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Slight decline for the solvency of pension plans in August



11 September 2017, 11:30

Photo : Freepik

According to the monthly survey ofAon Hewitt, the solvency ratio of the median for the domestic plans defined benefit pension is increased to 96.5 per cent in August, a drop of 1.6 percentage points compared to the month of July.

In addition, the study reveals that 38 % of plans used in the survey were more than fully funded as of 1 September, recording a drop of 4.8 percentage points compared to August 1st. The gross return on pension assets amounts to 1.2 %.

«Sensitive to perturbations of the global market»

«On the one hand, it has been shown in August that the plans were sensitive to disturbances on the world market, submitted last month to the escalation of tensions between the United States and North Korea, and in the wake of hurricane Harvey in Texas, said Claude Lockhead, partner and executive director of the convenient Retirement of the eastern region. Not only do these events resulted in yields decreasing, but they have also generated low yields as investors opted for the relative security offered by bonds, despite the recent increase in the rate of the Bank of Canada. «

«Near-record levels post recession»

«On the other hand, the solvency of the pension plan remains close to record levels post recession and sponsors are always in a favourable position to take immediate action to mitigate the risk, either through hedging, portfolio diversification or other risk reduction strategies,» added Mr. Lockhead.

The fund shares are treading water

Moreover, and as the of the insurance Journal pointed out last week, 35 of the 44 index funds in Canada have made progress, but only five indices have more than 2 %. In addition, eight of the nine indices of funds which have recorded negative results, a decline of 1 % or less, according to data recently published by Morningstar Research, the canadian subsidiary of the company-independent investment research Morningstar.

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