Growing need for SERPs to top up retirement income

By David Brown
|Canadian HR Reporter|Last Updated: 06/25/2002

Canadian organizations are apt to find themselves under increasing pressure to introduce supplemental employee retirement plans (SERPs) as more employees are negatively impacted by government limits on registered pension plans as wages increase.

Two recent surveys of Canadian employers found that one of every six employees is already impacted in this way and that number is expected to increase to one in four by the year 2005 when the limits are scheduled to be increased.

“Basically it’s the government’s fault we have SERPs,” said Lyle Teichman, a principal in Towers Perrin’s retirement practice. The federal government sets limits on the benefits that can be provided through a registered plan and so employers have to look to other vehicles to provide benefits to employees who exceed those limits, he said. Typically employees making $86,111 and participating in a two per cent defined benefit plan reach the point where pension benefits as a percentage of total pay begins to diminish.