A recent survey by RBC Dexia Investor Services has identified that 89% of benefit plan sponsors believe Canada’s pension system to be either poorly positioned or average in regards to Canada’s future pension prospects.

 With the objective to gauge the opinions of Canada’s defined benefit pension plan sponsors on key issues in the pension industry, RBC Dexia Investor Services surveyed 370 Canadian pension plan sponsors with pension plan assets ranging from less than CAD 100 million to over CAD 1 billion.

 To summarise the findings, Scott MacDonald, Head, Pensions, Financial Institutions and Client Service for RBC Dexia said: “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. The respondents to our survey frequently suggested the need for all stakeholders to work more closely together to help alleviate the current strain on the pension system.”

 An interesting outcome was that although 41% of respondents cited investment risk as the type of risk they were most concerned with, shortfall risk ranked a close second, at 36%. This was suggested to reflect the natural correlation between both risk factors—where negative or reduced investment returns dramatically influenced plan shortfalls.

 Operational risk was selected by 8% of respondents as their primary risk factor, while it appeared to be less of a concern among sponsors, relative to investment and shortfall risk. With increased focus and awareness on achieving operational efficiencies, coupled with close management of expenses and transparent governance practices, pension plans appeared confident in their ability to mitigate this risk variable.

 In order 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 was to be on the aligning future liabilities with assets, while 38% said they expected low returns to continue to be a significant challenge. 7% of respondents cited 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.

 The recent financial turmoil has highlighted the urgent need for change to ensure that Canada’s pension system meets the future requirements of pensioners. While diverging views on what needs to be done were evident, survey revealed that an open dialogue among the various stakeholders is an essential first step.