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October 12, 2021

Is your pension fund likely to come up short?

Just like everbody else, Canada’s biggest pension plans are struggling to cope after they took another beating over the past few months. And, when you look at future payouts, they continue to come up short, according to a recent Mercer study.

2011-Q3_img-1_eng The Mercer Pension Health Index now stands at 60% down from 71% at the end of the second quarter -- not to say that's anything unusual. The index, showing the ratio of assets to liabilities, has been on a steady downward trend for several years.

And things don't seem to improving.

Many funds, including two of Canada’s biggest: the Ontario Municipal Employees Retirement System (OMERS) and the Ontario Teachers’ Pension Plan (OTPP), are facing growing shortfalls, which means essentially that they're paying out more in contributions than they bring in and not making nearly enough on the money they already have. 

Pension costs are rising as retired teachers and their surviving spouses live longer. And most DB plans are subject to the same pressures.

To turn things around, OTPP will demand more contributions from members starting next year. The plan has also started trimming inflation-related increases for soon-to-be-retired teachers.

Why should you care? Well, even if you're not a teacher, this conditional indexing and higher contributions is a blueprint for what's likely to happen to your own pension plan - if you're lucky to have one to begin with.

Have you been hit with a request for more money? Have your prospective benefits been trimmed as well? Does any of this worry you?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...