Canadian Pensioner Longevity Risk

Richard Brown and Brent Simmons

In Canada, as in other developed countries, the pension industry has experienced significant changes since the beginning of the 21st century. Declining and persistently low interest rates, combined with significant equity market volatility, have resulted in many pension plan sponsors becoming much more focused on risk management and risk mitigation, which has in turn led to a much greater appreciation and awareness of longevity risk.

The Canadian pension industry is often compared with that of the UK, with the anecdotal comment that it tends to be five to ten years behind it. While this may not hold true for all aspects of the Canadian pension industry, it does when it comes to how pension plan sponsors think about and manage longevity risk. While the UK has, by far, been the global leader in the management of pensioner longevity risk, Canada has led North America in terms of greater recognition of longevity risk by pension plans and longevity-only risk transfer transactions.

In this chapter we give an overview of the different components of the Canadian pension system, historical Canadian longevity experience and expectations and the development of the Canadian longevity

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