Thursday, February 4, 2010

Canadian Pension Trust Fund Percentage.

After listening to the Koskie Minsky Webinar I checked back on the document that Mercer had sent regarding the Canadian Pension Trust Fund estimate.

They had calculated the estimate in May 2009 but using data from December 2008. They are in the process of calculating the value again, per the law, and Nortel has to file it by September 30th 2010.

In the estimate that Mercer made in May 2009 that resulted in the 69% number, they used an annuity interest rate of 4.85% for immediate and 4.45% for deferred annuities. These numbers are lower than the interest rates used in 2006 and 2004 valuations. In 2006 the interest rate was 5.75% and in 2004 it was 6.5%.

The 2006 report showed that on wind up the plan was 86% funded, so the current estimate by Mercer of 69% takes into account their estimate that the interest rate going forward is about 1% point lower than what was used in 2006. So it would appear that the 69% funding ratio has already built into it,( at least some of), the effect of lower annuity interest rates.

I don't claim to be expert on any of this. I hope that questions such as this are being reviewed carefully by Koskie Minsky and Segal to make sure we don't have our pensions cut deeper than is necesary?

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