Benchmarking Study Analyzes Pension Plan Risk Efficiency
Article written by Nellie Huang and Nisha Singh, associates at PBI Actuarial Consultants Ltd., published in the Benefits and Pensions Monitor Online.
For the first time ever, data has been gathered from multi-employer pension plans (MEPPs) and target benefit plans (TBPs) across Canada in order to better understand just how well these plans are putting the underlying investment risk in the plan to use.
All other studies have been focused on single-employer plans. However, MEPPs and TBPs are unique in that they do not have the flexibility of increasing contributions when shortfalls arise. As such, plan trustees need to know how to maximize risk efficiency so that plan members are rewarded appropriately for the amount of risk taken by the plan. After all, why take on more risk if there is no corresponding benefit to the members? The results of the study generated a lot of healthy discussion among pension plan trustees.