Canadian defined benefit pension plans managed to come in with funded positions slightly better than the previous year but lost ground in Q4: Aon
TORONTO, Jan. 2, 2024 /PRNewswire/ -- Aon plc (NYSE: AON), a leading global professional services firm, announced today that the aggregate funded ratio for Canadian pension plans in the S&P/TSX Composite Index increased from 100.7 percent to 101.8 percent during the past 12 months, according to the Aon Pension Risk Tracker. It was at 105.6 percent at the end of Q3.
The Aon Pension Risk Tracker calculates the aggregate funded position on an accounting basis for companies in the S&P/TSX Composite Index with defined benefit (DB) plans. To access Aon's interactive tracker, which dates to 2013, click here. The tool uses Aon's Risk Analyzer platform, which allows plan sponsors to track their individual plan's funded status daily. Versions of the pension tracker are also available for the S&P 500 in the U.S. and for other indices in the UK.
Key findings for the year ending Dec. 31, 2023 include:
Pension assets gained 12.4 percent over the year 2023.
The long-term Government of Canada bond yield decreased 26 basis points (bps) relative to the last year-end rate, and credit spreads narrowed by 8 bps. This combination resulted in a decrease in the interest rates used to value pension liabilities from 4.84 percent to 4.50 percent. Asset returns from growth assets such as equities and alternatives offset the increase in pension liability caused by decreasing interest rates.
"The past year was volatile for pension plans," said Nathan LaPierre, partner, Wealth Solutions, Aon. "However, most pension plans in Canada will still end 2023 in good shape. Plan sponsors can continue to plan de-risking activities including annuity purchases and hibernation strategies such as liability-driven investing and smart use of diversified growth assets".
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