In December, a Mercer report found the median solvency ratio for Canadian pension plans increased from 85 per cent at the end of the third quarter of 2016 to 93 per cent at the end of the fourth quarter.
Similarly, in a survey released last week, Aon Hewitt found that at the end of 2016, the median solvency ratio of Canadian defined benefit plans reached its highest level in more than two years. The ratio was 94.9 per cent as of Jan. 1, 2017, compared to 86.1 per cent on Jan. 1, 2016. The proportion of fully funded plans also grew rapidly through the year, climbing to 35.2 per cent from 10.7 per cent.
Mercer attributed the jump to rising long-term interest rates and equity markets, most of which occurred after the presidential election in the United States in November. Aon Hewitt agreed strong equity returns played a part in the turnaround and also noted increasing bond yields in the fourth quarter had a significant impact.
So after a year of volatility, what’s your view on the prospects for the economy in general and pension investments in 2017? Do you believe continued economic improvements will bode well for pension performance or do you think there’s a good chance the markets will take a negative turn soon? Or is the situation to uncertain given the lingering questions about what Donald Trump will do when he becomes U.S. president? Don’t forget to have your say in our weekly poll.
Last week’s poll looked at whether the federal government should eliminate the tax exemption for employer-sponsored heath-care benefits. A strong majority (89 per cent) of respondents disagreed with the idea, suggesting it would discourage employers from offering benefits. The remaining 11 per cent felt the idea was reasonable and suggested the health-care associations that came out against it in December are simply looking out for their own interests.