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Canadian defined benefit pension plans' financial health continues to improve in Q3: Aon report

TORONTO, Oct. 1, 2021 /PRNewswire/ -- Aon plc (NYSE: AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, today announced that the aggregate funded ratio for Canadian pension plans in the S&P/TSX Composite Index increased from 95.9% to 96.8% during the past three months as of September 30, according to the Aon Pension Risk Tracker.

The Aon Pension Risk Tracker calculates the aggregate funded position on an accounting basis for the companies in the S&P/TSX Composite Index with defined benefit (DB) plans. The tool uses Aon's Risk Analyzer platform, which allows plan sponsors to track their individual plan's funded status on a daily basis. Versions of the Pension Risk Tracker are also available for the S&P 500 in the U.S. and for a number of indices in the UK.

Key Findings:

  • During the third quarter of 2021, the aggregate funded ratio for Canadian pension plans in the S&P/TSX Composite index increased from 95.9% to 96.8%.
  • Pension assets were flat in the third quarter with small gains on equities offset by small losses on fixed income.
  • The quarter-end long-term Government of Canada bond yield increased 14 basis points (bps) relative to the last quarter-end rate while credit spreads remained flat. This resulted in an increase in the interest rates used to value pension liabilities from 2.92% to 3.06%.

"The third quarter of 2021 saw a return of volatility," said Nathan LaPierre, Partner, Retirement Solutions, Aon. "With the pullback in equity markets in September, equities were up only slightly over the quarter. Coupled with an increase in interest rates which lowered liabilities, funded ratios continued their upward trajectory. Plan sponsors should be wary of continued uncertainty and look for ways of reducing risk and locking in some of the gains."

About Aon
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 over 120 countries with advice and solutions that give them the clarity and confidence to make better decisions to protect and grow their business. 

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