Plunging Stock Markets and Canadian Pensions

I calculate that Canadian trusteed pension plans have probably lost about $50 Billion since the end of March due to falling share prices. RRSPs are probably down about  $30 Billion.

As of March 31st 2008 (most recent data) 4.6 million Canadians belonged to trusteed pension plans, and 5.8 million belonged to employer pension plans of all kinds.

Total assets of trusteed pension plans came to $957 Billion (down slightly from the end of 2007, after a long recovery from the dot com bust of 2002.)

36.4% of the assets of trusteed plans were in equities (not counting investments in pooled foreign funds.)

Both the Canadian and US stock markets have fallen by about 14% since the end of March – so the total loss to Canadian trusteed pension plans to date from falling equity values has been at least $49 Billion.

Long term bond rates have changed very little over the same period, so there are no significant offsetting positives on pension fund balances.

As of the end of 2005, according to the Survey of Financial Security, 60% of Canadian families had RRSP/RRIF investments totaling $600 Billion, most of which is held in mutual funds. If they have lost the same percentage of assets as trusteed pension plans (which is conservative) they may well be down by $30 Billion.

The issue of pension security has bene little discussed in the election. The NDP platform does call for a pension guarantee fund to safeguard pensions against inadequate assets when employer plans are wound up due to bankruptcy. Currently, only Ontario guarantees pension assets (at a very low level).