TORONTO, Nov. 25 /CNW/ - The Pension Investment Association of Canada
(PIAC) has written to all of the Finance Ministers across the country asking
them to take action to ensure the stability of Canada's retirement system.
Over the past several years, PIAC has made numerous submissions to
various governments urging changes that will enhance the capacity of pension
plans across the country to respond to changing financial and demographic
trends. The recent market events and world-wide credit crunch have the
potential to put severe strain on Canada's pension system and urgent action is
required to ensure that pension plans, and in the case of private sector
plans, the employer sponsors behind them, are able to weather the current
financial crisis.
PIAC has made detailed submissions over the past three years to the
pension review panels in Nova Scotia, Quebec, Ontario, and B.C./Alberta. Taken
together, these reviews present a unique opportunity for all levels of
government to make changes that can have a beneficial effect in response to
the immediate crisis and for decades to come.PIAC is calling on all governments to take the following steps:
In the short term;
1. To provide temporary relief for a 5 year period, to plan sponsors in
the currently unstable and fragile market environment by:
a. extending the amortization of solvency deficits to ten years for
all pension plans
b. using a solvency discount rate based on AA rated corporate bond
yields that has a similar duration to that of the pension plan
liabilities.
In the longer term;
2. To ease solvency funding requirements and to address risk asymmetry
in the rules regarding surplus entitlement by:
a. providing plan sponsors the flexibility to use Letters of Credit,
which already exists on a permanent basis in Alberta;
b. permitting plan sponsors to establish special purpose accounts
("solvency accounts") that are independent from the main pension
trust; and
c. researching the feasibility of allowing pension plans to have
reduced solvency funding requirements based on the credit
worthiness of the plan sponsor.
3. Facilitate the opportunity for plan sponsors to enhance the funded
position of the plans when plan sponsors are able to do so by:
a. amending the Federal Income Tax Act to allow plan sponsors to
make contributions beyond the current 110% limit; and
b. allowing plan sponsors to earmark contingency reserves to fund
pension plans, where plan sponsors would have the clear
entitlement to reclaim funds not required to fund pension
benefits.
4. Hold pension investments to the standard of a prudent person and
eliminate all quantitative limits on investing.
5. Harmonize pension law across Canada and establish one regulatory
system for pensions with one set of rules.PIAC has been the national voice for Canadian pension funds since 1977.
Senior investment professionals employed by PIAC's member funds are
responsible for the oversight and management of over $940 billion in assets on
behalf of millions of Canadians. PIAC's mission is to promote sound investment
practices and good governance for the benefit of pension plan sponsors and
beneficiaries.
To view all of PIAC's submissions, please visit www.piacweb.org, under
Submissions to Government.
For further information: PIAC Contact: Peter Waite, Pension Investment
Association of Canada (PIAC), 39 River Street Toronto, ON, M5A 3P1, Tel: (416)
640-0264, Fax: (416) 646-9460, rpella@piacweb.org, www.piacweb.org
