Canadian Defined Benefit (DB) plans are beginning to show improved solvency while Canadian Defined Contribution (DC) plans are slower to rebound.
After years of increased deficit funding by plan sponsors of both DB and DC plans across the country, a recent index from Towers Watson highlights the disparity between the health of the two.
Towers Watson’s latest DC Retirement Index — a benchmark that shows the impact of changes in capital markets, returns and annuity purchase prices on the potential retirement income of a Canadian worker in a DC plan — found that although market gains and rising bond yields have benefited both DB and DC plans as of late, differences in funding design and the actions of plan sponsors resulted in the discrepancy between the two.
The index shows a slight increase in monthly pension, from a low of 13.4 percent of monthly wage in November of 2012 to 15. 2 percent in September of 2013 for Canadian DC plans. When compared to a high of 22.3 percent in December of 2007.