TORONTO, June 30, 2021 /CNW/ -- Aon plc (NYSE: AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, today announced that the aggregate funded ratio for Canadian pension plans in the S&P/TSX Composite Index increased from 94.8% to 95.6% during the past three months as of June 30, according to the Aon Pension Risk Tracker.
The Aon Pension Risk Tracker calculates the aggregate funded position on an accounting basis for the companies in the S&P/TSX Composite Index with defined benefit (DB) plans. 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.
Key Findings:
- During the second quarter of 2021, the aggregate funded ratio for Canadian pension plans in the S&P/TSX Composite index increased from 94.8% to 95.6%.
- Pension assets gained value by 4.0% in the second quarter due to positive returns on fixed-income assets and continued strong equity market performance.
- The quarter-end long-term Government of Canada bond yield decreased 8 basis points (bps) relative to the last quarter-end rate while credit spreads narrowed by 7 bps. This combination resulted in a decrease in the interest rates used to value pension liabilities from 3.06% to 2.91%.
"Equity markets continue to do well in the second quarter and, combined with interest rates being fairly stable, this led to further improvement in the funded ratios of Canadian pension plans. As a result, we are seeing more closed or frozen pension clients de-risking and looking at hibernation strategies to protect the gains achieved," said Erwan Pirou, Canada Chief Investment Officer, Retirement Solutions, Aon.
"With healthy funded positions continuing, plan sponsors continue to have options for de-risking and funding their plans," said Nathan LaPierre, Partner, Retirement Solutions, Aon. "The group annuity market continues to heat up, with plan sponsors considering annuity buy-ins and buy-outs to offload some of their pension risks, while also considering performing off-cycle valuations to lock in lower contribution requirements."
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