Employer pension plans (trusteed pension funds)

The value of assets in employer pension plans has plunged during the past two years; at the same time, employer contributions to these plans have more than doubled, according to new data.

At the end of the fourth quarter of 2002, fund assets were worth only $543.8 billion, down 11.4% from their peak of $614.4 billion in the third quarter of 2000. This decline was due to falling stock prices that resulted in a devaluation of fund assets.

This devaluation forced employers to increase their contributions to these plans, halting a "contribution holiday" period for many funds that lasted in some cases up to four years.

In the third quarter of 2000, employers contributed only $1.6 billion to the funds. By the fourth quarter of 2002, this amount had more than doubled to $4.0 billion.

Employer contributions are expected to remain high throughout 2003. On an annual basis, employer contributions amounted to $12.6 billion in 2002, $10.5 billion in 2001, $7.3 billion in 2000, $8.9 billion in 1999 and $7.8 billion in 1998.

The value of the assets in employer pension plans, which are also called registered pension plans, or RPPs, has typically represented about 71% of the total retirement savings of the combined value of RPPs, registered retirement savings plans, and the Canada and Quebec pension plans.

Of total RPP assets, about 73% are in trusteed pension funds, which are invested in the financial markets.

The decline in stock prices that started in 2000 has forced many funds to rebalance their portfolios. In the third quarter of 2000, trusteed pension funds had 42% of their assets invested in stocks, 36% in bonds and almost 4% in real estate, with the remainder in mortgages, short term and other assets.

At the end of the fourth quarter of 2002, about 38% of their assets were invested in stocks, 37% in bonds and 6% in real estate.

In total, funds had revenues of $13.7 billion and expenditures of $15.3 billion in the fourth quarter of 2002. This resulted in a negative cash flow of $1.6 billion. Funds had a negative cash flow because they sold stocks at a price lower than what was originally paid in an effort to rebalance their portfolios towards bonds.

For 2002 as a whole, revenues hit $50.8 billion and expenditures, $54.6 billion, for a negative cash flow of $3.8 billion. In 2001, funds had a positive cash flow of $8.2 billion. In the peak year 2000, the positive cash flow was $57.2 billion.

Available on CANSIM: table 280-0002 to 280-0004.

Definitions, data sources and methods: survey number 2607.

For more information, or to enquire about the concepts, methods, or data quality of this release, contact Client Services (613-951-7355 or  1-888-297-7355; fax: 613-951-3012; income@statcan.gc.ca), Income Statistics Division.