Canada pension plans hit by falling markets

Thu Apr 16, 2009 11:44am EDT
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TORONTO (Reuters) - Private pension plans in Canada were hurt last year as falling stock markets drove asset levels below the plans' liabilities, Canada's financial regulator said on Thursday.

The average solvency ratio of the 400 defined benefit pension plans overseen by the Office of the Superintendent of Financial Institutions (OSFI) fell to 0.85 at the end of 2008, down from 0.98 percent at mid-year, OSFI said.

The solvency ratio compares the assets held by a pension plan to the liabilities it owes members.

Pension plans around the world are facing deficits because of the drop in the value of stocks they hold and are scrambling to shore up asset levels in time to pay benefits to retiring baby boomers, a post-war demographic bulge of people born between 1946 and 1964.

"The deterioration in funded status was due primarily to a decrease in the value of pension plan assets, reflecting losses on equity investments," OSFI superintendent Julie Dickson said in a statement.

Slightly higher interest rates, which lower pension plan liabilities, had a small positive effect, she added.

The federal regulator oversees 7 percent of all private pension plans in Canada, representing about 12 percent of pension assets. Canada's provinces regulate the rest.

OSFI in December warned pension plan sponsors and administrators that they needed to be prepared for the effects of the market downturn and consider a range of longer-term scenarios to deal with what could be protracted market weakness.

(Reporting by Andrea Hopkins; editing by Janet Guttsman)