Average solvency position of Canadian DB pension plans improved in May: report

Domestic stocks experienced slim growth during the month, with the S&P/TSX composite index rising 0.1 per cent. Foreign stocks experienced mild losses, with the MSCI ACWI index finishing the month down 0.9 per cent.

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Canadian bond returns were also negative as yields continued to increase through the month. The yield curve remained relatively flat as Government of Canada bond yields increased by a few basis points for all terms.

In the report, Gavin Benjamin, a partner in LifeWorks retirement and financial solutions practice, noted the majority of Canadian DB plans were in relatively good financial health, despite the volatility of the markets.

“The Financial Services Regulatory Authority of Ontario estimates that, as of March 31, 2022, the median solvency funded ratio of DB plans registered in their jurisdiction was 112 per cent and 85 per cent of plans had a solvency ratio over 100 per cent. Some plans across the country are suddenly even in territory where the Income Tax Act may require a contribution holiday absent conscious action, yet plan sponsor comfort around the sustainability of the funding cushion is not always high.”

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The report also noted some more troubling portents. Its accountancy index, which provides an indication of changes in the following year’s pension expense since the start of the year, declined 0.1 per cent, from 107.8 per cent to 107.7 per cent. More auspiciously, its pension expense index, which provides an indication of changes in the following year’s pension expense since the start of the year, dipped from 67.3 per cent to 53.6 per cent.