Briefing Notes

Briefing Note 69 - Risk Sharing Pension Plans: The Canadian Experience

The Government is introducing new legislation to facilitate the development of shared risk schemes and collective benefits in the UK. This legislation was introduced to Parliament on 26 June 2014, following extensive joint working with the industry, discussion with consumer representatives and two consultations by the Department for Work & Pensions (DWP), with the intention being for the Bill to receive royal assent before the end of the current Parliament. 

Some forms of risk-sharing schemes do already exist in the UK, for example, hybrid schemes including cash-balance schemes, and with-profit arrangements. The proposed legislation also allows for the development of new structures offering collective benefits that allow for the pooling of investment, inflation and longevity risks between members within a workplace pension structure, and allows for pensions in payment to fluctuate. These schemes do however already exist, or are in development, in a number of other countries, including the Netherlands, Nordic countries and Canada.  

This Briefing Note is the first of two Briefing Notes and focuses on the Canadian experience of setting up risk-sharing schemes. The second briefing note will focus on the experience of the Netherlands over the last 10-15 years and the shift from traditional defined benefit (DB) schemes to more conditional, collective arrangements.