{"id":18244,"date":"2020-05-01T09:15:19","date_gmt":"2020-05-01T13:15:19","guid":{"rendered":"https:\/\/www.benefitscanada.com\/news\/considering-the-investment-options-for-variable-benefits-145434"},"modified":"2020-05-01T09:15:19","modified_gmt":"2020-05-01T13:15:19","slug":"considering-the-investment-options-for-variable-benefits","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2020\/05\/01\/considering-the-investment-options-for-variable-benefits\/","title":{"rendered":"Considering the investment options for variable benefits"},"content":{"rendered":"
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Yaelle Gang, the Canadian Investment Review<\/span> | May 1, 2020 <\/p>\n

Almost all jurisdictions across Canada have introduced variable benefits as an option for defined contribution plan sponsors, but what\u2019s on the horizon from an investment perspective?<\/p>\n

The industry is well-versed in the upsides of variable benefits for both plan sponsors and plan members. But Canada is slightly further behind other countries when it comes to robust options from an investment fund perspective during decumulation.<\/p>\n

Read: Variable benefits in DC pension plans now allowed in Ontario<\/a><\/strong><\/p>\n

For plan sponsors proceeding with variable benefits, it\u2019s important to consider the available investment options, says Zaheed Jiwani, principal at Eckler Ltd.,  \u201cThey need to think about \u2014 should the investments look a little bit different? They should. They should probably offer a few more vehicles that would be more appropriate just for decumulation that they wouldn\u2019t have offered for the accumulation members.\u201d<\/p>\n

He suggests plan sponsors consider the differences between target-date funds that offer a flat glide path versus those that offer a de-risking glide path in decumulation. And he believes more attention will be paid to this part of the glide path going forward.<\/p>\n

\u201cI think you\u2019re going to start to get a little bit more attention paid for variable benefits and other decumulation vehicles. So you might get more income-oriented funds that aren\u2019t just purely fixed income; they could be dividends, equity funds, but something a little bit more sophisticated.\u201d<\/p>\n

Read: A look at DC pension trends in the U.S.<\/a><\/strong><\/p>\n

While Jiwani hasn\u2019t seen Canadian products specifically designed for decumulation, he notes some are on their way. And, with the U.S. further along the decumulation journey, Canadian plan sponsors can look at trends south of the border. <\/p>\n

In the U.S., T. Rowe Price is engaging in more conversations with DC plan sponsors about keeping retirees in the plan post-retirement, alongside discussions about the benefits of choice when it comes to retirement income, says Michael Oler, a U.S.-based retirement income product manager at the investment manager.<\/p>\n

\u201cIt\u2019s not necessarily going to be a one-size-fits-all proposition where a singular retirement income solution is going to work for everyone. Understanding the importance of choice and having potentially multiple retirement income offerings in a plan is also part of that conversation as well.\u201d<\/p>\n

The industry is also working on investment strategies that connect the accumulation and decumulation stages, notes Oler. Specifically, a managed payout product connects to one of T. Rowe Price\u2019s target-date fund series. \u201cIndividuals are getting continued access to that same investment that they\u2019ve had during accumulation. But now, when they\u2019re in retirement, they\u2019re actually able to start receiving monthly income from that strategy as well.\u201d<\/p>\n

He\u2019s also starting to see plan sponsors offer more flexibility around distribution options at retirement. \u201cIt doesn\u2019t have to be an all-or-nothing proposition where they either have to leave their money in the plan or take all of it out at once. I think we\u2019re starting to see more plans adopting instalment options, which allow for periodic withdrawals or systematic withdrawals out of the plan.\u201d<\/p>\n

Read: A look at the legislative landscape for decumulation options in DC plans<\/a><\/strong><\/p>\n

Returning to Canada, the current situation with the coronavirus pandemic highlights the importance of options such as variable benefits, says Jiwani, noting whenever there\u2019s an economic crisis, people are reminded about risk mitigation, which may push plan sponsors to act.<\/p>\n

In times of market correction, he adds, employers want to protect their plan members and ensure there\u2019s as much money in their pockets as possible. \u201cThat really means low fees all the way through, not just in accumulation, and really good investment products that are appropriate for them at every life stage, not just in accumulation.\u201d<\/p>\n

This article was adapted from a longer article on <\/em>Benefits Canada\u2018s companion site, the <\/em>Canadian Investment Review<\/a>.<\/em><\/p>\n

Read the full article at BenefitsCanada.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Yaelle Gang, the Canadian Investment Review | May 1, 2020 Almost all jurisdictions across Canada have introduced variable benefits as an option for defined contribution plan sponsors, but what\u2019s on the horizon from an investment perspective?...<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/18244"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=18244"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/18244\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=18244"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=18244"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=18244"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}