Pension Industry Has Critical Role
Policies being put in place today for an aging population assume workers are done at 65 and the state has to provide pensions, says Bob Rae, a former premier of Ontario who is currently working as a lawyer, mediator, and an arbitrator with particular focus on first nations issues. In the ‘Spotlight on Bob Rae’ session at the Association of Canadian Pension Management (ACPM) 2017 National Conference, he said politicians need to realize the architecture they are trying to create will “not get us to where we want to get to in the next 40 years.” The first politician to effect a universal state pension policy was Otto von Bismarck who introduced state pensions in Germany in 1889 for people who turned 65. However, life expectancy at the time was 57, said Rae. Today the demographics are quite different and although people are getting older, they are a lot healthier and living a “whole lot longer.” He also said changes to enhance the Canada Pension Plan won’t do very much for the huge Baby boom bubble that has moved through society for the last 65 years. This makes the pension industry critically important in helping to get through the next 20 years as the “old model of work and then no work doesn’t work anymore. People are more flexible in how they are working. There is more precarious work and part time work and there are those who don’t want to stop working and those who can’t work anymore,” he said.
Changes Coming For Travel Insurance First Payer
Changes are occurring in some travel insurance contracts regarding which policy should pay first when there is multiple coverage, says a Morneau Shepell ‘News & Views.’ Travelers are often insured under more than one plan as coverage may be included within a plan member’s group insurance plan, a spouse’s group insurance plan, credit card insurance coverage, an individual policy, or may be purchased separately through a travel agent. Traditionally, the insurer who is contacted first in the event of an emergency situation processes the claim. However, recently, some group insurers have added a provision in their travel insurance policies stating that they will only pay for expenses that are not covered by the plan member’s other travel insurance policies. This is referred to as an ‘excess coverage clause.’ In other words, they become the last payer when the plan member has group or individual travel coverage under more than one plan. Plans without a similar provision are at a disadvantage, requiring them to cover the bulk of the expenses claimed. It can be expected that more travel insurance providers will implement an excess coverage clause which could add some confusion to the claim payment process. For plan sponsors implementing an excess coverage clause can be expected to eventually reduce the cost of travel insurance included in group benefit plans.
Target Benefit May Be Solution
Target benefit plan may be the way to improve pension coverage and maintain defined benefit pension plans in the private sector, says Paul Owens, deputy superintendent of pensions for the government of Alberta. Speaking in the ‘Finding the Mountain Pass – Exploring Routes to Innovation’ session at the Association of Canadian Pension Management (ACPM) 2017 National Conference, he said the main causes of declining pension coverage and of private sector DB plans are accounting and solvency. Yet, solvency is a 21st Century issue caused by three financial downtowns since 2000. Converting to target benefit for future service and, when legislation allows, for past service would address this because the pension expense would be treated like a defined contribution plan removing volatility for the sponsor. For DC plans, he suggested pooling small plans into larger plans or creating multi-employer DC plan to reduce costs. As well, he recommended having investment decisions made by the plan sponsor or a board of trustees to improve outcomes. William da Silva, a senior partner and practice director for Aon Hewitt’s retirement business in Canada, said a lot of plan design innovation is coming from thinking about the risk framework. Plan design, funding strategy, assumptions and methods, and investment policy can all be adjusted to manage risk. However, one cannot be changed without the others because all affect the risk profile of a plan. As well, a lot of the innovative thinking is on how to make DB more like DC and DC more like DB, as is the case with target benefit plans. The staff pension plan at the University of British Columbia actually is a target benefit plan, said Orla Cousineau, executive director, pensions, at the university. The key factor in moving to a target benefit plan is making members understand and get a consistent message that benefits could be adjusted if the plan is underfunded or overfunded. It has always been transparent around “the plan design” with risks always clearly communicated to members. As well, it has always focused on the long-term sustainability of the plan.
DC Rise Blurs Lines
The rise of defined contribution and auto-enrolment is blurring the lines between institutional and retail investors, says the Investment Association (IA). Its 2016 annual survey shows new and growing DC schemes in the UK were classified as institutional investors for the IA’s purposes, but often behaved more like retail investors because individual members bore the investment risk. Although the IA does not have specific concerns about these difficulties, Anastasia Petraki, head of research and statistics, says it is important to ensure equivalent governance standards for defined benefit and DC schemes.
Decumulation Engagement Should Start Earlier
Employers need to engage plan members sooner and stop using rules of thumb when it comes to helping them prepare for the decumulation stage of their retirement, says Derek Wolfe, director of transition and retirement solutions at Manulife Financial. In the session ‘Making Sense of Decumulation’ with Jillian Kennedy, a partner and leader of defined contribution and financial wellness strategy for Mercer (Canada) Limited, at the Association of Canadian Pension Management (ACPM) 2017 National Conference, he said 68 per cent of Capital Accumulation Plan (CAP) assets are held by Canadians who are 46 or older and likely within 20 years of retirement. However, the accumulation stage is easier than the decumulation phase. The savings phase targets average returns by making investments that are right for the member who only needs to stay invested. The retirement phase sees them starting to make withdrawals which means they have to choose a retirement income option and decide when to take money out of plan. However, Canadian pre-retirees are either unsure of the income they will receive in retirement or how much income they will need. Kennedy said this will become more important going forward because as the defined benefit plan market shrinks, the defined contribution market is growing. Within 10 years, they will account for half of the assets in retirement plans in Canada. In the beginning, the focus was on accumulation and there was extreme inertia when employees reached retirement with plan members left on their own. Now plan sponsors need to develop their own decumulation plans to help with the transition. However, the challenge for sponsors today is that they are looking for protection as there are no safe harbours or mitigation of fiduciary duty. For plan sponsors, there also needs to be an alignment with their cultural objectives and talent strategies. For plan members, decumulation plans need to be flexible to meet their personal situations and provide the experience and expertise they lack. For both, there needs to be fee transparency and access to support and information.
Investors More Aggressive With Governance
Institutional investors were more aggressive with governance activism in the 2017 proxy season, says a report from PricewaterhouseCoopers and Broadridge Financial Solutions. Based on the analysis of 3,379 shareholder meetings held in the first half of 2017, the report said climate change proposals specifically gained momentum, with money managers like BlackRock publicly supporting proposals at several companies after not having done so previously. Overall, seven climate change proposals received at least 40 per cent shareholder support this season, compared with none in the 2016 proxy season. Institutional shareholders voted 66 per cent of their shares in favour of those proposals, compared to 13 per cent of retail shares. Across all categories, institutional shareholders generally were two to three times more supportive of proposals than retail shareholders.
ACPM Honours Volunteers
Serge Charbonneau, a partner in the pension consulting practice at Morneau Shepell; Chris Brown, president and chief executive officer of the Alberta Local Authorities Pension Plan; and Michel St-Germain, a partner at Mercer; were honoured with volunteer recognition awards at the 2017 Association of Canadian Pension Management (ACPM) National Conference. Charbonneau earned the Regional Council Award. He is chair of the federal council and a member of the Québec regional council. As federal council chair, he hosted a webinar on marriage breakdown and met several times with the department of finance and OSFI. He also addressed issues such as solvency rules; annuity purchases and Bill C-27; and OSFI’s disclosure guidelines and valuation guide. As a member of the Québec regional council, he worked on Canada Pension Plan (CPP) expansion and various Canada Association of Pension Supervisory Authorities (CAPSA) initiatives and issues. Brown was named the winner of the Don Ireland award. He served as co-chair of the Alberta-British Columbia Joint Expert Panel on Pension Standards; was a member of the Stakeholder Task Force on Common Pension Standards for CAPSA; was a former president and chair of the ACPM board of directors; and is a current member of the ACPM’s national board of directors, executive committee, national policy committee, and national conference planning committee. The award is in memory of the late Don Ireland, a long-time employee at Aon Hewitt and a vice-chair and member of the association who passed away suddenly last year. St-Germain was given the ACPM Industry Award. His practice at Mercer includes the development, financing, and administration of pension plans for organizations of various sizes and industry sectors. He is chair of the pension advisory committee of the Canadian Institute of Actuaries and sits on the ACPM national policy committee and executive committee. Over the past two years, he has been involved with the ACPM NPC subcommittees on a voluntary CPP, FSCO actuarial guidance, CPP expansion, and Ontario funding reform.
Shift To Passive Will Continue
Most portfolio managers, both active and passive, believe the shift toward passive strategies will continue for many years, says a report by Greenwich Associates. Of the asset management executives surveyed, 55 per cent believe this institutional shift of assets under management toward passive will continue for several more years before equilibrium. Meanwhile, 14 per cent believe this shift is structural and the long-term result will ultimately be heavily passive. Most active portfolio managers recognize that outperformance is ultimately the best way to compete with their passive counterparts. However, more than 88 per cent of U.S. active large-cap funds underperformed the Standard & Poor’s 500 over the past five years.
Market Value Of Assets Grows
The market value of assets held by Canadian trusteed pension funds topped $1.8 trillion in the first quarter, says Statistics Canada. Asset levels were up 4.2 per cent from the fourth quarter and were 10.5 per cent higher compared with the first quarter of 2016. Pension fund assets held in stocks grew five per cent in the first quarter of 2017, while bond holdings rose 0.7 per cent. Canadian pension funds hold approximately one-third of their assets in foreign investments. Foreign holdings grew 4.2 per cent in the quarter. Over 6.2 million Canadian workers belonged to employer-sponsored pension plans in the first quarter. Of this group, 5.2 million or 82.7 per cent belonged to pension plans with assets managed by trusteed funds, while the remainder had assets managed by insurance company contracts.
Teachers’ Acquires Airport Ownership
Arbejdsmarkedets Tillægspension (ATP), Macquarie Infrastructure and Real Assets (MIRA), and Ontario Teachers’ Pension Plan (Ontario Teachers) will change the ultimate shareholding of Copenhagen Airports A/S (CPH). Following a strategic review of MIRA’s investment in CPH, it offered for sale its securities in Kastrup Airport Parents ApS (KAP), a holding company which indirectly holds a 57.7 per cent ownership in CPH. Ontario Teachers’ has exercised its preemptive right to acquire that stake. Ontario Teachers’ has partnered with the Danish pension plan ATP which will provide the financing to fully fund the transaction. As a result of the transaction, ATP will become a direct shareholder in KAP and, together with Ontario Teachers’, the two will hold an indirect ownership of 57.7 per cent of CPH.
Langlois Has New Role
André Langlois is senior executive vice-president, life and health insurance, at Desjardins Financial Security Life Assurance Company. He has been with Desjardins Group for nearly 30 years and has held a variety of roles in areas such as product development, marketing, and individual insurance. Most recently, he served as executive vice-president, individual insurance.
Real Asset Performance Examined
‘Are you “Really” Outperforming with Real Assets?’ will be examined at a CFA Society Toronto session. A panel of Gavin Ingram, co-head and managing director at OPTrust; Jodie M. Gunzberg, global head of commodities and real assets at S&P Dow Jones Indices; and Timothy Bellman, head of global research for Invesco Real Estate will discuss the special characteristics of real asset indices. Topics include the major approaches of benchmarking the real assets and their pros and cons; the impact of different benchmarking approaches on the portfolio’s asset allocation decisions and investment managers’ decisions; and how choosing certain benchmark results in different investment strategies and evaluation of manager outperformance. It takes place September 21 in Toronto, ON. For information, visit Real Assets
Windup Decision For Sears Postponed
A motion to wind up the Sears Canada pension fund has been postponed. However, an Ontario Superior Court Justice also ordered that other creditors in the company’s insolvency are not to be paid until the issue is addressed. There are approximately 18,000 retirees and beneficiaries of the Sears Canada Plan, which is underfunded by about $270 million. Since November 2014, a group of 6,000 retirees has been requesting that the defined benefit part of the plan be wound up in order to disengage it from the failing company. Winding up the plan would require the company to pay the full amount of the deficit and could also trigger a payment into the plan by the Ontario Pension Benefits Guarantee Fund (PBGF) that would help offset its underfunding. Sears Canada filed for creditor protection on June 22 in order to restructure. It is closing 59 stores and eliminating 2,900 employees in an effort to emerge as a slimmer, profitable business.
Rules Of Thumb Don’t Help
The rule of thumb that people need to replace 70 per cent of income for retirement has little value when it comes to financial planning, says Bonnie-Jeanne MacDonald, an actuary, academic researcher at Dalhousie University, and resident scholar at Eckler Ltd. Speaking at the Association of Canadian Pension Management (ACPM) 2017 National Conference on ‘Generation Next: Meeting the Evolving Retirement Needs of the Canadian Workforce,’ she said her research shows they are harmful and don’t even help when planning for retirement because “a little bit of knowledge is a dangerous thing.” If people don’t feel they understand something, but feel strongly about it, they will deal with the problem from every angle to find a solution. However, those with a little bit of knowledge will not do that, they will just depend on the little bit they know. Compounding this is that rules of thumb are not being scrutinized despite the uncertainty which is being created because the population is aging, the ratio of retirees to workers is shrinking, Canadians are less likely to have pension plans and if they do they are defined contribution which is less reliable, and they are living longer so they need to spread their money out over a longer period of time. All of these mean retirement planning really matters and Canadians need to base their retirement planning on their financial circumstances, not rules of thumb.
Saskatchewan Introduces LLPs
Saskatchewan has introduced the concept of a limited liability plan (LLP). These are defined benefit pension plans where the employer’s liability with respect to funding of the plan is limited to the amount provided for in the plan pursuant to a collective bargaining agreement. Amendments to its Pension Benefits Regulations remove the requirement for these plans to fund solvency deficiencies; require provision for adverse deviations to be funded on the current service cost; require plan administrators to provide additional communication to plan members; restrict increases to pensions in pay; allow LLP pension plan contracts to be amended to provide the option to calculate commuted values (CV) based on the plan’s going concern assumptions and to permanently decrease the CV to the funded position of the plan; and provide that the transfer deficiency rules apply only to benefits being paid under a defined benefit provision that is subject to the Canadian Institute of Actuaries recommendations for discount rates used for commuted values. The amendments also clarify the treatment of funds held in locked-in retirement accounts and prescribed registered retirement income funds where the funds originated from a pooled retirement pension plan (PRPP).
Demand For Alternatives Creates Risk Of Overpaying
Investors need to take a breath when it comes to moving into alternative investments, says Marc Williams, an institutional portfolio manager at Leith Wheeler Investment Counsel. Speaking on ‘Are Alternatives a Double-Edged Sword?’ at the Association of Canadian Pension Management (ACPM) 2017 National Conference, he said people are getting ahead of themselves. There is huge demand for alternatives and when there is this kind of demand investors need to ask if they are overpaying or may end up overpaying. This is seen over and over in the history of investment, he said. The demand is growing for alternatives because investors don’t like bonds right now because they are not returning very much and regulators are pushing for mark to market in public investments making private alternatives an attractive option. However, investors are adding complexity and fees to their portfolio using metrics like liquidity that really haven’t been tested. Even the extent of the diversification they provide bears scrutiny, he said. Eric Bonnor, a specialist in infrastructure , timber, and agriculture at Brookfield Asset Management, suggested that blending private and public alternatives could improve returns. This approach would enhance liquidity by managing capital between private and public and improving consistency in exposure. This is a potentially sensible strategy in light of liquidity constrains that surface during periods of upheaval. As well, it creates the ability to add value through dynamic allocation and opportunistic investment. Also to be considered are the low correlations between public and private investments and the differences in return drivers.
Investors Turning To Low-vol Strategies
Low volatility (low-vol) equity strategies are capturing the attention of institutional investors, says Julien Palardy, vice-president and director at TD Asset Management (TDAM). Speaking at TDAM’s ‘Investment Review Day 2017,’ he said there are typically two categories of institutional investors. One is hesitant to move towards a low-vol strategy because they are measured against a benchmark and their jobs are actually at risk if they underperform for long periods of time. The other type is aware they should care about downside protection. “The majority of our institutional investor-base are pension funds who understand they should care about their risk against their liability. They have a stream of liabilities and they want to minimize the variants of volatility against that. One way to do this is to buy bonds, but if you care about your expected return over the long run, you need some value-added with some exposure to equities. The best way to minimize your risks against your liabilities is to go with low-vol,” Palarday said.
Focus Needed On Retirement Security For Modest Earners
More focus needs to be put on retirement security for modest earners, says Alex Mazer, founding partner at Common Wealth. In the session ‘Changes and Choices – The New Economy and Plan Design Considerations’ at the Association of Canadian Pension Management (ACPM) 2017 National Conference, he said these are people who not middle class, but not living in poverty. While they may be able to save something for retirement, they likely cannot do so at 10 to 20 per cent of pay. And while they have a reasonable likelihood of being GIS-eligible, the GIS “clawback” has a punitive effect on lower income savers. In fact, they can face a marginal tax rate in retirement of almost 100 per cent. This makes advising a low income person to save within an RRSP, for example, very bad advice. Andrew Cash, co-founder and president of the Urban Worker Project, warned that the reality of work in the 21st Century is that there is a growing number of independent workers such as freelancers and contract workers. In fact, the majority of jobs being created in the Canadian economy are of this nature in both the private and private sectors. However, the jobs come without benefits and income security measures for periods when these workers are between jobs. And while some of these people prefer to work as independents, many would rather have a permanent job with pensions and benefits. However, many independent workers doubt they will ever have a pension so they are investing in their health so they can work longer. How we talk to young people about retirement has to change, he said, and they need to be given access to workplace pensions and benefits. Mazen Shakeel, vice-president, market development, at Sun Life Assurance Company of Canada, told the session people are finding it difficult to save for retirement because they are saving for other things and saving is constrained, for example, by household consumer debt which is at its highest level ever. Retirement savings need to be repositioned as just savings so people learn saving discipline. Once they have learned that discipline, they will be able to save for retirement, he said, and plan sponsors need to design plans with flexibility to meet the needs of their workforce.
Ontario Allows DB Portability
Several pension reforms have taken or will take place in Ontario including portability, new superintendent powers, and regulation around missing members, says Peggy A. McCallum, a partner with Fasken Martineau. She told the its ‘Pensions and Benefits: Key Issues and Strategies, seminar that effective March 1, portability was permitted in Ontario for defined benefit pension plan members who have reached normal retirement date. Importantly, plans must expressly provide for portability if the member is retirement eligible, she said. The Pension Benefits Act also has draft regulations to give the Superintendent the authority to impose administrative monetary penalties (AMPs) for violations of the PBA. As for missing members, the superintendent may waive the requirement to provide biennial statements to former and retired members where the members are missing. McCallum said FSCO is to develop a policy on the steps to be taken to locate missing members.
YSB Plan Wants To Merge With CAAT
The Youth Services Bureau of Ottawa (YSB) Pension Plan will merge into the CAAT Plan as of January 1, 2018. The YSB merger will be similar to the Royal Ontario Museum (ROM) plan merger in 2016, which was the first of its kind to use the then new Ontario regulations permitting the merger of single-employer pension plans with a jointly sponsored plan. Those regulations require YSB Pension Plan members to vote on the proposal. The merger is consistent with the CAAT Plan governors’ priorities of benefit security and contribution rate stability. As with the ROM Plan merger, the YSB Plan merger does not change pension benefits or the provisions of the plan. The organization is one of Ottawa’s largest and most comprehensive non-profit agencies serving individuals 12 years of age and older. The YSB maintains a fully funded, $33 million defined benefit, single employer pension plan (SEPP) for its employees.
Current Landscape Meets Needs Of Boomers
The current retirement savings landscape was created to meet the needs of Baby Boomers and Gen-Xers and needs to change as Millennials become the biggest percentage of the workforce, says Bita Jenab, the founder of RetirementWorks. In the session ‘Engaging the Disengaged’ at the Association of Canadian Pension Management (ACPM) 2017 National Conference, she said an increasing wealth gap and lower income means Millennials are living from pay cheque to pay cheque. This means budgeting should be a focal point in their financial education as they have to balance consumption versus expenditures. Since they are a mobile workforce driven by money and promotion as opposed to loyalty to employers, sponsors need to get rid of everything paternalistic like locking in and need to provide benefits that are portable and help them reduce student debt, save for a house, and, after that, they can focus on retirement This makes saving for retirement just one part of their financial situation. Jackie Patel, director of marketing and sales support, group retirement services, at Desjardins Insurance, said providers need to break through in communications especially for Millennials who move quickly between methods of electronic communication. This is where big data comes in. It is not new and has been used for a while, but with the addition of behavioural engines, the industry can tap into the interests, motivation, and knowledge of the various generations in the workplace to analyze behaviour points and calibrate engagement levels for each member.
Sun Life Celebrates Opening Of New HQ
Sun Life Financial Inc. has celebrated the official opening of its new corporate headquarters in Toronto, ON. The 35-storey, 800,000 square-foot office tower is located at One York St. in the city’s south core financial district. The building was designed to achieve Leadership in Energy and Environmental Design (LEED) Platinum certification and features floor-to-ceiling windows, open workspaces, 200,000 square feet of retail, and connection to Toronto’s Union Station and PATH network. It has a ‘Client Experience’ floor, the Ignite Studio at One York, Digital Canvas, and fully agile work environments, with integrated technologies including a 40-foot ‘Skyline Video Wall’ and interactive wall to scroll through news, social media, etc., a ‘People Collage Wall,’ and a ‘Historical Timeline’ with a touch-screen display. “We’re competing not just with traditional insurance companies around the world, we’re competing with digital giants and we’re competing with all kinds of businesses around the world. So, we have to be fast and we have to be innovative,” says Dean Connor, president and chief executive officer of Sun Life Financial.
Two-thirds Of Households Contribute To RPPs
Almost two-thirds of Canadian households contributed to an employer sponsored registered pension plan (RPPs) or tax-sheltered savings in either registered retirement savings plans (RRSPs) or tax-free savings accounts (TFSAs) in 2015, says Statistics Canada. Of these households, more than half contributed to only one plan, while one-third contributed to two plans and 14 per cent contributed to all three. Households with lower incomes were more likely to contribute to TFSAs than to RRSPs or RPPs and contribution rates generally increased with income. Among households with after-tax income below $80,000, a larger proportion contributed to TFSAs (33.8 per cent) than to RRSPs (20.1 per cent) and or RPPs (17.6 per cent). However, households with higher income were generally more likely to contribute regardless of the type of account.
Brilliant Joins First State
Heather Brilliant (CFA) is managing director, Americas, at First State Investments. Prior to joining the firm, she spent 14 years at Morningstar, Inc., most recently as chief executive officer of Morningstar Australasia Pty Ltd. Earlier in her career, she held roles at Coghill Capital Management, Driehaus Capital Management, and Bank of America.
Sullivan Discusses Impact On ASO Plans
Operating outside of the boundaries of the CDIPC pooling solution for insured plans, self-insured (ASO) plan sponsors have had to get creative in addressing the challenges of escalating specialty drug costs and stop-loss premiums, says Mike Sullivan, CEO and co-founder of Cubic Health. He will outline what plan sponsors are doing with plan-specific predictive analytics, custom plan designs, and disease-state based approaches to managing high-cost drugs at the Benefits and Pensions Monitor Meetings & Events ‘Drug Pooling and Supplemental Drugs’ session. He joins Dan Berty, executive director at the Canadian Drug Insurance Pooling Corporation (CDIPC), and Anjila Arora, director of pharmaceutical benefits at Sun Life Financial. Berty will look at the CDIPC’s efforts to maintain the viability of drug plans when they are hit with one time and recurrent high cost drugs while Arora will discuss what’s helping shape tomorrow’s pharma story and impacting drug plan sustainability. It takes place October 17 in Toronto, ON. For information, visit Drug Pooling
Policy Changes Could Improve Outcomes
Policy changes could improve retirement outcomes for younger individuals and/or late savers in the U.S. in defined contribution pension plans, says a State Street Global Advisors (SSGA) ‘Pension Research Council’ working paper. One alternative policy would be to allow individuals to take out partial Social Security benefits rather than obliging them to always take the full benefit. For example, in Sweden, people who have reached the minimum age of eligibility for Social Security (62) can take a 25 per cent, 50 per cent, 75 per cent, or 100 per cent benefit and modify this percentage when desired at an actuarially fair rate. There is also no maximum age by which full payments must start. Another option would be to give people a choice to defer the start of Social Security benefits beyond age 70, to make the most efficient use of Social Security’s cost-efficient longevity insurance. In Australia, for example, eligibility for the Age Pension is based on an asset test, reassessed annually, rather than retirees’ age. People are not eligible for the Age Pension until they have drawn their assets down to a minimum level, after which they receive a flat rate Age Pension for the rest of their lives. Other than Social Security policy changes, the paper suggest mandating automatic enrollment in DC plans and automatically escalating contribution rates would be effective for improving retirement outcomes.
Company Culture Important In Ideal Job
Company culture has significantly moved up the list when evaluating work options and 74 per cent of Canadians are willing to take a pay cut for their ideal job, says Hays Canada’s ‘What People Want Survey.’ These findings reveal that in the four years since the study was launched, overall work satisfaction has declined by 19 per cent and that 89.8 per cent of Canadian employees would consider leaving their current job for something else, up from the 77.6 per cent reported in 2013. While financial compensation continues to dominate career decisions, there has been an 11 per cent drop in how salary is weighted, with Canadians placing increased importance on company culture, up 26 per cent since 2013. In fact, the combination of career progression and workplace culture trump paycheque when it comes to making career decisions. As well, respondents indicated that career training and progression are crucial considerations for job seekers. Three out of the four most sought after benefits are training and development related, with 76 per cent of Generation Y respondents wanting a personal development allowance.
Doughty Leads Manulife
Michael Doughty will take over as president and CEO of Manulife Canada, effective October 1, as part of a number of structural and leadership changes to drive better alignment with its strategic priorities, accelerate its growth, optimize legacy blocks of business in North America, and leverage its talent across geographies. Doughty has served as the interim president and CEO of John Hancock since May and, prior to that, led John Hancock Insurance. He has also held senior positions in Manulife’s Canadian insurance and pensions businesses since joining the company in 1992. It is also creating stronger global alignment and direct accountability for all of its wealth and asset management businesses by bringing them together into a primary reporting segment, global wealth and asset management. Paul Lorentz has been appointed head of global wealth and asset management. He joined Manulife in 1993 and has held a variety of senior roles in its wealth and insurance businesses.
InsurTech Presents Opportunities
While disruptive, the InsurTech movement presents more technology-related opportunities than witnessed before, highlighting the need for traditional insurers to design a balanced strategy which ensures return on their investments in innovation without a loss of focus, says the ‘2017 World Insurance Report’ from Capgemini and Efma. Much like the FinTech movement in banking and capital markets, InsurTech is the application of technology to spur savings and efficiency within traditional insurance industry models. InsurTech explores innovations such as customized policies, social insurance, and using data from mobile devices to dynamically price premiums. Despite their short history, InsurTechs have changed the face of the market. In fact, of the more than 8,000 consumers surveyed worldwide as part of the report, nearly one-third said they rely on InsurTechs either exclusively or in combination with incumbent relationships to access insurance services. Respondents also said InsurTechs have earned a reputation for better value for money and timely, efficient service. However, customers are not ready to walk away from the ties they have long had with incumbents, citing security and fraud protection, brand recognition, and personal interaction as areas in which incumbents performed better. In addition, 39.8 per cent of customers say they trust their insurers, compared to only 26.3 per cent who trust InsurTechs. Insurers agree that the complementary strengths of InsurTechs and incumbents form a solid case for collaboration. In fact, of the senior executives interviewed from various insurance firms in 15 markets, a strong majority (75 per cent) said that developing InsurTech capabilities would help them better meet customers’ evolving demands.
‘Ella’ Coaches Clients
Sun Life Assurance Company of Canada is launching ‘Ella’, an interactive digital coach who will help clients fully utilize their benefits and pension plans. This technology, which will be available first online and through its mobile app soon after, will help clients appreciate the plans provided by their employers like never before, helping them to achieve lifetime financial security and live healthier lives. It was built on its digital benefits assistant, a client engagement platform that was launched in 2016 and uses advanced analytics and big data technology to present an array of ideas to clients at key life moments. Available this fall, it will first appear in the benefits and pension area, providing outbound information, insight, and advice through data analytics. Over time, it will evolve to be increasingly interactive through artificial intelligence and offer a broader scope on healthcare.
Europe Reduces Carbon
The European real estate sector reduced carbon emissions by 3.1 per cent in 2017, more than the global average, says GRESB. Its 2017 data shows tangible improvements in the environmental, social, and governance (ESG) performance of property companies and real estate funds. Highlights include a 1.1 per cent reduction in like-for-like energy consumption, a 2.2 per cent reduction in carbon emissions, and a 0.5 per cent reduction in like-for-like water consumption. The latter was equivalent to 999 Olympic swimming pools, it says.
CPPIB Completes Ottawa Sale
The Canada Pension Plan Investment Board (CPPIB) has completed the sale of its 50 per cent ownership interest in Constitution Square, an Ottawa, ON, office property, to Greystone and Canderel, with the acquisition led by Canstone Realty Advisors. Constitution Square is a three-tower office complex totaling 1.1 million square feet located in downtown Ottawa. CPPIB acquired its ownership interest in 2005. “The continued strength of the Ottawa real estate market provided us with an opportune time to monetize our position in this asset,” says Hilary Spann, managing director, head of Americas, real estate investments, CPPIB.
Blunden Oversees HR Initiatives
Simon Blunden is director, people and culture, at GroupHEALTH Benefit Solutions. In this newly-created position, he will oversee human resource initiatives across the company’s offices throughout Canada. He brings experience from a diverse 20-year career in the human resource field, working in business-to-business and business-to-consumer services in a variety of sectors including communications, hospitality, media sales, and, most recently, in the transportation sector. He specializes in employee relations, performance management, leadership development, recruitment, and compensation and benefits.
Session Examines Benefits Fraud
‘Protecting the Integrity of a Benefits Plan How to Detect and Manage Fraud, Prevent Administrative Errors and Avoid Unnecessary Risk Exposure’ is the focus of a Benefits Breakfast Club session. Joel Alleyne, owner of Alleyne Inc.; Asha Rampersad, a lawyer and human resource advisor at Bernardi Human Resource Law LLP; and Ron Loucks, founder, president and CEO and a director at NexgenRx; will be the featured speakers. It takes place September 22 in Brampton, ON. For information, visit Benefits Fraud
Infrastructure Managers Taking On More Risk
Infrastructure investment managers are taking on more risk – and different types of risk – to match past returns, says Bfinance. In a paper, it says the burgeoning asset class has “entered a dramatically different era” characterized by diminishing returns and a greater diversity of investment options. The emergence of ‘Infrastructure 3.0,’ it says, is raising new questions for investors. “As today’s managers take on more risk and different types of risk to try and ensure returns at least match past performance, investors are grappling with an evolving opportunity set,” it says. “Allocators are increasingly asking whether their manager is overpaying for assets, whether certain funds are too large for their intended strategies, whether an appropriate premium is still available for illiquidity, and how much greenfield or non-OECD exposure is appropriate. Expectations for return, risk, and diversification characteristics should be based on current market realities, not historical results,” it says.
OPTrust Hits 1,000 Trades
OPTrust’s in-house trading floor has accomplished its 1,000th trade. It launched its in-house trading floor in June and over time will internalize public market asset management of approximately 40 to 50 per cent of its assets. Over the past two years, it has developed and is implementing its member-driven investing strategy, which was designed to enhance pension certainty, sustainability, and stability. As part of that strategy, the pension plan decided to manage the majority of its public market assets and strategies in-house. The strategy maintains a focus on aligning the plan’s outcomes with the needs of members. “The 1,000th trade serves as a measurable achievement to the success of OPTrust’s member-driven investing strategy,” says Hugh O’Reilly, OPTrust president and CEO. “This trading activity represents our efforts to increase our understanding of, and response times to, volatile markets as we pay our members pensions.”
Growth More Challenging Today
A survey by State Street Corp. shows 66 per cent of institutional investors believe growth is more challenging to achieve in the current market environment than in the recent past. As well, more than half ‒ 54 per cent ‒ see co-investment as a means of gaining expertise, although over the past five years, nearly a third of asset owners have brought some asset management activities in-house and 23 per cent plan to do so in the next 12 months. However, when bringing more functions in-house, asset owners have faced multiple challenges. More than half of the respondents stated operational resources are being drained because of managing the process, while 57 per cent have struggled to hire the necessary staff. Asset owners over the next year also plan to look to co-investments or joint ventures as a means of accessing new investment opportunities, particularly in illiquid assets. Many are planning to increase their exposure to these illiquid assets ‒ infrastructure, real estate, and private equity.
Delegation Of DC Governance Possible
Mercer has launched a program which will allow the delegation of defined contribution pension and savings plan governance. ‘Mercer Future Wise’ is a part of the private sector’s solution to Canada’s retirement gap. By delegating plan governance to a team of experts, participating plan sponsors will be able to reduce costs, ease plan management responsibilities, and provide participants with access to better outcomes. It also will provide clients with a greater level of insight into their plan members’ engagement levels, as well as doing much of the heavy lifting in implementation and evaluation of client plans, says Jillian Kennedy, a partner and Mercer’s head of defined contribution and financial wellness in Canada. It will take on plan governance work including conducting regular meetings with clients to manage plan design and benchmarking, conducting oversight of all investment managers, and improving outcomes: by helping Canadians make an easier transition from saving to enjoying retirement.
Transition To T+2 Successful
Canadian market participants successfully concluded efforts to transition Canada’s capital markets to a two-business-day (T+2) settlement cycle from a three-business-day (T+3) cycle, says the Canadian Capital Markets Association (CCMA). Implemented in Canada on September 5 in alignment with the U.S. and other markets, the CCMA says the transition required careful co-ordination among hundreds of people and many financial entities in the investment industry in Canada, the U.S., and other countries. “Managing this cutover so smoothly, while Canada’s capital markets industry continued to operate without downtime, is a testament to the people working in many different areas of our capital markets across the country over the past two years, and right through this past Labour-Day weekend,” says Keith Evans, CCMA’s executive director.
Misconceptions Exist Over Retirement Vehicles
One in five Americans incorrectly believes that 401(k) plans guarantee a steady stream of income in retirement regardless of market performance, says a survey by the Indexed Annuity Leadership Council (IALC). Many respondents also reported the same misconception specifically in regards to mutual funds (22 per cent) and certificates of deposit (20 per cent) and only nine per cent are focused on diversifying their portfolios. “If the majority of your retirement savings are in the stock market, when it takes a downturn, the risk of losing it all is real,” the organization said in a statement. “A diversification strategy can ensure balance and provide retirement planning peace of mind.” The survey found that 84 per cent of respondents would be interested in a product that guarantees a steady income stream in retirement. Moreover, 48 per cent said the thing they will miss most in retirement is a steady paycheck.
ISSP Impact Studied
Morneau Shepell will partner with the Jed Foundation (JED), a national non-profit that exists to protect emotional health and prevent suicide for teens and young adults. Morneau Shepell and JED are conducting a year-long study to examine the impact of Morneau Shepell’s specialized International Student Support Program (ISSP), which is designed to complement academic institutions’ on-campus services by connecting at-risk international students with support in their own language and from their own culture through instant 24/7 chat via an app, online, and by telephone, as well as providing ongoing support through telephone and video chat.
Clarke Heads tc
Session Looks At OSFI
Jeremy Rudin, superintendent of financial institutions at OSFI, is the featured speaker at an Economic Club of Canada session. OSFI is celebrating its 30th anniversary and his talk will highlight influential chapters in its history, its impact on the work of Canada’s regulator, and how it will continue to be guided now and into the future. It takes place October 3 in Toronto, ON. For information, visit OSFI Talk
Major Authority Focus Better
A major authority focus is the better approach for funding and asset allocation rules, says the Pension Investment Association of Canada (PIAC). In a letter to the Canadian Association of Pension Supervisory Authorities (CAPSA) on the consultation paper on changes to funding and asset allocation rules under a future multi-jurisdictional pension plans agreement, Kevin Fahey, chair of PIAC, says this ‒ Option 1 in the consultation paper ‒ is significantly less complex for plan sponsors, allows plan sponsors in jurisdictions which have reformed their solvency regimes to fully implement the changes, and puts all employees of the plan on the same footing in terms of benefit security. From a regulatory perspective, Option 1 preserves the philosophy of the major regulator approach and prevents balkanization in the critical area of funding. PIAC has long advocated for greater harmonization of pension legislation across Canada, says Fahey. The approach to pension plan funding under Option 1 is broadly similar to the 2016 agreement. For the funding of a multi-jurisdictional defined benefit plan while it is ongoing, Option 1 would, as a starting point, apply the requirements of the pension legislation of the major authority for the plan instead of the pension legislation of any minor authority. However, if a particular benefit would not be required to be funded under the major authority’s legislation, then that benefit would have to be funded for the plan members employed in that minor authority’s jurisdiction. For the allocation of a multi-jurisdictional DB plan’s assets when a major plan event occurs, Option 1 would allocate the plan’s assets pro-rata to the plan’s liabilities related to each jurisdiction. The consultation paper is at Future Agreement
Nova Scotia Looks At Funding Options
The Nova Scotia government is considering three options for a new funding framework, says a McInnes Cooper ‘Legal Alert.’ The province’s discussion paper, ‘Pension Funding Framework Review and other issues affecting pension plans’ suggests maintaining full solvency funding, but potentially increasing the funding period, establishing solvency reserve accounts, or putting in place other measures to reduce volatility; eliminating solvency funding, but enhancing going concern funding, essentially an approach similar in its basic design to that of Quebec and Ontario; or reducing the solvency funding requirement to less than 100 per cent, an approach similar to aspects of that of Ontario, which could be combined with one of the two other options. Other issues addressed beyond the funding framework include target benefit plans, obtaining an annuity discharge, and harmonizing the investment rules to recent federal changes. Feedback can submitted by November 10 to either email@example.com or Finance and Treasury Board, Pension Regulation Division, Box 2531, Halifax, NS B3J 3N5. The discussion paper is at Pension Funding
Retirement Saving Not Feasible For Middle Income Women
Saving for retirement is not economically feasible for 44 per cent of middle-income women, says a MassMutual survey. This compares to only 14 per cent of men with annual household incomes of between $35,000 and $150,000. It shows 39 per cent of these women and 35 per cent of these men say they do not feel very or at all financially secure and 47 per cent of women say they are not very or at all confident they will be financially secure in retirement. By comparison, 39 per cent of men share these views. The “research indicates that many women in middle America are falling behind when it comes to preparing for retirement and building financial security,” says Teresa Hassara, leader of MassMutual’s workplace solutions. The data indicates an imperative for financial education for middle American workers, especially women who often face greater financial challenges. Many people realize the need for financial education and say they would appreciate their employers making more such resources available, she says.
T+2 Reduces Systemic Risks
The move to T+2 settlement for securities markets in Canada and the United States is expected to reduce systemic risks, enhance efficiency, and reduce costs over the next several years, says Fitch Ratings. Shortening the settlement cycle for most financial products in Canada and the U.S., which took effect September 5 “will reduce operational and systemic risks” between industry counterparties, while also improving the financial system’s capital efficiency, and reducing costs. “Over the long term, this should result in cost savings for trading firms, including trust and processing banks, broker dealers, and buy-side firms. However, the report does say there is some initial operational risk due to the change in processes and industry infrastructure required for a shorter settlement cycle.
Importance Of Nimbleness Grows
The increase in importance of nimbleness for UK pension schemes has jumped from third place in 2016 to joint first in Aon plc’s ‘2017 Fiduciary Management Survey.’ Its key findings show the complexity of the solutions available to trustees and the challenge posed by current volatile markets mean that schemes are increasingly recognizing the value of fiduciary management in delivering timely action. While investment expertise remains the key advantage of fiduciary management ‒ cited by 51 per cent of the respondents ‒ the ability to make swift and incisive decisions is increasingly appreciated, with 51 per cent of pension professionals highlighting this benefit (up from 37 per cent last year).
Fee Guide Step In ‘Right Direction’
The Canadian Life and Health Insurance Association (CLHIA) sees the announcement of a fee guide for dental services in Alberta as a step in the right direction. “However, more work needs to be done to bring fees down to reasonable levels, given that dental fees in Alberta are 26 to 32 per cent higher than elsewhere in the country,” says Stephen Frank, its president and CEO. The CLHIA has been working with the government of Alberta since 2015 to implement changes that would have had a more substantial effect than the two to three per cent savings projected by the Alberta Dental Association and Colleges (ADAC). “In addition to a substantial reduction in dental fees, the CLHIA also strongly recommends that, as is already the case in most other provinces, the ADAC be split into separate entities,” says Frank. “The protection of the public and protection of dentists are conflicting priorities and should not be under the mandate of a single organization.”
Alternative Performance Satisfies
Alternative assets investors have generally been satisfied with the performance of their portfolios in recent years, but high pricing is a concern, says a survey from Preqin. Its ‘Alternative Assets Investor Outlook’ shows across all closed-end private capital asset classes that investors say high pricing is a key challenge facing the industry, with deal flow also a prominent concern. As dry powder has reached record highs across the private capital industry and the number of funds seeking investment has risen, it is becoming an ever-increasing challenge for investors to find attractive opportunities to which they can allocate capital and most are seeking to maintain or increase their allocations over the next 12 months. It shows 78 per cent of institutional investors currently invest in alternative assets and 47 per cent invest in three or more asset classes. The most-targeted asset classes are private equity and real estate, with 56 per cent of investors involved in each.
Online HSA Launched
The Edge Benefits has launched an online health spending account (HSA) capability to accompany its health and dental launch in June. Neil A. Paton, president and chief executive officer, says this capability utilizes the latest technology to enable smart phone expense submission. It based on a ‘pay as you go’ methodology that does not require any upfront funding. It has partnered with myHSA on the project.
CI Acquires BBS
CI Financial Corp. will acquire BBS Securities Inc. and associated entities, including Pario Technology Corp., a financial technology company, and Virtual Brokers, an online brokerage. BBS provides a wide range of services to retail and institutional investors. Peter W. Anderson, CI’s chief executive officer, says the purchase gives it technology that can be used throughout the CI Financial group of companies to increase the efficiency of operations and enhance the products and services offered to financial advisors and their clients.
Hub Expands Reach
Hub International Limited has acquired Integro (Canada) Ltd., a commercial property and casualty brokerage specializing in complex risks, including construction, transportation, professional services, manufacturing, real estate, entertainment, mining and financial services. Tina Osen, president of Hub Canada, says the expansion will broaden its geographic reach and ability to upscale its presence in the larger risk management sector across the entire country. Integro offers property and casualty and management liability insurance solutions to its clients and Hub will round out Integro’s solution by enabling it to offer employee benefits and personal line insurance options as well.
Fixed Income Team Grows
‘Charles Lefebvre, Luc Bergeron, and Tan Vu Nguyen are with the fixed income team at Fiera Capital Corporation. Lefebvre, who has more than 23 year of industry experience, has held a variety of portfolio management roles focused primarily on the fixed income space, most recently serving as chief investment officer at a leading asset management firm. Bergeron, who has over 25 years of industry experience, has held various fixed income portfolio management positions at investment firms, as well as with one of Canada’s largest pension plans. Tan Vu Nguyen, who has close to 25 years of industry experience, has held various positions in both consulting and portfolio management roles, and was most recently responsible for fixed income quantitative management at a leading asset management firm.
Brokers Need To Use CRM
‘Customer Relationship Management (CRM) Tools ‒ Why YOU Need Them & Changing Tech and the Things Brokers NEED to Know’ will be examined at the Canadian Group Insurance Brokers’ October seminar. It will discuss why brokers are wasting time and losing out on sales if they are not using CRM practices, strategies, and technologies to manage customer interactions and data to improve business relationships with customers, assist in customer retention, and drive sales growth. It takes place October 4 in Vaughan, ON. For information, visit CRM Practices
September Interest Rate Assumptions
The interest assumptions required to calculate commuted values and marriage breakdown values for an event which occurs in any month up to and including September 2017 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains nine worksheets:
- Commuted Values ‒ February 2011 CIA
- Marital Breakdown ‒ CSOP 4300, January 2012
- Ontario (Bill 133) Prior Rates – Rates for Ontario Marital Breakdown with valuation date prior to January 1, 2012
- Annuity Proxy for Solvency Calculations for Non-Indexed & Fully-Indexed Pensions
- Minimum Interest on Employee Required Contributions
- HISTORICAL Marital Breakdown ‒ CSOP 4300, May 2009 (Now Frozen)
- HISTORICAL Commuted Values ‒ 2009 Basis (Now Frozen)
- HISTORICAL Commuted Values ‒ 2005 Basis (Now Frozen)
- HISTORICAL Commuted Values ‒ 1993 Basis (Now Frozen)