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March 12, 2014
Public sector pensions considering benefit reductions

Approximately one-third of Canada’s public sector pension plans are contemplating reducing their benefits, an Aon-Hewitt survey suggests.

In a review of 139 public sector plans representing $250 billion in assets covering 2 million members, almost one in three plan sponsors revealed that they are actively considering benefits reductions in order to meet funding pressures resulting from low interest rates, volatile markets, increased retirements and longer member lifespans.

Options under consideration include the reduction or elimination of indexing for inflation and the phasing out of generous early retirement incentives.

Public sector pension plan sponsors appear to be more open to reducing member benefits than restricting the availability of pension plan membership to new members or reducing benefit accruals, the study says.

The majority of public sector pension plan sponsors, 71 per cent, revealed that they are considering increasing member contribution levels to help meet the funding crunch.

A large minority of plan sponsors, 43 per cent, expressed an interest in new pension plan designs that share financial risks among plan members and plan sponsors, the study

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