CFP speaks to CBC on interest rates
CFP’s President, Bob Farmer, spoke to CBC recently on the impact of low interest rates on pensioners in general and on any private pension plans that are in trouble. This was in the context of the current low interest rate environment Canada is experiencing and the upcoming Bank of Canada interest rate decision on whether to drop rates or not.
From the article
“When interest rates are low, the contributions that have to be made to the pension plan to keep it running tend to be on the high side,” says Bob Farmer of the Canadian Federation of Pensioners. “The lower the interest rate, the higher the cost.”
In addition to higher costs, Farmer says the sustained period of low rates has made it difficult for defined benefit pension funds to rely on normally reliable sources of income such as bonds. Farmer says this is a potential problem because many defined benefits plans are underfunded.
“The chickens come home to roost if the pension plan gets into trouble because the employer gets into trouble,” Farmer says. “And then it’s quite possible that if the employer goes bankrupt that [employees’] pensions will be reduced.”
You can read the full article here