In market turmoil, the typical Canadian pension plan is getting healthy. Consulting firm Mercer Canada Ltd. said its Mercer Pension Health Pulse, which tracks the average solvency ratio of Mercer customers’ defined benefit (DB) pension plans, rose from 108 percent on March 31 to 109 percent as of June 30. It was 96 percent at the end of 2020 and 103 percent at the end of 2021. The article is about Canadian Pension Plans Improved Financial Health.
The solvency funding of a DB scheme is the ratio of its assets to its liabilities. It is the estimated cost of paying the benefits promised by the plan. A fully funded system is at 100 percent, while plans with less than 100 percent are not fully funded.
AON plc said its pension risk tracker, which measures the total solvency of DB pension plans of companies in the S&P/TSX Composite Index, rose from 100.5 percent to 101.5 percent during the past three months. In addition, it has increased from 89.4 percent at the end of 2020 to 97.2 percent at the end of 2021.
The S&P/TSX Composite Index, a measure of more than 200 large Canadian stocks, fell nearly 14 percent from March 31 to June 30. AON maintains a portfolio of specific pension plans, including bonds and other assets that offset the downside of stocks. It was dropped 11.9 percent in the quarter.
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