Canadian public and corporate defined benefit plans’ funding levels fell in the first quarter, said Mercer (Canada) data.
The Mercer Pension Health index, which tracks the typical Canadian DB plan based on 100% funding as of Jan. 1, 1999, was at 90% as of March 30, down 3 percentage points from the end of 2015.
The median solvency ratio of Mercer clients’ pension plans was 82% as of March 30, down from 85% on Dec. 31. More than nine out of 10 plan clients had a funding deficit as of March 30.
Poor global equity market performance, lower long-term bond yields and the 7.3% quarterly rise in the Canadian dollar vs. the U.S. dollar, which negatively affected the return on unhedged foreign assets, were the drivers of the quarter’s funding decline, Mercer said in a news release.
“The relatively small decline in the solvency position of pension plans masks the considerable volatility that occurred in the first quarter of 2016,” said Manuel Monteiro, partner at Mercer (Canada) and leader of the firm’s financial strategy group, in the release.
A typical balanced pension portfolio would have returned -0.5% during the first quarter of 2016. Canadian equities returned 4.6% in the quarter; while based on the Canadian dollar, U.S. equity returned -5.4%; international equity, -9.1%; and emerging markets, -1.8%.
