14 February, 2018 07:00
Photo : Freepik
5 737 new pension plans, defined contribution established during the first half of 2017, 49 % were pooled registered pension plans (PRPPS), such as voluntary schemes retirement savings plan (VRSP).
This is what reveals the most recent research from LIMRA on this sector of activities. These types of plans had accounted for 29 % of new plans in the first half of 2016. In return, they have collected some dues, both in 2017 as in 2016.
Nearly half of the regimes in place during this period were voluntary schemes. Born of the will of the government, these voluntary schemes have seen the light of day two years ago in Canada, and then Quebec. Among the factors that explain this outbreak, it is necessary to see the obligation for québec SMES 10 to 19 employees to offer a VRSP or any other arrangement as of December 31, 2017. SMES with 20 employees or more are required from 31 December 2016.
If employers do not have the choice of implement, however, they are not required to contribute to the VRSP. The introduction of the PRPP is voluntary. The plan shall not apply to enterprises under federal jurisdiction.
1% to 4 % of plans underwritten
Between 1 January and 30 June 2017, plans to defined contribution pension plans have garnered 483 million dollars (M$) new contributions on an annualized basis in Canada, according to research from LIMRA, entitled Canada Pension Market : Second Quarter 2017. The PRPP and VRSP were harvested 4 percent of this half a billion of money expense. However, it is a growth for these plans : their share of new contributions was only 1 % during the first half of 2016.
Nine vendors were surveyed by LIMRA, of which eight insurers. These players represent about 90% of the market, revealed in the Journal of insurance the person in charge of the study, Sally A. Brick. The participants are BMO Insurance, Co-operators Life, Desjardins financial Security, Sun Life Financial, Great-West (including London Life and Canada Life), iA financial Group, Manulife and RBC Insurance. Since this year, LIMRA has added to its sources Annuities Brookfield, a canadian firm that specializes in, among others, the insurance life and group annuities, with or without a redemption of the plan’s liabilities.
LIMRA noted that it calculates from 2017 the insurance arrangements longevity between registered pension plans and financial partners. These partners include reinsurers and insurers is large, which bear the risk that retirees will survive to their life expectancy under the plan.
The lion’s share of the traditional pension plans
Registered pension plans (excluding the PRPP and the VRSP in the calculations of LIMRA) and the group RRSP have harvested 87 % of new contributions in the defined contribution plans in the first half of 2017. These contributions were distributed as follows : 47 % to group RRSPS and 40 % for registered pension plans. It is a setback for the RRSP, which had cornered 58 % of the contributions in the first half of 2016. This is in contrast to a growth for registered pension plans, whose share of the contribution was only 28 % in the first half of 2016.
While voluntary schemes have cornered nearly half of the 5 737 new pension plans, defined contribution plans established during the period under review, the group RRSP account for 30 % of them and the registered pension plans for 5 %. The large size of these plans explains their low proportion of the total number of regimes.
In terms of assets, the group RRSPS accounted for a share of 57 % at June 30, 2017, and registered pension plans 23 %. All in all, $ 2.1 billion of new assets transfers have been passed in the defined contribution plans during this period.
Always during the first semester, some 166 364 new members have joined schemes in all categories.
A good momentum
While the contribution on an annualized basis within defined contribution plans had substantially fallen after a peak in 2009, they have resumed an upward trend since 2014. 2017 seems to want to build on this momentum. The contributions gathered during the first and second quarters are in growth compared to their baseline period, respectively, in 2016.
For its part, the number of new plans has experienced a steady growth since 2010. The second quarter of 2017 displays a strong growth in this direction relative to that of 2016.