TORONTO, April 4, 2022 /CNW/ -- Aon plc (NYSE: AON), a leading global professional services firm, announced today that the aggregate funded ratio for Canadian pension plans in the S&P/TSX Composite Index increased from 96.9 percent to 100.5 percent during the past three months, according to the Aon Pension Risk Tracker.
The Aon Pension Risk Tracker calculates the aggregate funded position on an accounting basis for companies in the S&P/TSX Composite Index with defined benefit (DB) plans. To access Aon's interactive tracker, which dates back to 2013, click here. The tool uses Aon's Risk Analyzer platform, which allows plan sponsors to track their individual plan's funded status on a daily basis. Versions of the Pension Risk Tracker are also available for the S&P 500 in the U.S. and for a number of indices in the UK; moving to this platform in Canada allows Aon to take a global view of pension plan funded status.
Key findings in Q1 2022 include:
- Pension assets lost 7.2 percent over the first quarter of 2022.
- The long-term Government of Canada bond yield increased 69 basis points (bps) relative to the last quarter-end rate, and credit spreads widened by 25 bps. This combination resulted in an increase in the interest rates used to value pension liabilities from 2.77 percent to 3.71 percent. Given a majority of the plans in Canada are still exposed to interest rate risk, the decrease in pension liability caused by increasing interest rates offset the negative effect of asset returns on the funded status of the plans.
"There has been considerable volatility over the last quarter and increasing inflationary pressures impacting markets," said Nathan LaPierre, partner, Wealth Solutions, Aon. "Nonetheless, increasing nominal interest rates have likely had a positive impact on pension plans' funded positions. Plan sponsors should consider taking actions to lock in the gains that they have recently experienced by de-risking plans through asset mix or liability settlement opportunities, preparing them for the volatility ahead."
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