The median funding ratio of Canadian pension plans rose to 95.4% as of June 30 due to the rebound of equity markets in the second quarter, according to a survey from Aon.
Aon's Median Solvency Ratio rose 6.3 percentage points from 89.1% as of March 31, said a news release reporting the survey results Tuesday.
The median asset return for the second quarter was 11.5%, while the Canadian 10-year benchmark bond yield fell by 11 basis points and long bond yields fell 22 basis points, increasing pension liabilities by 2.2%.
Median asset returns had been -9% in the first quarter.
According to the survey, all equity indexes increased sharply during the first quarter, while alternative asset class returns showed some recovery from double-digit losses the prior quarter. While global infrastructure fell 2.7% in the second quarter (compared with a 22.4% loss the prior quarter), global real estate rose by 5.3% (compared with its 21.6% loss in the quarter ended March 31).
"The first half of 2020 shows perfectly what kind of risks are inherent in pension plans as we saw equity markets and underlying interest rates both impact plans," said William da Silva, Canadian practice director, retirement consulting at Aon, in the news release. "We have almost come full circle from Jan. 1. It's almost like we are getting a 'do-over.' More than ever, it's time to assess risk, evaluate options to manage funded status volatility and act before another event hits your plan."
As of Dec. 31, the median funding ratio was 102.5%.
