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The combination of an aging population, falling pension fund values, drop in employer contributions and economic downturn can simultaneously create the perfect storm and derail poorly planned pensions.

According to a global survey from HSBC Insurance, there is a significant preparation gap and education gap in pension planning

The survey showed that people’s short-term survival strategies in the midst of a recession are creating a serious long-term pension “downturn deficit.” There is the tendency to compromise long-term financial security at retirement for protecting assets in the short term. Also, in spite of a longer life expectancy, there continues to be insufficient planning. In part, poor financial understanding is responsible for the lack of preparation.

The consequence of these combined factors is that people will struggle at retirement to make ends meet.

According to the fifth annual study Future of Retirement: It’s time to prepare, there are noticeable preparedness gaps in pension planning. The study found that while 86% of respondents do know what their retirement income will be, only 27% feel they fully understand their long-term finances.

Canadians also displayed a preparation gap, with only 17% respondents indicating that they feel prepared for retirement.

Driving the preparedness gap is the gap in financial education. Lack of financial education and guidance makes longer-term planning difficult. The study showed that 43% of respondents never received any form of financial education and almost half (47%) have never had any form of professional financial advice.

“This year’s Future of Retirement report reveals a need for people to have access to more and better financial advice and guidance to help them survive the downturn while making the right financial decisions for the long term,” said Clive Bannister, group managing director, with HSBC Insurance.

During difficult economic periods, people often cope by preparing for the short term at the cost of long-term planning.

For example, in a downturn, people are more interested in general insurance, such as auto and home, rather than longer-term needs around health and income.

As a result of the downturn, people also alter plans and savings. The survey showed that 92% have changed some element of their finances, 17% reduced or stopped savings for retirement, and 9% expect to delay retirement.

These findings show that Canada, along with many other countries, still faces the challenge of accessing financial advice and education to better understand longer-term finances and plan appropriately.

The study is the largest of its kind in the world, with 15,000 people in 15 countries interviewed.

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Manulife caps four funds

Manulife Mutual Funds announced plans on June 10 to cap all its retail series: Manulife Global Tactical Fund, Manulife Global Real Estate Fund, Manulife Real Return Strategy Fund and Manulife International Large Cap Fund.

Beginning June 19, 2009, no new purchases, including systematic transfers, will be accepted for the mentioned funds.

Shortly thereafter, the funds will be terminated on or about December 11, 2009.

The funds are being capped and cut because of the high costs associated with managing them.

“Through regular review of our fund lineup, we are able to ensure that Manulife Mutual Funds offers a strong and efficient product offering that meets the demands of investors and their advisors. With these goals in mind, Manulife Mutual Funds has decided to cap and terminate these four funds to improve overall cost efficiencies,” says Bob Tillmann, vice-president, marketing and business development, with Elliott & Page Ltd.

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IA Clarington completes fund mergers

The merger of IA Clarington Investments Inc.’s nine mutual funds was completed on June 5, 2009.

“The goal of these mergers is to focus on the strengths of key managers both within our internal investment capabilities as well as among leading external managers. In several cases, these changes will also benefit investors through a reduction in management fees,” says David Scandiffio, president of IA Clarington.

The merged funds are listed below.

• IA Clarington Canadian Income Fund II, IA Clarington Canadian Growth & Income Fund, and IA Clarington Diversified Balanced Fund merged into IA Clarington Monthly Income Balanced Fund • IA Clarington Tactical Income Fund merged into IA Clarington Diversified Income Fund (renamed IA Clarington Tactical Income Fund) • IA Clarington U.S. Dividend Fund merged into IA Clarington Navellier U.S. All Cap Fund (renamed IA Sarbit U.S. Equity Fund) • IA Clarington Canadian Growth Fund merged into IA Clarington Canadian Leaders Fund • IA Clarington Canadian Opportunities Fund merged into IA Clarington Canadian Small Cap Fund • IA Clarington Canadian Value Fund merged into IA Clarington Dividend Growth Fund • IA Clarington Core Portfolio merged into IA Clarington Canadian Equity Fund

The investment objectives of IA Clarington Tactical Income Fund (formerly IA Clarington Diversified Income Fund) have been amended so that they are identical to those of the terminating IA Clarington Tactical Income Fund.

The investment objectives of IA Clarington Sarbit U.S. Equity Fund (formerly IA Clarington Navellier U.S. All Cap Fund) have been amended so that they are substantially similar to those of the terminating Sarbit U.S. Equity Trust.

The trailer fee for the Series T6 and Series T8 units of IA Clarington Monthly Income Balanced Fund purchased under the front-end option increased to 1.00%, effective for sales starting June 5, 2009.

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LOMA gives out national corporate awards

Sun Life, Foresters and Canadian Premier Life received top honours at the LOMA/LIMRA Canada’s annual conference held June 10 at the Metro Toronto Convention Centre.

The awards recognize best practices in learning and development in Canada’s life and health insurance industry.

Sun Life excelled through its three-session training program, Excellence in Action.

Also winning in the large-company category was Foresters, with its Build Knowledge for Life program, which works to embed industry education in the Foresters company culture.

In the small-company category, Canadian Premier Life won for its ADMS Colleague Commitment and the Oz Principle Accountability program.

(06/10/09)