The Aon Pension Risk Tracker calculates the aggregate funded position on an accounting basis for the companies in the S&P/TSX Composite Index with defined benefit (DB) plans. The tool uses Aon's Risk Analyzer platform, which allows plan sponsors to track their individual plan's funded status on a daily basis. Versions of the Pension Risk Tracker are also available for the S&P 500 in the
Key Findings:
- During the first quarter of 2021, the aggregate funded ratio for Canadian pension plans in the S&P/TSX Composite index increased from 89.4% to 94.8% according to the Aon Pension Risk Tracker.
- Pension assets lost value by 2.3% over Q1 due to negative returns on fixed income assets, partially offset by strong equity market performance.
- The quarter-end long-term
Government of Canada bond yield increased 74 basis points (bps) relative to the last quarter-end rate while credit spreads narrowed by 2 bps. This combination resulted in an increase in the interest rates used to value pension liabilities from 2.34% to 3.06%. A majority of the plans inCanada are still exposed to interest rate risk. Therefore, the funded ratio increased since the decrease in pension liability caused by the increase in interest rates was larger than the reduction in asset values.
"Equity market performance stayed solid in the first quarter of 2021 following a very strong fourth quarter", said
"Funded positions continued their upward trajectory in the first quarter and accelerating vaccination campaigns have bolstered confidence in an economic recovery. This growing confidence has increased yields over the quarter while stocks have also continued to perform well. Both factors have led to increasing funded ratios", said
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