Glimmer of hope as funding ratios show slight uptick
The funding ratios of Canadian pension plans within the S&P/TSX Composite index experienced a slight increase during the second quarter, reaching 102.1% by June 30, compared to 101.8% three months earlier, as reported by Aon's Pension Risk Tracker.
In a statement released Tuesday, Aon clarified that the Pension Risk Tracker provides an accounting-based calculation of the aggregate funding position for companies with defined benefit plans in the S&P/TSX Composite Index.
The tracker's analysis revealed that pension assets witnessed a growth of 1.2% throughout the second quarter of 2023. Simultaneously, the long-term Government of Canada bond yield rose by seven basis points over the same period, while credit spreads expanded by four basis points.
As a result, the interest rates used to assess pension liabilities increased from 4.6% to 4.71% during the second quarter. A spokesperson from Aon confirmed this information via email, as reported by Pensions & Investments.
"The muted asset performance and the small increase in discount rates supported a small increase in funded status over the quarter amidst volatility," said Nathan LaPierre, partner - wealth solutions at Aon.
"Pension plans treaded water at healthy funded positions over the last quarter, giving plan sponsors time to consider derisking activities and shape better decisions."
