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Solvency ratios of defined benefit pensions rose to end 2019, reports find

Two reports say the solvency positions of Canada’s defined benefit pensions rose to close out 2019 because of rising bond yields and a late-year equity rally.

Aon says solvency positions approached all-time highs after increasing sharply in the fourth quarter of last year, according to its median solvency ratio survey.

The professional services firm says the median solvency ratio rose to 102.5 per cent as of the first day of 2020 — up 7.2 percentage points compared with the same time the previous year.

The firm says the quarterly record stands at 103.2 per cent, which it hit in the third quarter of 2018.

Aon says 54.2 per cent of the country’s defined-benefit pension plans were fully funded as of the beginning of this year, up 16 percentage points from the same time the previous year.

Mercer Canada, meanwhile, says its pension health index, based on a hypothetical plan, rose to a solvency ratio of 112 per cent on Dec. 31 — up from 102 per cent at the start of 2019.

A solvency ratio of 100 or more indicates a plan is fully funded while anything less indicates there would be some shortfall if a plan had to be wound up.

This report by The Canadian Press was first published Jan. 2, 2020.

The Canadian Press