Briefly:

Previous Brieflies this week: | MON | TUE | WED | THU |

Fifty-nine percent of Canadian employees would have trouble making ends meet if their paycheque were delayed by even a week, according to the 2009 National Payroll Week Employee Survey, conducted by the Canadian Payroll Association (CPA).

“We were shocked by that number. So many Canadians are now living so close to the line that, if they miss a single paycheque, a majority will find themselves in financial difficulty,” says Janice MacLellan, chair of the CPA.

The younger workforce is feeling the greatest pinch with 45% of those aged 18-34 saying it would be difficult or very difficult for them to meet their current financial obligations if a paycheque were delayed, and a further 21% stating it would be somewhat difficult.

The situation is most precarious for single parents, with 72% saying they would have some trouble making ends meet if their pay was delayed.

The survey also found 50% of Canadian workers unable to save more than 5% of their net pay for retirement. Financial experts generally recommend a retirement savings rate of about 10%.

Though the majority, 52%, say they will need between $750,000 to $3 million to live comfortably in retirement, many Canadians are struggling to save enough to build up sufficient capital. About one-third of Canadian workers say they have been trying to save more but have been unable to do so and 42% say they aren’t even attempting to save additional funds.

With the constant need to save more, but limited funds to do so, many Canadians have expressed their preference for remunerations in the form of cash to help boost savings. A whopping 65% of those who responded said it’s more important that they receive higher wages from their employer, compared to better health benefits (25%), and education funding (10%). More than 2,800 employees from across the country participated in the survey.

• • •

National net worth on the decline, again

National net worth declined by $68 billion for a second consecutive quarter, and by $92.9 billion in the first half of 2009, according to Statistics Canada.

The impact of rising foreign equity markets on Canadian institutional investors’ international assets was more than offset by the downward revaluation effect on those same foreign currency denominated assets. Canada recorded a net foreign debt position (on a market value basis) in the second quarter, reversing a net asset position posted in the previous quarter.

Meanwhile, household net worth picked up in the second quarter, advancing $141 billion to $5.6 trillion. The partial market recovery in the second quarter helped boost financial assets such as shares, mutual funds and pension assets, thereby boosting household net worth.

Gains in the household assets helped offset the increase in consumer liabilities. Household debt was at 24.8 cents for every dollar in the second quarter, compared with 24.9 cents in the first quarter.

Non-financial private corporations also showed a decrease in debt, led by a decrease in loans and short-term papers.

However, debt in the government sector remained unchanged and offset the gains in the market.

The federal government’s credit market debt increased by $9.4 billion in the second quarter, with significantly less borrowing activity than in the previous two quarters.

The credit market debt of other levels of government also rose during the quarter due to substantial provincial bond and short-term paper issuances. Overall, total government net debt (at book value) as a percentage of gross domestic product increased to 39.8%, from 38.3% in the previous quarter and from 36.0% in the same quarter last year. Nevertheless, it remained well below the 90% range reached in the mid-1990s.

• • •

Lehman Brothers’ impact on pensions

On the first anniversary of the collapse of Lehman Brothers investment bank, PricewaterhouseCoopers says employers are far more engaged in the sustainability of their pension plans than they were prior to the onset of the global financial crisis.

According to Jonathon Land, a partner with PricewaterhouseCoopers in the U.K., trustees are engaging more actively than ever to assess the strength of their employer; make provisions for use of contingent assets; and influence the timing and levels of scheme funding.

“An AA-rated business like Lehman Brothers going to the wall would have been inconceivable two or three years ago, but pension trustees have also since been impacted by a number of other equally unlikely events, such as deflation for the first time in 40 years, an unprecedented drop in equities and huge swings in bond yields,” he says. “Whether the forecast recovery is a blip or a reality, the events of the last year all confirm the need for watertight recovery plans and absolute clarity around sponsoring employer’s obligations to its pension schemes.

“Regardless of how long the shock of the collapse of Lehman Brothers lingers, it’s critical pension scheme trustees — as caretakers of what is many companies’ largest unsecured creditor — understand the level of security provided by the sponsoring employer in good and bad times alike.”

(09/14/09)