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Pension plans defined benefit are gaining ground, according to RBC



February 13, 2018 09:45

Photo : Freepik

The canadian pension plans, defined benefit plans have gained ground in 2017 for the ninth consecutive year, reports RBC investor Services and treasury services (RBC KITS). These plans have experienced an increase of 4.4 % in the last quarter and posted an annual return of 9.7 %.

In a pension plan to a defined benefit plan, the amount of the pension is determined in advance according to a formula that usually takes into consideration a percentage of salary multiplied by the number of years of service. A defined contribution plan, for its part, has an amount of contribution is fixed in advance and the amount of the retirement income depends, among other things, the amounts accumulated in the account.

Increase in the interest rate

In the course of the last year, the yield on canadian bonds has been mostly positive, but the increases in the key rate of the Bank of Canada in July and September slowed compared to the beginning of the year, according to RBC SIT.

“The first increase in seven years in the key rate of the Bank of Canada has had repercussions on the bond market, and the canadian markets have continued to suffer from fluctuations in energy sectors and commodities. The market in global equities, however, remained strong and stable, ” says James Rausch, chief, Coverage customer, Canada, RBC investor Services and treasury services.

In addition, according to a survey conducted by RBC SIT, 40 % of the respondents are of the opinion that the low interest rates is the main concern for the coming year.

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