funding
Thu Mar 29, 2007 5:29 PM ET
By Lionel Perron
TORONTO, March 29 (Reuters) - Chief financial officers are increasingly pessimistic about the ability of corporate Canada to fund employee pension plans at current levels, according to a survey released on Thursday.
The survey, conducted in 2006 by the Conference Board of Canada and consulting firm Watson Wyatt <WW.N>, found 80 percent of 198 CFOs polled believe there is a "widespread pension crisis". The year before, only 59 percent shared that view.
About 61 percent said the pension crisis will persist over the next few years, up from 43 percent the year before. This is the third annual survey. In the first year, only 20 percent of CFOs expressed pessimism.
The survey found the steady drop in optimism is due, among other things, to pension plans' inability to recover from the losses they incurred when the stock market tumbled in 2001 after the collapse of the tech bubble.
"As things continue to be a challenge, people become less optimistic and realize that something will have to be done," said David Burke, retirement practice director at Watson Wyatt Canada.
The survey found that CFOs and senior human resources executives consider volatility of funding and expenses to be the greatest threats to the sustainability of "defined benefit" pension plans, which guarantee a specific payout on retirement.
To address the continuing crisis, a growing list of companies are taking steps to tackle the problem.
BCE Inc.'s <BCE.TO> Bell Canada telephone unit is eliminating supplemental benefits for future retirees to keep up with rival Telus Corp.'s <T.TO> lower-cost retirement benefits package.
In early February, retailer Sears Canada <SCC.TO> "re-designed" its retirement program to cut benefits and move from a defined-contribution, defined-benefit plan to just a defined benefit plan.
The survey found the CFOs and hiring managers see problems resulting from shifting the burden of funding retirement benefits to employees from employers. Such a move may make it difficult for their organizations to attract and retain high-performing individuals, they said, and affect their ability to cope with an aging work force.
The 2006 survey on pension risk was completed by respondents from 187 leading organizations. It said 42 percent of the responses were from CFOs and those in similar positions, while 15 percent were from human reources vice presidents. The remaining 43 percent came from individuals in management roles. |
