The Ontario Teachers’ Pension Plan posted a solid 13% rate of return for the year ended Dec. 31, 2012, beating its consolidated benchmark by 2%.
Canadian pension plans have improved their solvency position in Q1 due to a strong performance in equities and a slight increase in long-term interest rates. The Mercer Pension Health Index was at 87% on March 31, up from 82% at the beginning of this year.
Although fewer companies are offering DB pension plans, U.K. employers paid record amounts to these plans last year, according to an analysis by Towers Watson on recent Office for National Statistics data.
Bailouts are complicated things when it comes to sovereign nations, as the continuing woes of Greece, Ireland, Spain and Portugal illustrate. For all the infusion of Eurofunds, austerity has ultimately ended in a dead parrot scenario (for those readers who recall the Monty Python sketch): economies that wouldn’t go “voom if you put four million volts through it!”
U.K. pension plans are showing tracking upward, according to Mercer’s Pensions Risk Survey data.
A whole new regulatory environment is taking shape for banks and near-bank financial institutions. From an investor’s perspective, the new requirements—regardless of the form that they ultimately assume—will undoubtedly influence the stock and bond markets, the over-the-counter derivatives markets and financial transactions in general.
The thinking for plan sponsors over the last decade has been to reduce risk, reduce liabilities, get out of DB and move to a DC pension model. But a pure DC plan isn’t the answer to the overarching pension problem—and neither is DB, argued Yvan Legris, global CEO, consulting, with Aon Hewitt, at a recent Toronto Board of Trade event.
The City of Saint John, New Brunswick was beset last year by debate over its gaping $195 million pension deficit, so bad that a consultant reviewing the plan described it as the worst she's ever seen.
Pension plans sponsored by S&P 1500 companies finished 2012 with the highest year-end deficit ever. The aggregate deficit for these plans grew to $557 billion as of December 31, up from $484 billion at the end of 2011.
The solvency position of Canadian pension plans improved slightly in the fourth quarter of 2012, according to the Mercer Pension Health Index. But the improved position was due to plan sponsor intervention rather than economic improvement.