Defined benefit pension plans flat in August

By Andrew Rickard | September 07 2016 09:45AM

Canadian defined benefit (DB) pensions neither gained nor lost much ground last month.

Management consulting firm Aon Hewitt released the results of its monthly Pension Plan Solvency Survey yesterday, which tracks the performance of the 449 DB pension plans it administers in the public, semi-public, and private sectors. It reveals that the health of Canadian pension plans remained relatively stable in August.

Measuring assets over liabilities to calculate the solvency funded ratio, the survey found that the median solvency of Canadian DB pension plans stood at 85.5% on August 31, 2016, largely unchanged from the 85.3% recorded at the end of July. As for the number of DB plans that were more than fully funded at month-end, these results were also the same as last month, with 10.7% reporting a surplus.

"Pension asset returns ended the month at 0.6%, amid gains in U.S. (+0.8%), domestic (+0.3%), international (+0.7%) and emerging market (+3.1%) stocks. Global real estate and infrastructure declined by 2% and 2.5%, respectively," reads the report. "August solvency annuity purchase rates, based on August 31 bond yields, dropped by 13 basis points to 2.6% amid continued low yields in long-term bonds. Lower transfer value rates increase pensions’ solvency liabilities."