Eighty-nine per cent of defined benefit plan sponsors believe that Canada’s pension system is either poorly positioned or average when it comes to Canada’s future pension prospects.

The survey, conducted by RBC Dexia to gauge the opinions of Canada’s defined benefit pension plan sponsors on key issues in the pension industry, was released Monday.

In October 2009, RBC Dexia Investor Services surveyed 370 Canadian pension plan sponsors from coast to coast, with pension plan assets ranging from less than $100 million to over $1 billion.

“Whether due to recent market volatility or a lack of a unity from federal and provincial regulators, it is evident that defined benefit plan sponsors are finding it difficult to be optimistic about their ability to meet future pension obligations,” says Scott MacDonald, head, pensions, financial institutions and client service for RBC Dexia.

Although 41% of respondents cite investment risk as the type of risk they are most concerned with, shortfall risk (the risk of pensions not generating sufficient returns to offset obligations) ranks a close second, at 36%. This reflects the natural correlation between both risk factors-where negative or reduced investment returns dramatically influence plan shortfalls.

To understand what might be adding to the pessimism among plan sponsors, the survey asked respondents to identify their single biggest challenge in 2010.

Almost half, 48% indicated that their main focus will be on aligning future liabilities with assets, while 38% said they expected low returns to continue to be a significant challenge. Seven per cent of respondents believe the introduction of a new style of pension plan accounting standards (International Financial Reporting Standards) will be their biggest challenge in 2010, while 4% believe it to be understanding new instruments and alternative investments.

While plan sponsors were generally pessimistic about the current Canadian pension system, the survey revealed that 72% of respondents rank Canada’s pension system as equal to, or better than other systems globally.

IE