Pension funding edges higher as markets surge: Aon

Despite a rocky ride in 2020, the funding status of defined benefit (DB) plans at major Canadian companies finished the year a bit stronger, Aon plc says.

Aon reported that the funded ratio for DB pension plans at firms that belong to the S&P/TSX Composite Index edged up to 91.2% from 90.8 % the previous year.

“After a wild ride throughout the year – funded status cratered in late March, to almost 80% – Canadian pension plans ended 2020 in a similar, if slightly better, funded position compared to how they started the year,” Nathan LaPierre, partner, retirement solutions at Aon, said in a release.

Plans’ funding deficit also declined by $0.2 billion, as assets increased by $18.7 billion and liabilities increased by $18.5 billion during the year.

“Equity markets performed strongly in 2020 and helped funded ratios improve,” said Erwan Pirou, Canada chief investment officer, retirement solutions, at Aon.

Aon reported that pension assets returned 9.9% in 2020, including a 3.9% gain in the fourth quarter.

“However, some pension plans did not realize the full benefit of the equity market rally, as some active equity managers underperformed their benchmark,” Pirou said.

“One possible new year’s resolution: look at the structure of your equity portfolio to make sure it’s balanced across different equity styles and able to perform well in different environments,” he added.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.