Favourable investment markets have restored pension funding in Canada to the highest level in almost five years, according to Watson Wyatt.
For a typical pension plan, the pension funded ratio has increased to 98% at the end of first quarter of 2007 from 86% at the beginning of 2006.
Just a few years ago pension plans were facing a much different situation. In 2002, stock markets and bond yields, which are used to determine liabilities, were falling. As a result, most pension funds saw a decline in their funding status.
“The big focus of plan sponsors in the last few years has been managing volatility in costs, and many have considered changes in plan design,” says David Burke, Watson Wyatt’s retirement practice director.
“While this spotlight will continue, improvement in pension funding will give plan sponsors some room to pause for reflection and consider other aspects of their retirement decisions, including the human capital risks of altering plans.”
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