Wednesday, August 14, 2013

Pension Assumptions

e have a lot to worry about with Pension Plans. Part of the problem is that when anyone assesses the solvency of a pension plan, they do the assessment based on assumptions using interest rates (or investment return rates) and mortality.

Currently we are hearing a lot about US pension plans that are using interest rates assumptions that many believe are too high. Using too high interest rate assumptions and a pension plan will look more solvent than it actually is. I doubt if this problem is confined to US pension plans. I am sure we probably have such problems also in Canada

A recent Canadian Institute of Actuaries (CIA) study says that improving mortality will affect the funding of pension plans, or increase what we have to pay into them for retirement benefits.

The most recently CIA report is here. However it is pretty dense. You might be better off looking at the Pension Pulse blogger who has a good blog report on this subject.

On my other blog I am today writing about Andrew Peller Ltd (TSX-ADW.A, OTC-ADWPF)...continue...

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