The financial health of Canadian DB pensions declined sharply this week after improving through most of the second quarter, says Aon Hewitt.

Fears of the impact of Greece’s default on debt payments to the International Monetary Fund (IMF), along with its inability to broker a deal with creditors, have created sharp declines in asset returns and increases in solvency liabilities for Canadian pensions in just a few days.

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On June 30, the median solvency funded ratio stood at 92.9%—a four-percentage-point increase from the previous quarter—and 26.5% of surveyed plans were more than fully funded at the end of the second quarter.

Those results represent a reversal of the three-quarter trend of declining solvency, although the median ratio remains below the 96% level set in the second quarter of 2014.

However, before the events in Greece last weekend, the median solvency ratio for surveyed plans stood at 93.7%.

This week, amid continuing global equity market uncertainty fuelled by Greece’s debt crisis, the solvency ratio declined sharply before bouncing back up, and it remains unclear how large the impact of the Greek situation will be on plan solvency after Sunday’s referendum.

“Pension plans must take a long-term view and not be overly reactive to short-term market moves, but the events of this past week show the need for a disciplined risk management process in volatile times,” says Ian Struthers, investment consulting practice leader with Aon Hewitt. “In solvency terms, Canadian pension plans remain very healthy, so managing risk effectively is vital to protecting their gains and preparing for the future.”

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