Underfunded pensions – in Canada?

An article in the Montreal Gazette earlier this week confirmed what many people in Canada know and fear.

Many defined benefit pension plans are underfunded. And the number of problem pension plans appears to be on the rise.

What does this mean? Simply put, people across the country who receive private company pensions (not CPP benefits) are in a risky situation, because the plans don’t have enough funds to finance the regular pension payments.

Why? Partly because the invested money that finances the pension plans does not earn enough return in today’s low interest rate economy. Our chief financial regulator has expressed “serious concern” about the growing numbers of problem pension plans.

Companies will struggle to find solutions to this problem, which is long term and complex. It may partly explain the recent demand in various parts of the country to increase CPP payments to Canadians.

This is something that Canadians who are receiving or about to receive these types of pensions need to know. It would be wise, in my opinion, to revisit Estate plans to deal with a potential interruption to such pension payments.

This ad will appear in the Richmond News on January 11, 2013.