TORONTO, July 4, 2022 /PRNewswire/ — Aon plc (NYSE: AON), a global leader in professional services, today announced that the overall funded ratio of Canadian pension plans in the S&P/TSX Composite Index increase 100.5-101.5% over the past three months, according to Aon Pension Risk Tracker. It was 96.9% at the start of the year.
The Aon Pension Risk Tracker calculates the overall funded position on an accounting basis for S&P/TSX Composite Index companies with defined benefit (DB) plans. To access Aon’s interactive tracker, which dates back to 2013, click here. The tool uses Aon’s Risk Analyzer platform, which allows plan sponsors to track the funded status of their individual plan on a daily basis. Versions of the Pension Risk Tracker are also available for the S&P 500 in the US and for a number of indices in the UK; switch to this platform in Canada allows Aon to have a global view of the funded status of pension plans.
Key findings from Q2 2022 include:
Pension assets lost 11.9% during the second quarter of 2022.
The long-term government of Canada bond yields rose 77 basis points (bps) from the last quarter-end rate and credit spreads widened 38 bps. This combination resulted in an increase in the interest rates used to value pension liabilities from 3.78% to 4.93%. Given the majority of plans in Canada are still exposed to interest rate risk, the decrease in the pension plan liability caused by the increase in interest rates has offset the negative effect of the return on assets on the funded status of the plans. However, given the volatility, the results of individual pension plans will vary significantly depending on the asset allocation.
“Rapidly rising interest rates reduced liabilities, offsetting poor asset performance in the quarter,” said Nathan LaPierre, Partner, Wealth Solutions, Aon. “Plan sponsors will likely continue to de-risk to further protect plans’ funded positions as they navigate volatility, whether by bolstering interest rate hedges or risk transfer activities such as redemptions and redemptions.”
Aon plc (NYSE: AON) exists to shape decisions for the better – to protect and enrich the lives of people around the world. Our colleagues provide our clients in more than 120 countries with advice and solutions that give them the clarity and confidence to make better decisions to protect and grow their business.
Follow Aon on Twitter and LinkedIn. Stay up to date by visiting the Aon Newsroom and sign up for news alerts here.
+1,514 967 9330