Office of the Superintendent of Financial Institutions

Office of the Superintendent of Financial Institutions

April 16, 2009 10:19 ET

OSFI releases Estimated Solvency Ratio (ESR) for Federally Regulated Private Pension Plans

OTTAWA, ONTARIO--(Marketwire - April 16, 2009) - The Office of the Superintendent of Financial Institutions (OSFI) has released the results of its latest solvency testing of federally regulated private pension plans.

As part of its regular monitoring activities, OSFI tracks the ratio of plan assets to plan liabilities for the 400 defined benefit plans it regulates. The results show that the average estimated solvency ratio of federally regulated defined benefit private pension plans at December 31, 2008 was 0.85, a decrease from 0.98 as reported in June 2008.

"The deterioration in funded status was due primarily to a decrease in the value of pension plan assets, reflecting losses on equity investments," says Superintendent Julie Dickson. "Slightly higher interest rates had a small positive impact, as higher interest rates have the effect of lowering pension plan liabilities."

In a December 2008 letter to administrators of federally regulated pension plans on the implications of market conditions on defined benefit plans, OSFI noted that pension plan sponsors and administrators need to be prepared for the effects of the current market downturn. The letter also noted that they should continue to consider a range of longer-term scenarios, including the possibility of protracted market weakness, and think about possible responses that are consistent with their risk tolerance.

"OSFI continues to encourage plan administrators and sponsors to use scenario testing as a risk management tool," adds Ms. Dickson.

The private pension plans subject to OSFI regulation currently represent 7 per cent of all private pension plans in Canada, accounting for approximately 12 per cent of pension assets.

Created in 1987 by an Act of Parliament, the Office of the Superintendent of Financial Institutions (OSFI) is the primary regulator and supervisor of federally regulated deposit-taking institutions, insurance companies, and federally regulated private pension plans. OSFI's mandate is to advance and administer a regulatory framework that contributes to public confidence in a strong, stable and competitive financial system.

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