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Canadians need a radically better way to tap the $1.5-trillion they have collectively amassed in registered individual savings, according to a report from some of Canada’s most prominent retirement and pension experts.

As things now stand, many retirees lack employer-sponsored pensions. They are forced to choose their investments on their own and often scrimp on spending because they fear running out of money.

Encouraging the widespread adoption of what the report dubs dynamic pension (DP) pools could go a long way toward easing this stress, the researchers say. They argue that DP pools offer an efficient way to deliver dependable lifetime income to Canada’s rapidly growing senior population.

“Many people are worried about whether their money will last,” said Bonnie-Jeanne MacDonald, lead author of the report and director of financial security research at the National Institute on Ageing (NIA) at Ryerson University. “As a result, they are afraid to spend. There must be a better way.”

DP pools can offer this better way by providing an option for retirees that differs from alternatives such as annuities or self-managed investment portfolios, according to the report, titled Affordable Lifetime Pension Income for a Better Tomorrow. It was produced by the NIA and the Global Risk Institute, a financial-services research group.

Unlike annuities, which are based on ultra-safe, low-return investments such as bonds, DP pools are free to also invest in a diversified, professionally managed portfolio of stocks and other riskier but higher-yielding assets. As a result, their payouts to members are likely to expand over the years rather than remaining static, as annuities typically do.

A DP arrangement also benefits from pooling risk in much the same manner as a traditional defined-benefit pension. A risk-pooling system – in which the contributions of members who die earlier go to subsidize those who live into their 90s – translates into significantly higher payments to retirees than could typically be sustained by a self-managed investment portfolio alone.

So what are the downsides? The biggest is that payouts may fluctuate, unlike a defined-benefit plan where monthly payments are fixed. Each DP pool has to monitor its own investment returns, as well as the mortality of its members, then adjust what it is paying out to ensure the plan remains viable. Also, DP pools are not intended as a way to leave bequests. Members who want to do so will have to keep some of their assets separate.

Those drawbacks seem relatively minor when set against the security these vehicles offer. Someone who invests in a DP pool can feel confident his or her money will never run out, as long as they live.

“It can provide a high degree of income security to the many people who have savings but don’t have access to a company pension plan,” Ms. MacDonald said in an interview.

Recent regulatory changes have cleared the way for DP pools to be offered within defined-contribution pension plans and in some other contexts. But regulatory tangles still stand in the way of wider adoption. The authors of the report call on governments to clear away the remaining impediments.

One big key would be allowing standalone DP pools. Such a pool would ideally be open to anyone who wanted to join, a significant departure from existing rules, which often require that prospective members be employed by the organization sponsoring the pool.

Some signs suggest standalone DP pools could quickly become a thriving business.

In Canada, the University of British Columbia’s faculty pension plan has been running a DP pool for more than 50 years. Its success was never emulated more widely in Canada because of subsequent legislative changes that allowed UBC’s plan to continue operating, but barred lookalike new entrants.

However, the UBC plan became the template for the launch, earlier this year, of a DP pool in Australia called Lifetime Pension. Backed by QSuper, one of the biggest defined-contribution pension plans in the world, it is already the globe’s largest DP pool offering, according to the report.

It is time for the idea to spread in Canada, too, Ms. MacDonald said. She says insurers and banks, who are among the potential managers of these plans, have shown great interest in the concept in early discussions. She hopes government will move quickly on the necessary regulatory changes and that Canada’s first stand-alone DP pools will be introduced in a year or so.

“It’s a way to democratize pensions,” she said. “To make a lifetime income available to any Canadian who wants to have one.”

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