1. 2006 General Meeting Assemblée générale 2006 Chicago, Illinois
Canadian
Institute of
Actuaries
L’Institut canadien
des
actuaires
2006 General Meeting
Assemblée générale 2006
Chicago, Illinois

2. The Future of DB Plans
“All human situations have their inconveniences. We feel those of the present but neither see nor feel those of the future, and hence we make troublesome changes without amendment and often frequently for the worse”
Benjamin Franklin

3. Troublesome Changes In the past… In the present… In the future…
Increased accrual rates
Improved early retirement benefits
Lowering or elimination of employee contributions
In the present…
Closing of DB plans
Freezing of earnings
In the future… ?

4. Future Pension Trends Retirement programs for non-union employee
groups of publicly-traded companies in Canada 0% 5%
10%
15%
20%
25%
30%
35% DB
DB+DC
DB closed
closed/DC
new DC
Greater of
DB and DC

5. Future Landscape Current DB plans, in 5 years 50% 45% 40% 35% 30% 25%
Retirement programs for non-union employee
groups of publicly-traded companies in Canada 0% 5%
10%
15%
20%
25%
30%
35% DB
DB+DC
DB closed
closed/DC
new DC
Greater of
DB and DC
Current DB plans, in 5 years 0% 5%
10%
15%
20%
25%
30%
35%
40%
45%
50% DB
DB+DC
DB closed
closed/DC
new DC
Greater of
DB and DC
Wound-up

6. The Future Difficult to predict but… Non-Union Plans Union Plans
Trend to DC will likely continue in the short to medium term
The move to DC will likely change in the longer term
Longer term, DB plans and hybrid plans will still exist but be in the minority
Union Plans
Continue to be primarily DB, but DC will exist

7. Changes Required Legislative reform Correct asymmetry
Provide funding flexibility
National Pension Regulator and Law

8. Future Directions Benefit Design Innovation will be critical
Flexibility in design
Accruals
Contributions
Ancillaries
Unions will need to be open to alternatives

9. Future Directions Funding/Investment Reduce Volatility
Better matched investments
Maintain higher, even fully, funded status

10. Future of DB Pensions The future will be different
Without significant change, the future of DB is limited