The market value of Canadian employer-sponsored pension plans grew 3.9 per cent to a total of $1.7 trillion in the third quarter of 2016, nearly doubling the increase of 1.8 per cent in the second quarter of the year, according to new data from Statistics Canada.
The survey examined a sample of 144 defined benefit, defined contribution or hybrid pension plans with trusteed-managed funds. It found that, of the 6.2 million Canadian employees who are in an employer-sponsored pension plan, 5.2 million (or 83.3 per cent) belong to a trusteed plan, while the remaining members have assets managed by insurance companies.
The plans’ revenues dropped 12.3 per cent in the third quarter, following a 55.4 per cent increase during the previous three months.
“We do see fluctuations, particularly in the revenue expenditures,” says Greg Sannes, pension survey manager at Statistics Canada. “And we saw fairly big gains in Q2; that is reflective particularly of investment income associated with interest and dividend payments that were high in Q2. Then we saw a subsequent decline in those payments in Q3.”
Investment income dropped by 23.4 per cent, compared to a 19.8 per cent rise in the second quarter, according to the survey, which noted an 8.3 per cent increase in profits from selling securities, as well as an 11 per cent decrease in expenditures due to reduced pension payments, administrative costs and cash withdrawals, partially offset the decline.
“That’s not to say there was a loss in investment income. There was just a decline quarter to quarter,” says Sannes.
Among the pension plans sampled, assets in stocks grew 5.3 per cent, while there were also increases in mortgages (4.6 per cent), bonds (4.1 per cent) and real estate (0.6 per cent). Foreign investments, which made up just under a third of total assets, grew by five per cent, compared to the second quarter, when they increased by just one per cent.
“We do see a fair amount of volatility, particularly in the income and expenditure values . . . and the increase in the market value of assets is driven by a couple of the asset portfolios, in particular the stocks and bonds,” says Sannes. “The stocks or shares, in particular, fall very closely to what the TSX was reporting for the same quarter.”