The financial health of Canadian defined benefit pension plans improved again in February as buoyant stock markets offset the impact of moderating bond yields, according to Aon Hewitt’s monthly pension plan solvency survey.
The survey, which is based on the results of defined benefit pension plans administered by the organization, found median solvency stood at 97.3 per cent on March 1, 2017 compared to 96.4 per cent on Feb. 1, 2017. Of the surveyed plans, 41.3 per cent were more than fully funded as of March 1, an increase from 38.2 per cent a month earlier.
The gross pension asset return for February was two per cent, as fixed income and risk-seeking asset classes all finished the month in positive territory, according to the survey. Leading the field were U.S. equities (up 5.6 per cent), emerging market equities (up 4.7 per cent) and global equities (up 4.4 per cent). Alternative asset classes also performed strongly with global real estate returning 4.8 per cent and infrastructure returning 5.3 per cent on the month.
As 10-year and long bond yields declined (by 14 and seven basis points, respectively), solvency annuity purchase and transfer value rates decreased slightly as of March 1, noted the survey.