The health of Canadian pension plans suffered the effects of January’s slumping equity markets and declining bond yields, according to tracking results for the month from Aon Hewitt.
Its Pension Plan Solvency Survey, which tracks the performance of 449 Aon Hewitt-administered defined benefit pension plans, found that, at January 29, median solvency stood at 82.9%, more than three percentage points below the ratio as at January 1, 2016.
Read: Trends in workplace pension plans
It also found:
- Only 8% of the surveyed plans were more than fully funded at month-end, down from 10.7% on January 1.
- At -1.45% for the median plan, pension asset returns were weak throughout the month.
- 10-year Canada bond and the annuity purchase discount rate yields declined in January by 17 and 33
basis points, respectively.
Read: Low equity market returns expected in medium term: survey
“There has been an inauspicious start to the year, with the MSCI, TSX and S&P all in negative territory,” said Ian Struthers, partner, in Aon Hewitt’s Investment Consulting Practice.
“It has made January a challenging month for many investors, and even worse for pension plans, which have seen declines in risk-seeking assets compounded by lower long bond yields, which increase plan liabilities. The market volatility that defined 2015 has continued into the New Year. These markets require sensible risk-seeking, diversification and patience, based on a long-term view. ”