PENSION FUNDS

2017 data now available for corporate Canadian DB plan sponsors

Aggregate assets of Canadian pension plans of companies in the S&P TSX 60 index increased to $144 billion and aggregate liabilities increased to $151 billion in 2017. The aggregate funding ratio improved slightly to 94.86% from 92.83% in 2017, and the median funding ratio improved 3.9 percentage points. Since 2009, aggregate plan assets increased by 59.5% and aggregate liabilities increased by 56.25%.

The average discount rate for Canadian defined benefit plans was 3.52% in 2017, down from 3.74% in 2016. The average discount rate has dropped from 6.12% in 2009. The average funding ratio across all Canadian plans has fluctuated, with an average funding ratio of 93.18% and the highest funding ratio of 97.69% achieved in 2013.

The average equity allocation declined 2.13 percentage points in 2017, and 1.83 percentage points of capital was added to fixed income. Asset allocation structure changed significantly over the nine-year period. The average equity allocation dropped to 40.23% in 2017 from 52.39% in 2009 following a 9-year global bull market. With a total of 12.16 percentage points capital shifted out of equity during the period, 7.17 percentage points were added to fixed income and 2.71 percentage points were added to alternatives.

Aggregate assets of Canadian banks in the S&P TSX 60 index increased to $38 billion and aggregate liabilities increased to $39 billion in 2017. The average funding ratio improved by 5.86 percentage points to 97.6% in 2017. Canadian banks had an average funding ratio of 98.13% over nine years, higher than the average funding ratio of 93.18% across all sectors of the S&P TSX 60 index. The average discount rate for Canadian banks also declined to 3.63% in 2017, down from 6.63% in 2009. In 2017, however, Canadian banks in general used a higher discount rate compared to firms in other sectors; an average of 28 basis points higher. Over nine years, Canadian banks have also reduced the average equity exposure to 43.39% in 2017 from 51.6% in 2009. In the meantime, alternatives saw the most capital inflow of 5.7 percentage points, the fixed-income allocation increased by 4.82 percentage points and surpassed equity to become the largest asset class in 2017.

Aggregate plan assets and liabilities of Canadian energy companies in the S&P TSX 60 index both increased by 18.12 percentage in 2017, which led to an unchanged average funding ratio of 88.95% since 2016. Over nine years, Canadian energy companies had an average funding ratio of 85.05%, below the average funding ratio of 93.18% across all sectors of the S&P TSX 60 index. The average discount rate used by Canadian energy companies declined over time to 3.44% in 2017, below the average discount rate of 3.63% used by Canadian banks as well as the average discount rate of 3.52% used by all companies in the S&P TSX 60. Energy firms had the most aggressive investment structure with 56.76% invested in equity in 2009, compared to a 52.39% S&P TSX 60 average equity allocation and 51.6% average equity allocation adopted by Canadian banks. Energy firms gradually reduced equity exposure to 46.07% in 2017, and increased fixed income by 6.93 percentage points to 44.95% over nine years.