Just how much today's low interest rates will squeeze out of Canadian pensions remains to be seen, according to one Ontario advisor, identifying a growing concern.
“There are a lot of unknowns,” says Ottawa-based financial planner, Mark Freedman, citing the global economic turmoil, particularly in the U.S., China and Europe. “All the noise out there is confusing for the average investor. They don’t know what to believe.”
According to a study released Thursday by the Global Risk Institute (GRI) in Financial Services, Canadian pensions are suffering and will continue to do so if low interest rates persist.
The study, conducted by GRI and the Rotman School of Management at the University of Toronto, reports that pension plans at all levels (including public plans such as elderly benefits and social insurance, as well as employer-sponsored plans, individual retirement savings plans and other tax advantages) are dependent upon economic growth, business investment and higher employment. All are, in fact, compromised by low interest rates.
“Recent debates about the current low levels of interest rates in developed economies are really just the tip of the iceberg,” says Michel Maila, president and CEO at GRI in a release. “What lies beneath these low rates is ongoing anemic growth, low investment and weak employment.” (continued on Page 2.)