For people who have a defined-benefit (DB) pension plan through their employers, years of compulsory saving may eliminate much of the uncertainty around how much to set aside for retirement. But these pension plans are only part of an overall financial picture and can be subject to change, underscoring the need for financial advisors to prepare their clients for all possibilities.

According to recent data from Statistics Canada, DB plans accounted for two-thirds of registered pension plans in 2017. Most are held by government employees; as of Jan. 1, 2018, more than 4.2-million Canadians held DB plans, including more than three-million public-sector employees and 1.2-million private-sector workers.

Although advisors and their clients should not be that concerned about the adequacy and solvency of public DB pension plans, a few private-sector DB pension plans have been in focus in recent years after high-profile insolvencies left employee pensions underfunded and up in the air.

“If it’s a public pension plan, well, we know we don’t really have to worry,” says Shelley Johnston, a senior wealth advisor and certified financial planner (CFP) in Whitby, Ont., with the Pension Specialists, which operates under the IPC Securities Corp. umbrella. However, she points to situations such as Nortel Networks Corp. or Sears Canada Inc. – which filed for bankruptcy, leaving underfunded DB pension plans that resulted in pensioners seeing their pensions reduced substantially – as a cause for worry.

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