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The Mercer consulting group says defined benefit pension plans in Canada generally ended 2017 in better financial condition than they’ve experienced for most of the past decade.

The firm says many of the Canadian defined benefit pension plans that it tracks were fully funded, or very close to fully funded, at the end of the year.

Read: CCPA recommends solution if pension plan is underfunded

It says defined benefit plans were helped by surging stock markets, particularly in the fourth quarter.

Read: Canadian equities drive pension returns in Q3

However, a decline in long-term interest rates offset some of the gains in equities.

According to Mercer estimates, a typical balanced pension portfolio with a combination of equity and fixed income investments would have returned 5.3% during the fourth quarter of 2017.

Mercer says the median solvency ratio for its 604 pension clients in Canada was 97%—meaning half the pension plans had enough assets to cover at least 97% of their obligations.

That’s an improvement from the end of 2016, when the median solvency ratio for Mercer clients was 93%.

Defined benefit plans have become less common in recent years because of the cost and financial risk they pose to employers if investments perform poorly.

To address the risk, many employers have opted for other retirement options, and two provinces—Quebec and Ontario—have moved to relax the rules for defined benefit plans under their jurisdiction.

Also read:

Understanding maximum transfer value rules

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Originally published on Advisor.ca
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