TORONTO - Things appear to be looking up for federally regulated private pension plans in Canada, according to the Office of the Superintendent of Financial Institutions.
OSFI's latest six-month survey estimates that the average solvency ratio for the 400 or so private plans it regulates at 0.88 or 88 per cent as of June 30.
That means that, on average, the total value of assets in all federally regulated private plans were 12 per cent lower than liabilities. That was a three per cent improvement from December 2008 when the assets of such plans were 15 per cent short of liabilities.
"These results show a very modest improvement overall from the December 2008 results," says Judy Cameron, managing director of OSFI's Private Pension Plan division.
"The estimated solvency ratios are impacted by interest rates and investment performance, including equity and bond market movements. The June 2009 results demonstrate the importance of continued vigilance and attention to managing the risks associated with pension plans," Cameron said in a statement.
But while the average plan showed improvement, many others, both federally and provincially regulated, continue to report major solvency problems. In some cases, solvency deficits approach 50 per cent or more.
Air Canada, for example, has struggled with an almost $3-billion solvency deficit and recently negotiated a pension funding moratorium and a new pension deficit funding arrangement as it attempts to cope with the effects of the recession on the travel business.
The private pension plans subject to OSFI regulation currently represent seven per cent of all private pension plans in Canada and account for approximately 12 per cent of private pension assets.
Meanwhile, in a separate report, OSFI said the total number of people in Canada covered by a registered pension plan or RPP in both the public and private sector increased steadily to 5.9 million from 5.1 million in the decade between 1997 and 2007.
However, as a percentage of the labour force, the number of workers in registered pension plans declined from 34 per cent in 1997 to 33 per cent in 2007.
As a percentage of paid workers, the decline was even greater: down to 38 per cent in 2007 compared with 42 per cent in 1997.
But based on gender, women were doing relatively better on that score, with the number of women among the paid workforce in a pension plan at 39 per cent, one per cent higher than men and the first time their participation has been higher since 2005.
Among the 5.9 million plan members covered by an RPP, three million were men and 2.9 million were women as the proportion of female members increased to 49 per cent from 44 per cent. In terms of absolute numbers, that represented a 700,000 increase in the number of women in registered plans.
Meanwhile, registered pension plan (RPP) coverage in the public sector decreased from 88 per cent to 84 per cent from 1997 to 2007, while the number of members increased from 2.4 to 2.8 million.
The RPP coverage in the private sector decreased from 28 per cent to 26 per cent in the same period, while the number of members covered increased from 2.7 to 3.1 million.
In addition to the decline in RPP coverage, there has been a shift from defined benefit to defined contribution plans and other hybrid plans, OSFI said.
Overall, the proportion of plan members in defined benefit plans has declined from 86 per cent to 77 per cent over the last ten years.
While the shift from defined benefit to defined contribution plans has been greatest in the private sector -- from 78 to 62 per cent -- it has also occurred in the public sector as well, declining to 93 per cent from 95 per cent.
A defined benefit plan is predetermined and is usually based on a formula involving years of service and earnings.
A defined contribution plan is not pre-determined and is based on the assets within an individual retirement plan account at the time of retirement.
