TORONTO, Nov. 17, 2011 /CNW/ - Morneau Shepell Ltd, a leading actuarial
and risk management consulting firm, has developed the Pension Risk
Index to illustrate the potential impact of pension plans on financial
"The Morneau Shepell Pension Risk Index allows a plan sponsor to measure
the financial risk of its pension plan, compared to those of other
companies in the same industry," says Patrick De Roy, Partner and
National Leader of the Risk Management Practice for Morneau Shepell.
"The sponsor can use this knowledge when shaping the plan's investment
or funding policy, or even the plan design."
De Roy says pension plans can have a significant impact on a company's
financial health. Any significant deterioration in the plan's financial
position could endanger a company's financial stability. The 2008
financial crisis and persisting low interest rates have motivated
analysts and rating agencies to increase their scrutiny of pension
The Pension Risk Index, which is updated annually, is the product of a
Morneau Shepell study that looked at the impact of pension plans on the
financial results of 100 large Canadian public companies. It combines
the results of three risk measures:
the size of unhedged liability,
the pension expense.
"According to the methodology used, each company surveyed receives a
score indicating how a change in the plan's financial position impacts
the company's financial results," says Yann Lussier, Principal and Risk
Management Consultant for Morneau Shepell. "In comparing companies we
note that aside from those with average scores, the level of risk
varies greatly from one company or sector to another. The industrial
products sector is one where companies are most at risk. The sectors
least at risk are:
consumer staples, and
To view the Pension Risk Index,
One of the major risks faced by pension plan sponsors is the risk of a
mismatch between plan assets and liabilities. Many plans are currently
in deficit, with a significant portion of assets invested in equities.
However, actuarial liability is measured based on current bond yields.
"Even though an equity-focused investment strategy would make it
possible to reduce costs over the long term, the return on equity
investments in the short term could be significantly lower than the
growth of the actuarial liability. That is what happened so
dramatically during the last financial crisis in 2008 and in recent
months," says De Roy.
For those companies that face significant risks, policies can be adopted
to better protect a company and its shareholders against deterioration
in their plan's financial position. This might call for an investment
policy where the target asset allocation differs significantly from a
typical pension plan's portfolio.
Morneau Shepell is the largest Canadian-based firm offering
industry-leading benefits and pension consulting, outsourcing, as well
as health and productivity solutions. The company works with clients to
develop innovative solutions that integrate with their business
strategies to achieve results. Through Benefits and Health Solutions
Consulting, Pension Consulting, Health Management, Administration
Solutions and Shepell•fgi's Employee Assistance Program, Morneau
Shepell helps clients reduce costs, increase employee productivity, and
improve their competitive positions by supporting their employees'
financial security, health and well-being.
Established in 1962, Morneau Shepell serves over 8,000 clients, ranging
from small businesses to some of the largest corporations and
associations in North America. With approximately 2,500 employees in
offices across North America, we provide services to organizations
across Canada, in the United States and around the globe.
Morneau Shepell Inc. is a publicly traded company on the Toronto Stock
Exchange (TSX). For more information, visit www.morneaushepell.com.
SOURCE Morneau Shepell Ltd.
For further information: