The Aon Pension Risk Tracker’s results, published by Aon plc on October 3, show that the aggregated funded ratio for defined benefit pension plans maintained by companies in the S&P/TSX Composite Index, increased in the third quarter of 2023.
The global professional services firm says the aggregate funded ratio for Canadian defined benefit pension plans maintained by companies in the index increased from 101.7 per cent to 105.4 per cent over the last three months. The risk tracker calculates the aggregate funded position on an accounting basis.
“The long-term Government of Canada bond yield increased 77 basis points (bps) during the quarter and credit spreads widened by two bps. This combination resulted in an increase in the interest rates used to value pension liabilities from 4.62 per cent to 5.41 per cent,” they write.
Nathan LaPierre, partner, wealth solutions with Aon says “although pension assets experienced negative returns over the quarter, yields have continued to increase which lowered liabilities and increased funded positions amid volatility.” He adds: “The continued upward trend of pension plan funded positions will likely lead to further de-risking opportunities, including increased interest in liability-driven investment solutions and annuity buy-in and buy-outs.”
