The median solvency ratio of Ontario’s defined benefit pension plans at Sept. 30, 2016 was 79 per cent, a very slight drop from 80 per cent at the end of June, according to the Financial Services Commission of Ontario’s quarterly report.
The projected solvency ratio is estimated based on approximately 1,300 defined benefit plans registered in Ontario, including hybrid plans that have a defined benefit provision. The report found that 21 per cent of plans had a solvency ratio between 85 and 100 per cent, while five per cent of plans had a solvency ratio greater than 100 per cent.
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The decrease, according to the report, can be partially attributed to a change in solvency liabilities due to changes in the commuted value discount rate and the annuity purchased discount rate, which resulted in a three per cent drop in the ratio. It was also due to the investment return on the model pension fund of 3.7 per cent causing the ratio to increase by two per cent.
The model pension fund earned a year-to-date rate of return of 7.1 per cent to the end of the third quarter of 2016. These rates of return were developed based on the following asset mix: 45 per cent in fixed income, 30 per cent in Canadian equities and 25 per cent in foreign equities.
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