Canadian DB pension plans’ solvency continued to improve significantly in the fourth quarter of 2013 and ended the year in a much stronger position than at the same point in 2012.
Aon Hewitt’s quarterly survey of more than 275 Aon Hewitt-administered pension plans from the public, semi-public and private sectors found that the median solvency funded ratio increased to 93.4% by the end of 2013.
That’s a 5.7 percentage point improvement from the end of October 2013 and 24.8 points higher than it was a year ago.
“Last year saw a remarkable turnaround, and we ended with the highest median solvency ratio in six years and more than 28 percentage points higher than it was in mid-2012,” says Will da Silva, a senior partner in the company’s retirement practice.
Approximately 26% of the surveyed plans were more than fully funded at the end of the fourth quarter, compared with 15% in the previous quarter and 3% at the end of 2012.
The major contributors to increased solvency were improved equity market returns, with help from higher long-term interest rates, which rose by 91 basis points over the year, and sponsor contributions toward solvency funding requirements.
Related articles: