Canadian pension plans the healthiest in over a decade: Report

Toronto consulting firm says 40 per cent of pension plans were fully-funded by the end of 2013.

Canadian pension plans rang in the New Year as some of the healthiest in the world, reaching a peak in more than a decade, reported Toronto-based consulting firm Mercer on Thursday.

The Mercer pension health index – which analyzes the adequacy, sustainability and integrity of a pension system be it publicly or privately funded – indicates that Canadian pension plans were standing at 106 per cent as of Dec. 31 – their best level in since June 2001. This is up from 82 per cent at the beginning of last year, and 98 per cent as of Sept. 30.

Mercer attributes this growth to strong stock markets and rising interest rates.

“Canada’s retirement system continues to be one of the strongest systems in the world and stands to benefit from rising long-term interest rates,” said Scott Clausen, a partner in Mercer’s retirement business, in a news release. “Canada has been able to maintain its strong rating by providing a combination of universal pensions, income-tested pensions, employer pensions and individual RRSPs, although there is always room for improvement.”

Mercer also reported that about 40 per cent of Canadian pension plans were fully funded at the end of the year, compared to just six per cent back in Jan. 2013. The firm estimates that long-term interest rates would reduce the liability of pension plans by between 10 to15 per cent.

Overall, Canada’s pension index value ranks sixth in the world, according to Mercer.

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