The solvency position of Canadian pension plans continued to rise in May.
The Mercer Pension Health Index stood at 91% at the end of the month, up from 86% at the end of April and 82% at the beginning of 2013.
“Pension plans are getting a boost from three key sources: buoyant equity markets, rising long-term interest rates and plan sponsors making contributions to fund the deficits,” says Manuel Monteiro, a partner in Mercer’s financial strategy group. “For many plan sponsors, getting back to a fully funded status is now clearly in sight.”
Pension plan assets have benefited from very strong foreign equity returns in 2013. At the end of May, the S&P 500 and MSCI World indexes were up 15.4% and 15.7%, respectively. The S&P/TSX composite index was up a relatively disappointing 3% to the end of May.
At the same time, pension plan liabilities have decreased due to a rise in interest rates. The long-term Government of Canada bond yields used to measure solvency liabilities were about 20 basis points higher at the end of May than they were at the beginning of the year.