The median solvency ratio for Canadian defined benefit pension plans fell to 99.8 per cent in February, down 1.5 percentage points from the post-recession high of 101.3 per cent reached in January, according to the Aon Median Solvency Ratio survey released March 6.
The survey measures plans’ assets over liabilities to calculate their solvency funded ratio. It tracks the performance of Aon Hewitt-administered defined benefit (DB) pension plans from the public, semi-public and private sectors.
“February demonstrated just how delicate the markets’ Goldilocks moment might be,” said Ian Struthers, Partner, Investment Consulting Practice Director, Aon. “Pensions have benefited from rising equity valuations and higher yields, but that trend quickly reversed in February. It’s too early to tell whether the tide has truly turned, but in a rising rate environment and with growing trade-related concerns over the global expansion, we expect more volatility in stocks and fixed income going forward. The good news is that pension solvency remains very strong, so for those plan sponsors who haven’t done so already, they are still in a position to take action towards mitigating risk and seeking stronger diversification.
Half of plans more than fully funded
Of the plans surveyed by Aon, 49.6 per cent were more than fully funded as of March 1. This is an increase of 3.1 percentage points from the previous month.
Gross pension asset return for February was -0.7 per cent, as major domestic and international indices stalled, says Aon.