After seeing some progress in recent months, defined benefit pension plans in Ontario saw a drop in solvency levels during the second quarter.

According to the Financial Services Commission of Ontario, the median solvency ratio was 89 per cent as of June 30. That was down from 93 per cent on March 31, 2017. Only 14.5 per cent of plans had a solvency ratio above 100 per cent. Another 51 per cent of plans had solvency ratios between 85 per cent and 100 per cent.

The pension regulator cited a drop in commuted value interest rates as a significant factor in the decline. In addition, returns were weak at just 0.1 per cent after expenses. Bond returns were 1.1 per cent, while Canadian equities were down 1.6 per cent. Foreign equities, meanwhile, produced a positive return of 1.3 per cent. The results for Canadian equities were down significantly from a return of 15.8 per cent in 2016.

The Ontario numbers trail those reported by BNY Mellon Asset Management Canada Ltd. this week for Canadian pension funds. BNY Mellon’s report of a median return of 1.5 per cent for the second quarter of  2017 marks the fifth straight quarter of positive results.

Read: Pension solvency liabilities rise amid low interest rates, returns: report

Its fund-level tracking service, which consists of 90 Canadian pension funds, also reveals a one-year return of almost 10 per cent. The pensions have a market value of more than $234 billion and an average plan size of $2.6 billion.

“The Canadian plans remained positive in the second quarter of 2017, with 96 per cent of the plans posting positive results and a median return for the quarter of 1.5 per cent and a 2017 year-to-date median return of 4.7 per cent,” said Catherine Thrasher, managing director of global risk solutions for Canada at BNY Mellon.

She noted pension plans benefited from higher allocations to international equities, which was the top performing asset class in the second quarter with a median return of 3.7 per cent. It was also the best performing asset class so far this year, with a median return of 21 per cent.

Median returns for Canadian and U.S. equities were lower in the second quarter, at minus 1.3 per cent and 0.7 per cent, respectively. Leading the way in alternative asset classes was private equity, which reported a median return of two per cent, followed by infrastructure (1.9 per cent), real estate (1.7 per cent) and hedge funds (minus two per cent).

Read: Equity markets help raise Canadian pension plan returns: research

Copyright © 2017 Transcontinental Media G.P. Originally published on benefitscanada.com

Join us on Twitter

Add a comment

Have your say on this topic! Comments that are thought to be disrespectful or offensive may be removed by our Benefits Canada admins. Thanks!

* These fields are required.
Field required
Field required
Field required