Professional services firms, Aon plc and Mercer have each released their most recent measures tracking the performance of defined benefit (DB) pension plans in Canada.
Aon says the aggregate funded ratio for Canadian pension plans at companies in the S&P/TSX Composite Index increased from 100.7 per cent in the last quarter of 2022 to 101.1 per cent during the first three months of 2023, according to the Aon Pension Risk Tracker. The tool is designed to allow plan sponsors to track a plan’s funded status daily.
The Mercer Pension Health Pulse, meanwhile, tracks the median solvency ratio of the DB plans in Mercer’s pension database. This measure shows that ratio rising in the first quarter of 2023, increasing from 113 per cent at the beginning of 2023 to 116 per cent at the end of the first quarter. They say January’s improvement was primarily driven by asset returns, February’s improvement was primarily driven by increasing bond yields, and declines in March that were attributed to decreasing bond yields.
Of the plans in Mercer’s pension database, 83 per cent, up from 79 per cent at the end of the fourth quarter in 2022, are estimated to be in a surplus position. The firm says many plans are in better health than they have been in more than 20 years. The sentiment was echoed in the Aon report, which points out that many pension plans are now looking at ways to de-risk through pension risk transfer activities.
