Pension assets soar in 2009

By Alain Thériault | September 25 2010 08:29PM

The amount of pension assets under management took off in 2009 compared to the disastrous year before. For the most part, this increase was due to the stock market recovery that followed the market crisis of 2008. In terms of market share, the major players' standings remained about the same as they were the previous year.

According to the Fraser Group's recently published Pension Universe Report, pension assets managed by the major insurance companies grew by 21.8% in 2009. Under the pension assets category, the Fraser Group includes defined contribution plans, group RRSPs, and deferred profit sharing plans. Company president Ken Fraser believes that, with six participants, the survey represents about 90% of the pension assets managed by insurers.

This level of growth is different from 2008, which was marked by a 13.4% drop in pension assets. What's more, Mr. Fraser points out that it brings the two-year rate of growth for pension plans to 5.5%

Insurers control the lion's share of this sector. "According to the Canadian Life and Health Insurance Association (CLHIA), the industry manages about 70% of all pension plans," says Mr. Fraser.

As of Dec. 31, 2009, companies participating in the Pension Universe Report managed pension assets totalling $84.4 billion. These funds are spread over 31,500 clients (employers or plan sponsors) and include 4.1 million pension plan members in 2009, which is about the same number as in 2008.

"While the value of assets increased substantially in 2009, this was primarily driven by the recovery in financial markets. The growth in actual members was quite weak, only 1.3% compared to 5.6% in 2008," explains Mr. Fraser. "Undoubtedly this reflects the slower employment growth and higher unemployment in 2009."

According to the Fraser report, Sun Life Financial is the number one player in the market. The insurer confirms that it saw almost no growth in the number of pension plan members. But Tom Reid, Senior Vice President of Group Retirement Services at Sun Life, notes that members have begun to invest in their plans again. The insurer estimates that, out of an increase of $6.9 billion in pension assets under management, $5 billion can be attributed to an improvement in the markets, which leaves nearly $2 billion in net sales.

"We have experienced strong sales across all funds. We also had a healthy mix between RRSP and defined contribution group plans, and well spread across the country," comments Mr. Reid.

At Standard Life Canada, 80% of the growth in assets resulted from the rebound in the stock markets. "This shows that there is still 20% in fresh money coming from members who are following their retirement plans and making regular contributions each year," says Claude Leblanc, Senior Vice President of group savings and retirement at Standard Life.

Mr. Leblanc also notes that despite the financial crisis, few pension plans were shut down in Canada. This is different from what occurred in the United States, where a number of employers stopped matching their employees' pension plan contributions. This kind of thing did not happen in this country, he says.

This is for the best, he adds, since employers who make contributions on behalf of their employees help to keep pension plan assets stable. He points out that assets in group RRSPs are much more stable than those in individual RRSPs, since employer contributions are locked in for a number of years.

As far as the number of pension plans is concerned, the rate of growth has slowed since the financial crisis, but remains steady. "We saw a 10% increase in the number of plans at Standard Life between 2008 and 2009," says Mr. Leblanc. "It is a growth market for us, even if it is not as high as we would like it."

According to the Fraser report, 2009 was not a year for significant changes in market standings. Sun Life Financial still dominates the group pension business, having increased its share of the market by 1% over 2008, and its assets under management by 24.1% for the same period.

Great-West Life and Standard Life are still in second and third place respectively, with their market share remaining unchanged from last year. These two insurers also saw an increase in their assets; Great-West by 24.9%, and Standard Life by 24.5%. As for Manulife Financial, it consolidated its position in fourth place by increasing its market share by 1% between 2008 and 2009, and also grew its assets by 33.7%.

Industrial Alliance and Desjardins Financial Security (DFS) are at the lower end of the Fraser Group's market survey. Each of these two players increased their market share by one per cent. Industrial Alliance increased its assets by 29.4% between 2008 and 2009. DFS also experienced strong growth in assets during the same time period, posting a gain of 33.3%.