Rising bond yields lifted the discount rate, but Aon warns volatility still rules
Canadian pension plans in the S&P/TSX Composite Index strengthened their funded position over the second quarter, with the aggregate funded ratio climbing to 116.7 percent from 111.4 percent three months earlier.
According to the Aon Pension Risk Tracker, a higher discount rate drove much of the gain.
The long-term Government of Canada bond yield rose 33 basis points over the previous quarter and credit spreads narrowed by 9 basis points, lifting the discount rate 24 basis points to 4.67 percent, the tracker reported for the quarter ending June 30.
Pension assets added 1.6 percent over the period, per the same findings.
The Aon Pension Risk Tracker measures the aggregate funded position on an accounting basis for S&P/TSX Composite Index companies that sponsor defined benefit plans, and it has tracked the figure since 2013.
“Pension plans regained the ground that they had lost in the first quarter of the year, but volatility and uncertainty are still the name of the game,” said Nathan LaPierre, partner for wealth solutions in Canada at Aon.
LaPierre added that plan sponsors continue to evaluate how they might shield their plans from that uncertainty.
