Target benefit pension plans require different investment
Transcription
Target benefit pension plans require different investment
News From Aon Aon Hewitt Media Contact: Rosa Damonte, 416-227-5718, [email protected] Alexandre Daudelin, 514-982-4910, [email protected] For immediate release Target benefit pension plans require different investment policies, says Aon Hewitt Fourth guide to target benefit plans from leading retirement consulting firm focuses on the role of investment policy in plan design TORONTO, Ont., January 23, 2015 – The unique characteristics of target benefit pension plans mean that plan sponsors need to develop and adopt unique investment policies, according to Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON). One of the country’s leading retirement consulting and actuarial firms, Aon Hewitt today released the fourth in a series of guides to target benefit pension plans – a growing pension design that is increasingly being allowed by Canadian jurisdictions and adopted by organizations across the country. The guide, entitled “Investments for the Target Benefit Plan,” is an essential resource for organizations considering initiating or changing their existing pension plan to a target benefit (TB) plan design, which builds in flexibility for pension benefits so that the plan can pay lifetime pensions while remaining sustainable through market fluctuations, economic circumstances and changing demographics. TB pension plans have unique features that distinguish them from either defined benefit (DB) or defined contribution (DC) plans, including fixed contributions, required reserve levels and targeted benefits that can be altered in response to overall plan health and liabilities. Nearly every jurisdiction in Canada has adopted or is considering regulatory reform allowing target benefit designs to help employers and employees improve the sustainability of their pension plans. These reforms are already having an impact. In Saskatchewan last year, for example, the Regina Police Service unveiled its new Target Retirement Income Plan (TRIP), a landmark pension plan that all parties – the City of Regina, Regina Police Service unionized staff, and the Regina Board of Police Commissioners – worked hard to develop over several years, and which is designed to provide post-retirement income security to nearly 500 employees for many years to come. Aon Hewitt, a leading consulting firm providing insight and guidance to pension plan sponsors in both the private and public sectors, is publishing a series of guides to help organizations understand target benefit plan structures and how they work. The newly released guide leverages Aon Hewitt’s extensive experience and leadership in the development and governance of target benefit plans, and examines the characteristics of these plans that impact investments, in addition to describing the risks and objectives that should be addressed in the investment policy. “Because of differences in plan structure, governance and maintenance, target benefit pension plans require different investment policies than traditional DB plans,” said Troy Milnthorp, National Leader, Target Benefit Task Force at Aon Hewitt. “We’ve produced this new guide to help plan participants better understand those differences and develop a sound investment policy that can ensure a target benefit plan works for sponsors and pensioners alike.” The guide also offers concrete suggestions for the establishment of the plan’s investment policy, including considerations for asset-liability modeling and for adopting a dynamic approach to managing plan assets. "The investment strategy of a target benefit plan needs to take into account not just traditional risk management, but also the characteristic benefit and funding policies of the TB design,” added Milnthorp. “It needs to Risk. Reinsurance. Human Resources. accommodate a number of possibilities, such as contributions exceeding expected costs, as well as reserve levels and how any excess funds are treated.” The guide is available at www.targetbenefits.ca About Aon Hewitt Aon Hewitt empowers organizations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organizational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness. Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide. For more information on Aon Hewitt, please visit www.aonhewitt.com. About Aon Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, best reinsurance intermediary, best captives manager, and best employee benefits consulting firm by multiple industry sources. Visit aon.com for more information on Aon and aon.com/manchesterunited to learn about Aon’s global partnership with Manchester United. 2