guaranteed pension entitlements.

Meritas Files ‘Say On Pay’ Proposals

Meritas Mutual Funds is filing shareholder proposals requesting the adoption of an advisory vote on executive compensation. The resolution, commonly referred to as ‘Say on Pay,’ was submitted at eight Canadian companies – Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Nortel Networks, Royal Bank of Canada, Sun Life Financial, Toronto-Dominion Bank, and TSX Group. The proposals ask that shareholders be given an annual, management-sponsored vote on the board's executive compensation report.

Asian Companies Experience Fewer Credit Disruptions

As the global economy slides toward recession, companies in Asia continue to invest in their businesses and report that the credit environment across the region remains more benign than in Europe and the United States, says a Greenwich Associates’ ‘Market Pulse.’ The preliminary results of its ‘2008 Asian Corporate Banking Study’ suggest that companies across the region agree that local economies will overcome significant headwinds and continue expanding over the next year. Its research does reveal signs that companies are beginning to feel the pinch of the global credit contraction. Most tellingly, 45 per cent of companies say their need for funding for ongoing operations is on the rise.

Northern Trust Adds Messaging Format

Northern Trust has adopted the Financial Product Mark-up Language (FpML) messaging format in processing over the counter (OTC) derivative trades. As part of its move towards increasing automation and straight through processing in OTC derivative trade processing, this format can be used for its clients across the globe. FpML is a messaging format which automates the flow of information between asset servicers and their clients and operates independently of any underlying software or hardware infrastructure pertaining to derivative trades.


Friday, October 24, 2008

GM Cuts 401K Payments

General Motors Corp is suspending matching payments to employee 401K plans as of November 1. The company could reinstate the payments if business conditions improve. It also continues to assess its staffing needs as part of efforts to conserve cash amid a deep downturn in sales. The automaker, which has lost $51 billion over the past three years, hopes to raise $15 billion in liquidity through 2009 through a series of steps, including a 15 per cent reduction of salaried workers in North America.

Loonie Dive Helps BCE Buyout

The drop in the loonie is helping U.S. lenders and backers of the BCE buyout by the Ontario Teachers' Pension Plan. With the dollar below US80 cents, the three U.S. private equity funds investing in BCE and three global banks lending on the $35 billion buyout are seeing a material decline in the cost of their financing commitment. As a result, it is expected that the transaction will close by December 11 as scheduled.

Sponsors Calm In Crisis

Canadian pension plan sponsors are staying relatively calm in spite of the ongoing financial crisis gripping the markets, says a Morneau Sobeco ‘60 Second Survey.’ It found Defined Benefit plan sponsors do not seem overly worried about the impact of the financial crisis on their pension plans. The most common proposed action was reducing the plan’s equity weighting or raising cash. Sponsors of Defined Contribution plans are somewhat more concerned and plan to send a special communication out to plan members to help them cope with the investment losses.

‘Toxic Combination’ May Prompt Defaults

A ‘toxic combination’ of economic and funding pressures has set in motion the beginning of a surge in U.S. high yield defaults that could turn out to be the worst period ever, says research from Fitch Ratings. It says the critical supports of low corporate default rates have deteriorated at an alarming pace in 2008 and believes that recent unprecedented events in the credit markets, along with a number of other factors, suggest the coming high yield default wave may be the most severe on record. The coming default wave will resemble the early 1990's recession, with more industry sectors affected by defaults than in the 2001/2002 downturn due to the broader negative implications of depressed consumer spending, compounded by the leveraged buyout boom of 2004-2007 which pushed up leverage levels across many firms previously better capitalized to withstand a downturn.

Government Strengthens Access To Credit

The federal government has made a move to strengthen Canadian access to international credit markets by creating a Canadian Lenders Assurance Facility. The facility will offer insurance on wholesale term borrowing of federally regulated deposit-taking institutions. This will help secure access to longer-term funds so that Canadian financial institutions can continue lending to consumers, homebuyers, and businesses.

Program Provides Access To U.S. Healthcare

Marsh Canada Limited has introduced an insured critical illness treatment program that can provide participants with prompt access to U.S.-based private healthcare treatment facilities. The program, known as Global Preferred Care, gives Canadian employers a great deal of flexibility in design and structure. Individuals enrolled in the program have access to treatment for conditions such as cancer, heart procedures, and other serious illnesses at the top one per cent of hospitals in the United States. Canadian employers, their senior executives, as well as other employees, members of associations, affinity groups, individuals, and their families can be covered under the program. The program can be structured as an employer paid benefit or on a voluntary employee paid basis.

U.S. Sponsors Experience Significant Losses

Most U.S. institutional investment plan sponsors reported a fourth consecutive quarter of negative results for the period ending September 30, 2008, says data in the Northern Trust Universe. “All plan types suffered significantly from volatile and declining markets in the third quarter, with corporate plans performing especially poorly relative to their assigned benchmarks,” says William Frieske, performance consultant, Northern Trust Investment Risk & Analytical Services. Corporate plans posted a median return of -8.8 per cent for the third quarter while public fund and foundation and endowment plans reported median returns of –9 per cent and -8.5 per cent.

Leblanc Joins Standard Life

Claude Leblanc has joined The Standard Life Assurance Company of Canada as senior vice-president, group savings and retirement. He has 30 years of experience leading Canadian organizations in the insurance and financial services sector.

CARP Holds First Conference

Elaine Dembe, the ‘passion doctor,’ is one of the featured speakers at the ‘1st Annual CARP Conference,’ October 30 in Toronto, ON. One of Canada’s authorities on stress resiliency, longevity, and motivation, she joins a line-up of speakers that includes Leslie Beck, author of ‘Foods that Fight Disease,’ and Patricia Lovett-Reid, senior vice-president of TD Waterhouse. The conference is followed on November 1 and 2 by ‘The ASPIRIN 81mg ZoomerShow,’ a consumer show and lifestyle expo for men and women who are 45plus. For more information, visit

U.S. Movement Examined

Value based health management will be the focus of a Benefits Breakfast Club session October 30 in Burlington, ON. A movement that has been developing in the United States, it shows promising opportunities for creative problem solving in the benefits and workplace health. Steve Priddy, director, employee relationship initiative for value based health benefits, at the Institute for Health and Productivity Management will explain what makes a plan value based and talk to the financial and health benefits it offers to employers and employees. For more information, visit


Thursday, October 23, 2008

Financial Crisis May Hit China

China may not escape the current financial crisis, says Andrew Barker, senior portfolio manager, international equity, at Artio Global Management. Speaking on the worldwide transition of the global economy, he said China does not have the domestic consumption to overcome the impact of a U.S. recession on its exports. A slowdown in U.S. consumption would also spill over into the rest of Asia which provides intermediary products used for the Chinese production of goods for the U.S. market. Chinese domestic consumption accounts for about 30 per cent of its GDP.

Fidelity Shifts To GWL

Fidelity Investments Canada ULC will transition its Canadian group retirement and savings plan recordkeeping business to the Great-West Life Assurance Company (GWL). The agreement represents $2.2 billion in assets under administration and approximately 100 plan sponsors, 470 group retirement plans, and 95,000 members. Allen Loney, president and CEO of Great-West Lifeco, says “This agreement further solidifies Great-West Life’s position as a market leader in group retirement and savings plans in Canada.” It now provides recordkeeping services for 30 per cent of the capital accumulation plans in Canada.

Ethical Funds Unveils 2009 Plan

The Ethical Funds Company will engage more than 40 Canadian and international corporations in the coming year to encourage action to advance corporate sustainability, reduce portfolio risks, and increase share value. With the launch of its ‘2009 Focus List,’ it outlines the corporations and areas of focus for its Shareholder Action Program. Companies identified will be asked to address issues such as fighting climate change, protecting biodiversity, and safeguarding water.

DB Plans Fared Well

Canadian Defined Benefit pension plans are faring well in volatile markets, says research from Fidelity Investments’ institutional asset manager Pyramis Global Advisors. Its second annual ‘Canadian Defined Benefit Research’ found that the plans benefited from the strong Canadian equity markets with five-year average returns of 11.7 per cent, as of December 31, 2007. Despite the performance, the research also shows that plan sponsors are growing more concerned about how they will continue to generate returns in today’s low return environment and volatile markets. “Many Canadian pension plan sponsors are at a crossroads on where they are going with their plans. While they have benefited from strong Canadian equity markets over the past few years, they are now faced with challenges and tough choices,” says Peter Chiappinelli, senior vice-president of asset allocation strategies.

Deutsche Publishes Climate Change Research

The accelerating pace of global warming will force governments to invest more heavily in climate change mitigation and adaptation despite the financial setbacks of the current market crash, says a Deutsche Asset Management (DeAM) research paper.  ‘Investing in Climate Change 2009 – Necessity and Opportunity in Turbulent Times’ says that an economic downturn offers governments across the developed world a prime opportunity to boost their spending on ‘green’ infrastructure as a stimulus to avoid severe recession. The paper states that the debate around climate change is shifting away from cost and risk towards the question of how to capitalize on opportunities. The climate change universe is well-suited for public equity markets and, particularly, private markets such as venture capital, private equity, infrastructure, and timberland.  

Retirees Use DC Funds Prudently

U.S. retirees do not spend their Defined Contribution balances immediately at retirement, but make thoughtful choices and use the proceeds prudently, says a study by the Investment Company Institute. The study found only about three per cent of accumulated DC account assets were spent immediately at retirement. The few retirees who spent their entire DC plan lump sums generally had received small distributions and, on average, derived a sizable portion of their household incomes from Defined Benefit plan and Social Security payments. Of those who spent their entire lump sum, most used the proceeds sensibly, for example, to buy a primary residence, make home repairs, repay debt, or pay for healthcare.

Rough Quarter For Pension Funds

Diversified pooled fund managers posted a median return of -8.2 per cent before management fees, says Morneau Sobeco’s ‘Performance Universe of Pension Managers’ Pooled Funds’ for the third quarter of 2008. Since the beginning of the year, the median return was also -8.2 per cent. With a return of -8.2 per cent, the pension funds are having their worst quarter since 1981, which yielded a return of -11.2 per cent, says Jean Bergeron, a principal in the asset management consulting practice. Unless there is spectacular turnaround before the year ends, pension funds will suffer significant losses in 2008. Since 2007 was also a difficult year, pension funds that are required by legislation to perform an actuarial valuation at the end of the year will have, for the most part, to absorb significant actuarial deficits.

Best System Should Be Goal

Canada’s goal should be to have the best healthcare system in the world, says Jason Hutton, national director of sales for Best Doctors Canada. Speaking at the Toronto Area Chapter – ISCEBS session ‘The Canadian Healthcare System – Are We in Need of a Check-Up?’, he said the country’s healthcare system ranks around 30th in the world according to the World Health Organization. The problem is that it reflects a hospital/doctor-centred view as practiced in 1957 and what is needed is a system that can adapt to the current century. If changes are not made, the system lacks sustainability.


Wednesday, October 22, 2008

Agreement On Multi-jurisdictional Plans Proposed

The Canadian Association of Pension Supervisory Authorities (CAPSA) has released a proposed ‘Agreement Respecting Multi-jurisdictional Pension Plans’ for comment. “The proposed agreement is an important initiative for plan sponsors, administrators, labour groups, members, advisors, and regulators,” says David Wild, Chair of CAPSA. “It will serve to provide a clear framework for the administration and regulation of pension plans that have members in more than one jurisdiction.” There are more than 3,000 multi-jurisdictional pension plans operating in Canada with approximately 2.3 million members. CAPSA is interested in receiving feedback on the agreement, in particular on its practical application.  The deadline for submissions on the proposed agreement is January 30, 2009. Copies of the consultation document can be viewed at

Pension, Benefit Handbook Published

CCH Canadian Limited, in partnership with Morneau Sobeco, is publishing a new edition of the ‘Morneau Sobeco Handbook of Canadian Pension and Benefit Plans, 14th Edition.’ The handbook examines employee pension plans, government pension programs, post-retirement benefits, flexible benefits, and much more. Topics have been added such as liability driven investing, benefits governance, and retirement planning.

Automated Adds Software Product

Automated Benefits Inc has launched its latest software product. Adjudicare offer features which allow users to create and edit their own benefit plans as well as create and manage multiple plan designs and setups. “Our focus continues to be on developing the strongest products and solutions for our customers,” says President John Jackson.

FEI Works With University Of Regina

The Financial Education Institute of Canada has been selected to provide online educational services to the academic and administrative staff of the University of Regina. The service is being provided through the institute’s web curriculum and covers a wide range of financial planning issues from basic planning techniques to more sophisticated investment strategies. It also goes beyond the purely financial aspects of career and retirement to examine issues around health, relationships, work/life balance, and time management. 

Investors More Cautious

Canadian investors have become significantly more cautious and more pessimistic about their retirement standard of living in the past three months, says research for the British Columbia Securities Commission. Online studies conducted by Innovative Research Group in July and in October show that the percentage of investors who think their standard of living in retirement will be worse than it is today rose from 33 per cent to 44 per cent in that period. Those who believe their standard of living in retirement will be better than today remained the same at 20 per cent.

Desjardins Offers TFSA Headstart

Desjardins Financial Security is giving Canadians a chance to get a head start on their 2009 savings resolutions by investing in a DFS Transition account, which can be converted into a Tax Free Savings Account (TFSA) in January 2009. The DFS Transition account offers a competitive interest rate and the money invested in the account can be transferred, free of charge, to a TFSA as of January 1, 2009.


Tuesday, October 21, 2008

Crisis Delays ABCP Plan

The Pan-Canadian Investors Committee for Third-Party Structured ABCP no longer expects the proposed restructuring of the third-party ABCP market in Canada to be completed before the end of October. It says while the implementation process continues to move forward, the completion of the transaction has taken longer than expected because of the large number of participants, the complexity of the required documentation involved in the process, and the recent volatility in the global financial markets. It now expects that the restructuring plan will be completed by the end of November.

More Employers Offer Wellness

More than half (57 per cent) of larger U.S. employers (500 or more employees) currently offer a wellness program – up from 49 per cent in 2006, says a MetLife survey. Its ‘Annual Employee Benefits Trends Study’ also shows that nine out of 10 companies that offer a wellness component believe they help cut an employer's medical costs. Four out of five employers with wellness programs also give workers an extra incentive to take part such as gym/fitness centre discounts and additional time off.

Ideas Cost Investors

Having an idea may cost an individual investor 3.5 per cent of return plus 0.5 per cent commission, says Shawn Brayman, president of PlanPlus. Speaking at Mindpath’s ‘3rd Annual Top Advisors Investment Strategies Symposium,’ he said a comparison of hundreds of thousands of transactions where an investor sold one stock and bought another within 48 hours – typically because the investor had an idea that the new stock would outperform the old one – showed they lost money on the idea. As well, the four per cent they lost was usually picked up by institutional investors using buy and hold strategies. He also said that the research also showed that women were better investors than men because they bought and held more often.

Optimum Using RBC Dexia

RBC Dexia Investor Services has been selected by Optimum Asset Management Inc. to provide a full range of investor services including global custody, fund valuation, and unitholder recordkeeping for the company's newly-launched family of pooled funds. Claude Lamonde, president of Optimum, says the decision was based on its reputation for service excellence, combined with demonstrated expertise in the fund business.

Salman Executive Vice-president

Zahid Salman is executive vice-president responsible for all pension and benefits consulting and outsourcing practices in Ontario, Western Canada, and the U.S. for the Morneau Sobeco Income Fund. He has worked in the pension and benefits industry for more than 15 years, including time as Canadian chief operating officer for another major professional services firm.


Monday, October 20, 2008

Canadian Pensions Battered

Plummeting equity markets hurt pension plans in the third quarter as the ongoing financial crisis gained global intensity, says a survey by RBC Dexia Investor Services. Within its $340 billion universe, Canadian pension plans suffered the largest quarterly decline in a decade, tumbling 8.6 per cent in the three months ending September 30. Canadian equity was the hardest hit asset class, plunging 18.2 per cent as commodity prices dragged the resource-heavy S&P TSX Composite Index to its lowest quarterly result since September of 1998. Energy stocks lost 28.3 per cent, while materials dropped 33.6 per cent over the period.

Webster Based In Montreal

David Webster is director, relationship management, based in CIBC Mellon Global Securities Services Company’s Montreal, QC, office. He has more than 12 years of industry experience including nine in the Quebec market providing asset servicing solutions to regional institutions.

Executive Compensation Landscape Changing

Ernst & Young LLP’s performance and rewards team is hosting a breakfast seminar on recent developments affecting executive compensation. The seminar will be held in Toronto, ON, November 5. For more information, visit


Friday, October 17, 2008


Nova Scotia Releases Pension Review

The Nova Scotia Pension Review Panel’s ‘Interim Discussion Paper’ would allow plan sponsors to amortize plan surplus over a minimum of eight years. The paper, which has just been released, says while the panel agrees “asymmetry” exists between employers/sponsors and employees in Defined Benefit pension plans, it does not agree that this means that employers/sponsors carry all the risks, while employees carry none. It says unless an employer can demonstrate that they will exist forever, employees are at risk that the employer may cease to exist. Employees are also at risk of being asked to make additional contributions if the plan requires increased funding. It says its surplus amortization proposal would allow plans to benefit from the surplus slowly, which would provide a cushion to mitigate any sudden changes in funding status. Amortization would be through prospective reductions in minimum funding requirements. To see the ‘Interim Discussion Paper,’ click here

Education Needed On TFSAs

The most important new savings tool offered by government in over 50 years is facing a slow start unless more Canadians can be educated about it, says a survey by Investors Group. Slightly less than half (46 per cent) of Canadian adults plan to open a Tax-Free Savings Account (TFSA) when it becomes available and only about one-in-six (17 per cent) plan to contribute the maximum amount of $5,000. The majority of people who do not plan to invest in a TFSA seem to be held back by a lack of knowledge saying either they were uncertain about how it worked, preferred to wait and see, or did not know. About one in five cited a lack of money as the reason they do not plan to invest in a TFSA.

Employers Fail To Target Mature Workers

Most Canadian employers are not targeting mature workers with specific policies and programs, says a Conference Board survey. ‘Harnessing the Power: Recruiting, Engaging and Retaining Mature Workers’ found while many respondents identified the aging of their workforce as a concern, only six per cent are focusing on retaining mature workers, while 11 per cent indicated they are actively focused on attracting and recruiting mature workers. Only seven per cent formally consider mature workers as a distinct employee group. Among the few employers that have programs targeted to recruit mature workers, almost three-quarters reported having been successful in their recruitment efforts, compared to just under one-quarter of those without targeted programs.

Canadian Economy To Contract

The Bank of Montreal says Canada's economy will contract in the final quarter of 2008, and the first quarter of 2009, entering a recession. A commentary by its chief economist, Sherry Cooper, says “Canada cannot escape the knock-on damage of not only the U.S. recession, but also the wealth destruction arising from the plunge in our stock market and the slowdown in our housing markets. With commodity prices being pulled down by a decline in global demand, Canada's energy sector can no longer be counted on to support the Canadian economy. BMO is the second bank to forecast a recession. Previously, the Bank of Nova Scotia said a recession was imminent. However, the Royal Bank of Canada and the Toronto-Dominion Bank both expect the country to narrowly avoid a recession.

Parent Has International Responsibility

Brigitte Parent will become senior vice-president, group business, international, at Sun Life Financial as of January 5, 2009.benefits. She is currently senior vice-president, group benefits. Stuart Monteith is now senior vice-president, group benefits. For many years, he was leader of Mercer's group benefits business in Canada.

300 Years Of Credit Crises Examined

‘Market Meltdown: Understanding 300 Years of Credit Crises’ will be discussed at a Fraser Institute event November 13 in Toronto, ON. Dr. Mark Mullins, executive director of the Fraser Institute, will put the credit crises which have traveled around the work in context and discuss the role of markets and public policy going forward. For more information, visit


Thursday, October 16, 2008

OSFI Defends Interest Rate Use

OSFI still believes that the use of long-term average interest rates have a legitimate place in establishing long range discount rates. In its comments on the Actuarial Standards Board’s Exposure Draft for Commuted Value Standard of Practice, it says this also has the benefit of reducing volatility of commuted values to a certain extent. The board has stated that the commuted value should be the economic value of the obligations discharged by the pension plan to the plan member. This economic value is based entirely on current market-based indicators with respect to the applicable discount rates.

Median EAFE Plus Manager Outperforms

Despite the worst performing month since 1975, the median EAFE Plus manager leads the MSCI EAFE index by 66 basis points year-to-date, says InterSec Research’s ‘Third Quarter 2008 Preliminary Report.’ International markets continue to struggle amid the global market turmoil of 2008 as the MSCI EAFE index fell 14.5 per cent in the month of September. The median manager was unable to add value in the third quarter of 2008, returning -21.6 per cent and underperforming the index by more than 100 basis points.

CI Converting To Corporation

The CI Financial Income Fund has approved a proposal to convert to a corporation in order to position CI to pursue the growth opportunities that are available as a result of the current economic and market conditions. "The unprecedented situation in today's markets has created attractive opportunities for acquisitions in the asset management business," says William T. Holland, chief executive officer. "A corporate structure will allow us to take full advantage of these unique circumstances and put us at the forefront of industry consolidation."

Mercer Adds Two

Pierre Neatby is Canadian business leader and Clare Collins-Newton is chief information officer, North America, at Mercer’s outsourcing business. Neatby has more than 20 years of industry experience and previously worked at Buck Consultants where he served as vice-president – benefits outsourcing. Collins-Newton will head the consolidated Canadian and U.S. technology teams for its outsourcing business.

Loder Leads DC Services

Michelle Loder is national business leader of Defined Contribution services for Towers Perrin. Prior to joining the firm, she was with an international human resources consulting firm and practiced as a tax specialist with a large public accounting firm.

Benefit Ball Tickets On Sale

Tickets for the CPBI ‘2009 Benefit Ball’ are now on sale. This year’s event ‘Celebrates Bollywood.’ It takes place February 5 and all proceeds go to the Crohn’s and Colitis Foundation of Canada (CCFC). For more information, visit


Wednesday, October 15, 2008

Bank Provides Cash For Pension Funds

The Bank of Canada will provide cash for pension funds that hold short-term assets such as commercial paper if the markets for those assets disappear. This is part of Canada's commitment to the Group of Seven nations' efforts to loosen credit conditions and restore lending by injecting extra cash into the market.

Small Employers Less Satisfied With Health Insurers

U.S. employers are looking for more from health insurers to help them better manage their health benefit programs, says a PricewaterhouseCoopers Health Research Institute report. ‘What Employers Want From Health Insurers Now’ found that small
employers are less satisfied with their insurer-provided health services than larger employers. The disparity may reflect the fact that larger employers typically receive a wider array of customized plan designs from insurers, and the cost of administering small groups is usually more expensive on a per employee basis.

Northern Trust Enhances Cash Reporting Tools

Northern Trust has strengthened its corporate cash custody and asset services with an online system designed to assist corporations with managing their balance sheet cash reserves more effectively while helping satisfy the regulatory and reporting requirements of corporate cash investors. The Clearwater Analytics system for accounting, performance, compliance, and risk reporting complements its investment risk and analytical services solutions currently offered to institutional investors.

Employers Focus On Participation

Many organizations are focusing on employee participation rather than improved health in measuring their healthy choice incentives, says a survey from the Integrated Benefits Institute (IBI). It found encouraging employee participation is seen by employers as the most important goal rather than having healthier workers. Nearly two-thirds of the surveyed employers provide cash-based and benefits-related incentive programs for their employees to promote improved health and productivity. However, 19 per cent use disincentives and penalize employees who fail to co-operate in health and productivity programs.

New York Mellon Custodian For Bailout

The Bank of New York Mellon will act as custodian for the U.S. Treasury Department’s $700 billion economic rescue package. It will provide the accounting for the portfolio, hold its cash and assets, provide pricing and asset valuation services, and assist with other related services. The company will also serve as auction manager and conduct reverse auctions for the troubled assets.

Interim Changes Exaggerate Risk

Proposed interim changes to company accounting standards for employee benefits (IAS 19) will exaggerate pension scheme risk when compared with other liabilities, says a Hewitt Associates statement. The IASB is expected to report on the consultation results in the second half of 2009. The consultation came in response to pension sponsor concerns about the existing accounting standard, including the approaches to recognizing gains and losses and a lack of clarity and its impact on liabilities. Hewitt is worried the proposed interim changes will harm pension schemes by exaggerating volatility above other liabilities, including debt.

DB De-risking Discussed

Sibson Consulting will host a Defined Benefit plan de-risking breakfast briefing November 18 in Toronto. Topics covered include the dynamic pension buyouts market in the UK and the relevance of the UK experience to Canada. For more information, visit

Anxiety In Workplace Examined

‘Mental Health in the Workplace Forum @ Rotman’ will return October 21 in Toronto, ON. This year the topic is ‘Worried Sick: A Manager’s Guide to Anxiety in the Workplace.’ Expert panelists include Prof. Julie McCarthy, assistant professor of organizational behaviour, Rotman School of Management, U of Toronto; Dr. Peter Farvolden, principal, Cognitive Behavioural Therapy Associates of Toronto; and Dr. David Goldbloom, senior medical advisor, Centre for Addiction and Mental Health and Professor of Psychiatry, U of Toronto. For more information, visit


Tuesday, October 14, 2008

Limits Coming On Growth

Speed limits on growth and inflation will be the result of the credit crisis, say David Schaffner, president and CEO of Leith Wheeler Investment Counsel. Speaking on ‘The Credit Crunch: Origins and Long Term Impact’ at the CPBI Western Region Fall 2008 Conference, he said some of the results of the credit crisis will include more regulation about leverage and the rating agencies. He says signs that the crisis is ending will include a bottoming of the U.S. housing market and a slowdown in the pace of write downs in the financial sector.

Financial Crisis Recasts Pension Debate

The financial crisis starkly highlights the relative pros and cons of Defined Benefit pensions and 401(k) plans, says experts at Watson Wyatt. Broadly speaking, the predictable, mainly guaranteed income of pensions (including so-called hybrid plans such as cash balance plans) contrasts sharply with the day-to-day fluctuation of 401(k) account values, which are wreaking havoc on planned retirements. “The current environment underscores some latent employer risks with 401(k) plans,” says Alan Glickstein, a senior retirement consultant. “For example, they make it harder for companies to predict who will retire and when. Employees who mostly rely on 401(k)s are also more likely to worry about their financial security, creating an additional drain on morale and productivity during turbulent times.”

OMERS Opens London Office

To accelerate its expansion into private market investments and to take the next step in establishing a global footprint, OMERS has established an office in London in the UK. "We are weathering the current market crisis largely because we were an early believer in shifting large amounts of capital from public to private markets," says Michael Nobrega, OMERS president and CEO. "Our substantial private market assets have gone a long way toward partially offsetting the volatility and negative performance of public securities." The OMERS pension fund has been ranked in the top quartile of Canadian pension funds in each of the last three years driven by solid returns in private market investments.

Engagement Requires Well-being

Employers need to create a culture of health, not a silo of benefits if they want to link employee engagement and well-being to the bottom line, says Wendy Poirier, of Towers Perrin. Speaking at the CPBI Western Region Fall 2008 Conference, she said engagement in the absence of well-being may lead to an unproductive workplace which is engaged, but not healthy. Elements of workplace well-being will need to evolve to meet changing employee needs, she said.

ACPM Debates Unlocking

A debate on the merits of unlocking retirement savings and the real story behind phased retirement will be among the featured sessions at impACT 2008. Theme of the ACPM event is ‘Emerging Pension Issues: Four Easy Pieces.’ It takes place November 4 in Toronto, ON. For more information, visit 


Friday, October 10, 2008

Worst Performance In Decade

Canadian pension plans posted their worst returns in a decade in the third quarter of this year, says Mercer’s model balanced pension fund. Returns dropped 7.9 per cent in the quarter ended September 30, the worst quarter since its balanced portfolio lost 9.1 per cent in the third quarter of 1998. However, typical pension plans are not facing a decline in their funded status in terms of their corporate financial statements because corporate bond yields rose in the quarter, reducing some of the funding obligations for pensions.

Single Fund Better Design For DC

A single fund approach may be a better design for Defined Contribution pension plans than the traditional multi-fund plan, says Murray Campbell, of Lawson Lundell LLP. Speaking at the CPBI Western Region Fall 2008 Conference, he said the single fund approach may have less legal risk. Since there are fewer “moving parts,” there are fewer things to go wrong. Simply because the value of the assets may go up or down, does not lead to legal liability for a sponsor, he said.

DB Preferred For Pensions

Unions, retirees, and some sponsors believe Defined Benefit pension plans are the preferrable way to deliver pension benefits, says Scott Sweatman, co-chair of the Alberta/BC Joint Expert Panel on Pension Standards. Speaking at the CPBI Western Region Fall 2008 Conference, he said the panel has learned that those who want DB plans to continue as a viable pension benefit option are prepared to look for ways for members to share the risk with the employees. He said they have also learned that multi-employer pension plans (MEPPs) are not the same as DB plans and should not be treated as such. The panel is to report to the ministers of both provinces on November 14.

Benefit Plans Need Governance

The time has come for benefit plan governance, says Kelly Bourne, of Mercer. Speaking at the CPBI Western Region Fall 2008 Conference, she said increasing costs mean benefit plans are growing in significance. In fact, in some cases, the cost of benefit plans for the employer is higher than the cost of pension plans. Having a good governance plan in place can make sure that the dollars being spent are optimized and the risk is controlled and minimized, she said.

Shepell-fgi Earns Award

Shepell-fgi has been awarded the Canadian Project Excellence award in Leadership Excellence. The award recognizes outstanding leadership and sponsorship that results in improved project results and enhanced organizational productivity. Shepell-fgi's Continuous Improvement Initiative won the award because it positively and radically changes the mind-set of all employees, from the frontline to senior leadership.


Thursday, October 9, 2008

Transition Management Tools Discussed

As pension plans expand their global approach and as market volatility continues, transition management is growing in complexity, says Jamie Cashman, managing director, Mellon Transition Management. At a breakfast hosted by CIBC Mellon, he discussed how transition planning tools have evolved to respond to plan sponsors’ increased demands. To ensure a transition’s transparency, the benefits of the ‘T Standard’ and the ‘T-Charter’ were examined, along with ‘Dark Pools’ as sources of liquidity. The use of derivatives to offset effects of cash drag, to rebalance plan allocations, or to move alpha from one asset class to another were also discussed as beta management solutions.

RBC Revises Outlook Downward

The persistent turmoil in financial markets and disappointing economic trends over the past two quarters have prompted RBC to revise downward its growth outlook for Canada to 0.9 per cent from 1.4 per cent. RBC Economics expects Canadian economic growth to rebound slightly in 2009 to a moderate 1.5 per cent. "The continued weakness in the U.S. economy is expected to dampen growth in Canada," says Craig Wright, senior vice-president and chief economist, RBC. "However, this pressure on our growth will be tempered by strong commodity prices which are contributing to robust export revenues and providing support to Canadian domestic spending via a boost to incomes."

Participation In Retirement Plans Increases

The percentage of U.S. workers participating in an employment-based retirement plan increased significantly in 2007 for the first time since 1998, with the increase affecting virtually all categories of workers, says a study by the Employee Benefit Research Institute (EBRI). Specifically, the percentage of all workers participating in an employment-based retirement plan increased from 39.7 per cent in 2006 to 41.5 per cent in 2007. The study notes that retirement plan participation trends increased significantly in the late 1990s and then decreased in 2001 and 2002. In 2003 and 2004, the participation trend flattened out. The level of participation subsequently declined in 2005 and 2006 before increasing in 2007.

Session Looks At Savings Plan Developments

‘Recent Developments Affecting Registered Savings Plans’ will be examined at a CPBI Manitoba region breakfast October 23 in Winnipeg, MB. David Ablett, director, tax and retirement planning, with Investors Group, will examine topics such as pension income splitting, locking-in rules, and Tax-free Savings Accounts. For more information, eMail

Retirement Income Time Bomb Examined

Mindpath’s 3rd Annual ‘Top Advisors Investment Strategies Symposium’ will examine ‘The Coming Retirement Income Time Bomb.’ It takes place October 20 in Vaughan, ON. Featured speakers include Malcolm Hamilton, principal and worldwide partner, Mercer Consulting; Thomas Salisbury, professor of mathematics and statistics at York University; and Alan Wicks, vice-president and senior portfolio manager, MFC Global Investment Management. For more information, visit


Wednesday, October 8, 2008

Employers Unprepared For Retirement Wave

While many Canadian employers face retirement levels of 20 per cent or more over the next five years, most admit that they are not fully prepared to deal with this, says the HRPA 2008 survey on the readiness of Canadian businesses for the coming wave of retirement. ‘Are Canadian firms prepared for the boomer exodus from the workforce?’ shows 26 per cent of employers expect up to 20 per cent of their workforce to retire in the next five years and 15 per cent of firms said up to 30 per cent of their staff will hit retirement age within that time. However, only 14 per cent of organizations feel ‘fully prepared,’ while 83 per cent are ‘poorly prepared’ or ‘somewhat prepared.’

Advice Adds Value

Financial advice is becoming more important with the demise of the Defined Benefit pension plan, says Irshaad Ahmad, president of Russell Investments Canada. Speaking at the annual Univeris conference, he said the decline of the DB plans means individuals will be left to rely on their own savings and the Canada pension plan to provide their retirement income. A recent survey shows those who use financial advisors to help them manage their savings for retirement do find they add value.

SEC Studies ‘Mark-to-market’

The U.S. Securities and Exchange Commission is scheduling public roundtables to obtain input into its study on ‘mark-to-market’ accounting. It will meet with investors, accountants, standard setters, business leaders, and other interested parties. The study is required as part of the bailout package for the financial industry. It will focus on the effects of these accounting standards on a financial institution's balance sheet; the impact on bank failures in 2008; the impact on the quality of financial information available to investors; the process used by the Financial Accounting Standards Board in developing accounting standards; and whether it make sense to modify these standards.

Sun Invests In Buffett & Company

Sun Life Financial Group Benefits has made an investment in Buffett & Company Worksite Wellness Inc., a Canadian provider of worksite wellness programs. Buffett & Company will continue to operate as a stand-alone company, headed by Ed Buffett, with Sun Life Financial holding a minority interest. Dean Connor, president, Sun Life Financial Canada; says the move will support its HealthyRETURNS program. HealthyRETURNS helps group benefits plan sponsors reduce health and disability costs and build healthy workplaces.

Oxford Promotes Morrison

John Morrison has been promoted to president, real estate management, at Oxford Properties Group. He has more than 30 years of commercial real estate experience and joined Oxford in 2002. Oxford invests in and manages real estate assets on behalf of OMERS.


Tuesday, October 7, 2008

Immediate Settlement Method Proposed

The Law Commission of Ontario (LCO) is advocating adoption of the Immediate Settlement Method as the primary means of settling pension issues in its recommendations on the division of pensions on marriage breakdown. The LCO's primary recommendation is that when a spouse who is a member of a pension plan decides to use the pension to settle an equalization obligation, the Immediate Settlement Method be used. This requires the valuation of the pension at the date of separation and a transfer out of the pension fund for the benefit of the spouse to whom the equalization amount is owed. It has the advantage of being relatively easy and straightforward.

Gender Influences Retirement Decision

Significantly more men (52 per cent) than women (37 per cent) say they will spend time living abroad in retirement, says a poll by TD Waterhouse. However, healthcare coverage is the biggest factor in their decision to spend time outside of Canada each year. Among all respondents, 45 per cent say they will spend one month or more out of the country annually when they retire. However, women are significantly more concerned about several key factors regarding living abroad including being able to afford to live outside of the country and being worried about being away from family or friends.

Sun Life Sells CI Interest

Sun Life Financial Inc. has sold its 37 per cent interest in CI Financial Income Fund to Scotiabank. Sun Life had acquired roughly one-third of CI since mid-2002 in exchange for selling its mutual fund subsidiaries – Spectrum Investment Management Ltd. and Clarica Diversico Ltd. – to CI. The transaction included a distribution agreement that gave CI preferred access for its financial products among Sun Life's advisers.

Healthcare Costs Batter Americans

Americans continued to be battered by rising healthcare costs this year, with more than half of those with health insurance reporting they experienced higher costs, says the Employee Benefit Research Institute’s 2008 Health Confidence Survey (HCS). Some said the increases adversely affected their household finances and some said the U.S. healthcare system is so flawed that it should be completely overhauled. Despite concerns about costs, confidence about various aspects of today’s healthcare system remained fairly level with findings from the 2007 HCS. One-half (51 per cent) report being extremely or very confident that they are able to get the treatments they need and 42 per cent are confident they have enough choice about who provides their medical care.

Leblanc At Standard Life

Claude Leblanc is senior vice-president, leading the group savings and retirement Business, at the Standard Life Assurance Company of Canada. He will be working actively with the division's sales, member services, and marketing teams to ensure that the company continues to achieve profitable and sustainable growth.


Monday, October 6, 2008

Funds Acquire Global Real Estate

Canadian public and corporate pension funds are increasing their real estate investments outside the country, says a report by global real estate advisory firm DTZ. It says they are, for example, taking advantage of good deals in cash-strapped Europe. Canadian institutional investors bought more than $10 billion in real estate last year in the U.K., Germany, France, and Russia, as well as the U.S. and Australia.

Employee Not Bound By Notice

The Ontario Court of Appeal has determined that an employee was not bound by two years’ notice of a fundamental change to his terms of employment, says a ‘Fasken Martineau Pensions and Benefits Bulletin October 2008.’ In Wronko v. Western Inventory Service Ltd., it says two statements in the judgment raise particular concern for changes to pensions and benefits. The court does not accept that an employer has any unilateral right to change an employment contract or that by attempting to make such a change it can force an employee to either accept the change or quit. The court also noted that the third situation described above may arise particularly when the unilateral change does not have an immediate impact on the employee, as in the Wronko case. In light of this, if a proposed change is announced and employees object, the employer’s response may be critical to the ability to impose the change without being exposed to wrongful dismissal claims. Mere notice of the change may not suffice, regardless of the length of notice.

Access To Credit Diminished

Marking the start of a new and dangerous phase of the global financial crisis, even the biggest and strongest U.S. companies are reporting difficulty accessing essential credit, says research from Greenwich Associates. A Greenwich Associates survey of U.S. companies reveals that companies of all sizes and credit ratings are seeing their access to both short and long-term financing sharply diminished. In past market downturns, U.S. banks have drastically pulled back on their credit commitments to the least qualified borrowers, but they largely continued to generate revenues by extending loans to companies with solid, investment-grade ratings. "What we are now experiencing is something different and deeper than perhaps anyone imagined," says Steven Busby, a Greenwich Associates consultant. "This is a true crisis of liquidity – even the strongest companies are struggling to get short-term financing. It may not be long before companies are forced to curtail operations due to lack of funding and the full consequences of this crisis become evident in the broad economy."

Funds Review Securities Lending

Pension funds are reviewing their securities lending activities, says a report. It says stock lending has acted as a lubricant in recent years, oiling the wheels of markets and providing a modest boost to the revenues of asset managers and pension funds in the process. Now, however, Calstrs and Calpers, New York State's Common Retirement Fund, and Dutch peer APG have temporarily suspended the lending of some of their financial stocks. As well, Vanguard, and the Strathclyde pension fund in the UK have temporarily shutting down their entire securities lending program.


Friday, October 3, 2008

Board Issued Fair Value Clarifications

The clarification issued this week by the U.S. Securities and Exchange Commission's Office of the Chief Accountant and the staff of the Financial Accounting Standards Board in relation to fair value accounting requirements is consistent with Canadian accounting standards, says Paul Cherry, chair of the Canadian Accounting Standards Board. The board in Canada has already issued three staff commentaries to help companies apply fair value accounting requirements when dealing with this country's own liquidity crunch. These commentaries provided companies with guidance on how to report to investors on their holdings of Asset-Backed Commercial Paper. The first was issued almost a year ago. Board staff is considering expanding the commentary guidance to cover a wider range of investments, he says.

Pension Governance Needs Strengthening   

An international network of finance sector professionals is calling on the Organisation for Economic Cooperation and Development (OECD) to strengthen its draft guidelines for pension fund governance for long-term value creation. The Network for Sustainable Financial Markets network is especially concerned that financial system incentives be better aligned with the establishment of long-term fund investment objectives. The OECD guidelines were put out for public review prior to distribution as international benchmarks for pension funds.

Fitzpatrick Now COO

Sue Fitzpatrick is chief operating officer, Best Doctors Canada Inc. Spanning a career of over 25 years, she has held senior level positions at both large multi-national and smaller growth companies in Canada. She joined Best Doctors in June of 2007 as vice-president of business relations.

Marcoux Joins Fortis

Vincent Marcoux is vice-president, institutional sales and client services, Quebec and Eastern Canada, for Fortis Investment Management Canada Ltd. (Fortis Investments). Prior to joining Fortis, he worked for a European bank and key institutions such as SNC-Lavalin Group and the Montreal School Board Pension Plan.

McGinty Now Vice-president

Ian McGinty is executive vice-president, human resources, at Bruce Power. He joined Bruce Power in 2007 from Johnson & Johnson (J&J), where he was global vice-president of employee engagement. He held a number of executive level roles of increasing responsibility in logistics, production, quality management, and human resources with J&J and, prior to that, General Motors.

Economic Crisis Examined

‘The Economic Crisis: What Happened, Why and What’s Next?’ will be the topic of an Economic Club of Canada session October 6 in Toronto, ON. It will feature Don Drummond, chief economist, TD Bank Financial Group; Warren Jestin, chief economist, Scotiabank; Avery Shenfeld, senior economist, CIBC World Markets; Craig Wright, chief economist, RBC Financial Group; and Douglas Porter, deputy chief economist, BMO Capital Markets; will be the panel. For more information, visit

CVCA Looks At International Networks

Issues and strategies in building international networks will be examined at a CVCA – Canada's Venture Capital & Private Equity Association session October 15 in Toronto, ON. ‘Global Customers, Investors and Acquirers: Do or Die’ will feature speakers including Scott Aldsworth, vice-president and east coast regional director, High Street Partners, Inc.; and Maggie Fox, CEO, Social Media Group. For more information, visit

Committee Members Learn Essential Skills

Essential Skills For Pension Committee Members’ will take place November 12 to 14 in Toronto, ON. Areas examined include retirement income planning considerations for employees with a DC pension plan and developing an understanding of the trustee’s roles and responsibilities. For more information, visit


Thursday, October 2, 2008

New Plan Includes Tax Breaks

The U.S. Senate has approved a reworked bailout plan for U.S. financial institutions. The new plan includes tax breaks for millions of middle-income Americans and a temporary increase in the deposit insurance cap. The plan now goes to the House of Representatives which is expected to vote on it Friday.

Hedge Funds Not Primarily To Blame For Collapse

A majority of institutional investors think the U.S. Securities and Exchange Commission, the U.K. Financial Services Authority, and other global regulators should permit the short-selling of financial stocks, but most large companies support the ban imposed earlier this month. A Greenwich Associates survey found more than 60 per cent of survey participants say the short-selling of financial stocks should be allowed, nearly a quarter say the practice should be banned, and almost 15 per cent are uncertain. However, opinions diverge sharply between institutional investors and large companies. Only 32 per cent of large companies think the shorting of financial stocks should be permitted, with a solid majority supporting the ban. While slightly more than 45 per cent of pension funds say investors should be able to short financial stocks, nearly 40 per cent support the regulators’ decision.

Canadian Regulators Look At Mark-to-market

Canadian regulators are looking at a U.S. guidance on applying new accounting rules which grants banks and other companies more flexibility, says a report in The Globe and Mail. The mark-to-market or fair value rules are being blamed for exacerbating the financial market crisis in the U.S. They require companies to record the current market value of their assets each quarter, making balance sheets far more vulnerable to market volatility. However, much of what the U.S. is looking at was already considered in Canada during the asset-backed commercial paper meltdown. It looks at methods for valuing distressed securities in inactive markets, which has already been the case in Canada's ABCP sector for over a year. However, securities regulators here will discuss the need to further extend the guidance with Canada's Accounting Standards Board.

Teachers’ Reduce Inflation Protection

The Ontario Teachers' Pension Plan will cut back on inflation protection for some future retirees to eliminate a $12.7 billion funding shortfall. Instead of the current 100 per cent adjustment for the cost of living, inflation increases for pension credit earned after 2009 will range from 50 to 100 per cent, depending on the financial health of the plan. A survey of its members indicated that they preferred the scale-back of inflation protection to other options – a 10 per cent cut in future benefits or raising the full retirement requirement for age plus years of service to 90 from 85. Inflation protection accounts for about 25 per cent of the cost of pensions. Current pensioners will continue to receive full cost-of-living shelter.

Man Opens Calgary Office

Man Investments has expanded its national presence in Canada by opening an office in Calgary, AB. The new location will act as a hub to Western Canada, and will facilitate its ability to foster relationships with clients and distribution partners across the country.

Morneau Purchases Leong

Morneau Sobeco Income Fund has purchased Leong & Associates Actuaries And Consultants, of Vancouver, BC. Leong & Associates was one of the largest independent actuarial and pension consulting firms in Western Canada. Its current employees will become employees of Morneau Sobeco.


Wednesday, October 1, 2008

U.S. Assessing Fair Value

The U.S. Securities and Exchange Commission’s Office of the Chief Accountant and the staff of the U.S. accounting standards board, FASB, are consulting with investors, accountants, and auditors on the application of fair value measurements in the current market environment. Fair value critics argue that the application of fair value accounting has increased the pressure on firms amid illiquid markets. They have called for regulators to suspend its use for financial institutions. The bailout package voted down in Congress included a provision restating the authority of the commission to suspend the application of fair value accounting and to study the issue.

Global Investors Backed Bailout Plan 

More than 60 per cent of institutional investors, large companies, and pension funds around the world think the $700 billion government bailout plan rejected by the U.S. House of Representatives would have a good chance of restoring stability to financial markets if implemented, says a survey from Greenwich Associates. And, nearly two-thirds of survey respondents believe that some form of government intervention will be required to shore up markets. “Less than a quarter of respondents say they are confident that the free market can correct itself,” says Greenwich Associates consultant Peter D’Amario.

Turmoil Impacts DC Plans

The unprecedented events taking place in financial markets are forcing plan sponsors to re-evaluate investment offerings and address employees' concerns regarding the safety of their retirement savings, says the Buck Alert ‘Financial Market Turmoil: What DC Plan Sponsors Need to Consider.’ It says sponsors need to take a measured response involving the three key elements that they sponsor should incorporate into their monitoring role – investment review, proactive employee communications, and an effective fiduciary governance structure. For example, recent events should prompt prudent fiduciaries to undertake an immediate review of their investment alternatives, particularly the investment options long considered to be low risk, for exposure to distressed obligations and ailing financial institutions and insurers. Fiduciaries and plan sponsors may also want to communicate with employees to allay their fears, and leverage this unfortunate event to remind employees about the importance of diversification, rebalancing, and dollar cost averaging.

Standard Life Takes Management Of Funds Online

The Standard Life Assurance Company of Canada’s retail markets division has teamed up with Standard Life Investments to launch a ‘Focus on Funds’ website. With this new video tool, advisors and investors will now be able to learn more about how mutual and segregated funds are managed by SLI’s portfolio managers in Canada and around the world. For more information, visit

Making Health Management Value Based

Value based health management will be the topic at the next Benefits Breakfast Club session. It will examine the value based health management program that has been developing in the United States. Steve Priddy, director, employee relationship initiative for value based health benefits at the Institute for Health and Productivity Management, will explain what makes a plan value based and talk to the financial and health benefits it offers to employers and employees. It takes place October 30 in Burlington, ON. For more information, visit

Healthy Footprint Explained

Successful organizations have a few things in common – healthy work cultures, healthy communication, healthy people strategies, and a healthy organizational footprint. The Health Work & Wellness Conference October 15 to 18 in Calgary, AB, will provide access to tools and resources to create a healthier, more productive workplace. Sessions will feature researchers and practitioners who have developed successful organizational health strategies in Canada and abroad. For more information, visit

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