Canadian defined benefit pension plans saw major improvement in their funded status in the fourth quarter, according to Aon Hewitt and Mercer reports released Thursday.
The median funding ratio among the 275 Canadian DB plans administered by Aon Hewitt was 93.4% as of Dec. 31, a 5.7-percentage-point improvement from three months earlier and 24.8 points higher than the end of 2012.
About 26% of the Aon Hewitt client plans were more than fully funded at the end of the fourth quarter, compared with 15% in the previous quarter and 3% at the end of 2012.
Meanwhile, the Mercer Pension Health Index — which tracks the typical Canadian DB plan based on 100% funding as of Jan. 1, 1999 — was 106% as of Dec. 31, up eight percentage points from Sept. 30 and 24 percentage points above the end of 2012.
According to Mercer, almost 40% of Canadian DB plans are now fully funded, compared to 6% at the beginning of the year, and 6% were less than 80% funded, compared to 60% at the beginning of the year.
“It's hard to overstate how good 2013 was for most defined benefit pension plans,” said Manuel Monteiro, partner in Mercer's financial strategy group, said in a Mercer news release about the report.
“Over the year, we saw improvement in the three key factors affecting plan solvency,” Ian Struthers, partner in Aon Hewitt's Canadian investment consulting practice, said in a separate news release. “With higher interest rates, stronger market returns and increased contributions, the median plan was in a far better position at the end of 2013.”
