Canada’s DB pension plans resilient however should prep for headwinds

“DB pension plans’ funded positions proceed to profit from increased rates of interest, with many plans now in surplus positions,” mentioned Ben Ukonga, Principal and chief of Mercer’s Wealth enterprise in Calgary. “The query that ought to now be on plan sponsors’ minds is how greatest to handle this surplus, and probably locking it in, so as to not re-experience the darkish days of great pension deficits.”

A separate report from Aon reveals that the mixture funded ratio for Canadian pension plans within the S&P/TSX Composite Index elevated from 101.8% to 102.1% within the second quarter of 2023.

Among the many key findings of the Aon Pension Threat Tracker:

  • Pension belongings gained 1.2% over the second quarter of 2023.
  • The long-term Authorities of Canada bond yield elevated 7 foundation factors (bps) in the course of the quarter and credit score spreads widened by 4 bps. This mix resulted in a rise within the rates of interest used to worth pension liabilities from 4.60% to 4.71%.

“The muted asset efficiency and the small improve in low cost charges supported a small improve in funded standing over the quarter amidst volatility,” mentioned Nathan LaPierre, associate, Wealth Options, Aon. “Pension plans treaded water at wholesome funded positions over the past quarter, giving plan sponsors time to contemplate de-risking actions and form higher choices.”

Dangers forward

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