Pension plans “performed well” in 2024 and Aon plc is urging pension plan managers to consider derisking their positions in light of this and in light of the uncertainty that 2025 brings.
The aggregate funded ratio for Canadian pension plans in the S&P/TSX Composite Index – the Aon Pension Risk Tracker calculates the aggregate funded position on an accounting basis for companies in the index with defined benefit (DB) pension plans – decreased to 105.5 per cent at the end of the year, a decline from 105.8 per cent at the end of the third quarter. One year ago, the pension risk tracker was 100.7 per cent.
Pension assets gained 2.3 per cent over the fourth quarter of 2024, they say. “The long-term Government of Canada bond yield increased 20 basis points (bps) relative to the previous quarter rate and credit spreads narrowed by 29 bps. This combination resulted in a decrease in the discount rate from 4.42 per cent to 4.33 per cent,” they write.
Nathan LaPierre, partner of wealth solutions at Aon adds that many plans have room to de-risk and should consider doing so in light of healthy funded positions and the uncertainty the coming year brings.
“Most pension plans performed well in 2024, with a meaningful uptick in funded ratios,” he says. “Uncertainty is the name of the game for 2025.”
