The financial health of pension plans stumbled in the third quarter because of a strong Canadian dollar, according to the Mercer Pension Health Index.

In Canadian dollar terms, international and U.S. equities returned -4.5% and -4.7%, respectively, during the quarter as represented by the MSCI EAFE and S&P 500.

The impact of the rise in the loonie is highlighted by the local currency returns for both indices. The MSCI EAFE returned -2.5% while the S&P 500 produced a return of 2.0% in the third quarter.

Still, the index is up 3% for the year. “With long-term interest rates holding steady over the quarter at higher levels than at the end of 2006, and pension fund assets producing modest positive growth during the first nine months of the year, pension plans are better off now than they were at the beginning of the year,” says Paul Forestell, retirement professional leader at Mercer. “The picture is even better when you take into account additional contributions that plan sponsors have been making.”

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