Woes batter pension plans

TORONTO—The drastic drop in global stock markets and interest rates has been mirrored by Canada’s corporate pension plans, according to an international consulting firm.
Watson Wyatt Worldwide said the ratio of a typical pension plan’s assets compared with its solvency liabilities plunged 27 percent in 2008.

Dismal economic developments in the fourth quarter helped drag the ratio down from 96 percent last January to just 69 percent at year’s end.
The firm said companies face an uphill battle in 2009 as they struggle to keep their foundering plans afloat at a time when they can least afford to.
Experts caution companies with defined-benefit plans, which guarantee employees a specific amount of retirement income, face the most daunting challenges.
But David Burke, retirement practice director with Watson Wyatt Canada, said most workers only are at risk if their employers are unable to survive the current economic crisis.
“Canadian pension plans are certainly reflecting the declines in financial markets. However, members of DB plans will be at risk only if the company does not survive long enough to fully fund the plan,” he said in a statement.
“What’s most troubling is that the significantly higher pension contributions that will be required to offset sizeable investment losses are placing additional strain on companies and negatively impacting corporate capital investment plans for 2009 and beyond.”
Burke praised government pension relief initiatives, adding such plans needed to be implemented quickly to have any effect.
Both the federal and provincial governments are mulling further relief initiatives.