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Canadian Defined Benefit Pension Plans Start the Year Strongly in Q1: Aon Reports

TORONTO, April 3, 2023 /PRNewswire/ -- Aon plc (NYSE: AON), a leading global professional services firm, announced today that the aggregate funded ratio for Canadian pension plans in the S&P/TSX Composite Index increased from 100.7 percent to 101.1 percent during the first three months of 2023, according to the Aon Pension Risk Tracker.

The Aon Pension Risk Tracker calculates the aggregate funded position on an accounting basis for companies in the S&P/TSX Composite Index with defined benefit (DB) plans. To access Aon's interactive tracker, which dates to 2013, click here. The tool uses Aon's risk analyzer platform, which allows plan sponsors to track their individual plan's funded status daily. Versions of the pension tracker are also available for the S&P 500 in the U.S. and for other indices in the UK.

Key findings as March 31, 2023 include:

  • Pension assets gained 5.1 percent over the first quarter of 2023.
  • The long-term Government of Canada bond yield decreased 26 basis points (bps) during the quarter and credit spreads widened by two bps. This combination resulted in a decrease in the interest rates used to value pension liabilities from 4.84 percent to 4.60 percent. Given that most plans in Canada are still exposed to interest rate risk, the increase in pension liability caused by decreasing interest rates partially offset the positive effect of asset returns on the funded status of the plans.

"The recent issues in the banking system had surprisingly little bearing on overall equity return in the first quarter, as equity markets continued their recovery after a strong Q4. This was enough to have a small positive impact on funded ratios and more than offset the small negative effect of a decrease in interest rates," said Erwan Pirou, Canada chief investment officer at Aon. "Many pension plans are looking at ways to protect the current good financial position with de-risking or hibernation strategies as well as pension risk transfer activities."

For more information, please click here.

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