Benefits & Pensions
Mercer Canada report says rally in stocks helped strengthen pension plans to end year
TORONTO — A report by Mercer Canada says a rally on the stock market in the fourth quarter helped boost the strength of Canadian defined benefit pension plans to end the year.
The consulting firm says its pension health index, which represents the solvency ratio of a hypothetical defined benefit pension plan, rose to 114 per cent at the end of December from 107 per cent at the end of September.
Mercer says in the fourth quarter the funded positions of defined benefit plans continued to recoup the losses incurred in the first quarter helped by the rally in equity markets, aided by higher bond yields and changes to the Canadian Institute of Actuaries’ commuted value standards.
Ben Ukonga, principal in Mercer’s financial strategy group, says the funded positions of defined benefit plans endured a gut-wrenching decline in the first quarter, but most are now back at or close to their pre-pandemic level.
The median solvency ratio of the pension plans of Mercer clients was at 96 per cent at Dec. 31, up from 93 per cent on Sept. 30, but down from 98 per cent at the beginning of the year.
A solvency ratio of 100 or more indicates a plan is fully funded while anything less indicates there would be some shortfall if a plan had to be wound up.