Canadian derisking market could favour first movers

Jana Steele

Aug 10, 2015

Rick Baert, Pensions & Investments


Canadian corporate plan’s derisking activity has been muted at best. There’s been little publicized activity in corporate DB plan derisking apart from large-scale moves.


That doesn’t mean corporate plans haven’t derisked. But instead of focusing on investment strategy, the risk management moves have targeted changes in plan design, said Jana Steele, partner, pensions and benefits, at the law firm Osler, Hoskin & Harcourt LLP, Toronto. For example, as part of Air Canada’s pension changes that included a move to LDI, the airline moved many of its new hires into a hybrid DB/defined contribution plan and changed to early retirement provisions for members of unions representing airline employees.

“Plan sponsors in Canada have been looking at several risk management strategies over the last 10 or more years,” Ms. Steele said. “Most of the action with that has centred on changes in plan design, whether it’s closing the DB plan to new hires or moving to a shared-risk or target benefit plan. We’ve seen more plan design changes than other risk management or derisking options. Changing design is another option on the risk management spectrum.”

Future derisking in Canada should shift to LDI and annuities changes and away from plan design change, said Ms. Steele.

“I absolutely could see (LDI and annuitization) gaining momentum as risk strategies,” she said. “Many of the plans that have wanted to do changes in plan design as a risk management strategy already have made them. Investments and risk transference are the next place that plan sponsors may go to manage risk.”

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