TORONTO, Sept. 13, 2013 /CNW/ - Eckler Ltd., a leading Canadian-owned consulting and actuarial firm, today released findings from a new tool that gauges how members of Capital Accumulation Plans (CAP) are faring. The Eckler CAP Income Tracker (capit) measures the replacement income a member can expect when retiring from a typical CAP, and follows the results over time.
"With interest rates at extreme low levels and multiple market meltdowns, pension plans have been under tremendous pressure over the past decade," says Janice Holman, Principal in the Toronto office. "Just as defined benefit pension plans have seen their funding levels slip, so too have CAPs - but less obviously, as CAPs don't typically measure the income they fund."
The CAP Income Tracker shows that a member's replacement income ratio declined from 88% in 2006, when the CAP Income Tracker begins, to 61% at June 30, 2013.
"When most CAPs were created in the mid-to-late 1990s and early 2000s, the combination of moderate interest rates, solid equity returns and government benefits provided a very comfortable retirement income for most CAP members," says Holman. "What is shocking is how quickly the story changed. In a mere five years, replacement income ratios fell by more than 30% and have remained there."
For CAP sponsors, the Income Tracker supports plan governance with a benchmark for assessing retirement income adequacy. It also provides important background information that will help sponsors assess issues like contribution levels, auto-enrolment, investment menus and the effects of interest rates on their members.
The Income Tracker also alerts plan sponsors to potential workplace issues that may affect their business and bottom line, such as older workers delaying retirement and demand for more part-time work arrangements.
About the CAP Income Tracker
The CAP Income Tracker assumes the member made annual contributions at a rate of 10% starting at age 40, will receive maximum Old Age Security and Canada/Quebec Pension Plan payments, and use their CAP account balance at retirement to buy an annuity. The member's CAP account is invested based on a balanced strategy. Salary is set at $60,000 as of March 31, 2013 and adjusted annually in line with changes in the average industrial wage.
Capital Accumulation Plans (CAPs) are registered plans that permit members to make investment decisions among two or more options offered within the plan. They include defined contribution (DC) pension plans, deferred profit sharing plans (DPSPs), group registered retirement savings plans (RRSPs), and tax-free savings accounts (TFSAs).
For more information on Eckler's CAP services please contact Janice Holman at [email protected]
About Eckler Ltd.
Eckler Ltd. is a leading consulting and actuarial firm with offices across Canada and the Caribbean. Owned and operated by its active Principals, the company has earned a reputation for service continuity and high professional standards. Our select group of advisers offers excellence in a wide range of areas, including financial services, pensions, benefits, communications, investment management, pension administration, change management and technology. Eckler Ltd. is also a founding member of Abelica Global - an international alliance of independent actuarial and consulting firms operating in over 20 countries. Visit www.eckler.ca for more information.
Image with caption: "Capital Accumulation Plan members' income falls 30% since 2006 according to Eckler Ltd.'s new CAP Income Tracker (CNW Group/Eckler Ltd.)". Image available at: http://photos.newswire.ca/images/download/20130913_C6985_PHOTO_EN_30810.jpg
SOURCE: Eckler Ltd.
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