Aon survey finds financial health of defined benefit pension plans ends 2017 near decade-long highs
January 04 2018 - 10:29AM
· Aon’s Median Solvency Ratio at end of Q4 2017 stood at
99.2%
Capping a year that saw the financial health of Canadian defined
benefit pension plans reach levels not seen in more than a decade,
plan solvency in the fourth quarter of 2017 maintained the trend
and remained near the post-recession high set in Q3, according to
Aon’s latest quarterly Median Solvency Ratio survey.
Quotes:“From a financial point of view, 2017
was a very good year for the plans many Canadians will rely on in
retirement, and pension plans are entering 2018 on solid footing,”
said William da Silva, Senior Partner and Retirement Practice
Director at Aon Hewitt. “With solvency near 100%, it seems very
clear that plan sponsors are looking at another manageable year
regarding funding, and 2018 is also shaping up to be a good year
for settlements, as one of the key impediments to fully settling
liabilities – cash outlay – is now less of a concern.”
“Markets and monetary policy got together in 2017 to make
Canadian pension plans healthier than we’ve seen in years,” said
Ian Struthers, Partner and Investment Consulting Practice Director
at Aon Hewitt. “Rising interest rates have decreased plan
liabilities, but also remain low enough to continue to support the
bull market in equities. How long these supportive financial
conditions will last is anyone’s guess, but the good news for
pensions is that they are in a strong position to mitigate risk and
employ smart diversification strategies going forward.”
Key Facts:
- Aon’s median solvency ratio held steady through the fourth
quarter of 2017, standing at 99.2% on Jan. 1, 2018. That compares
with 99.3% for Q3 2017.
- 46% of plans were fully funded as of Jan. 1, down from 48% in
Q3.
- Canadian bond yields fell over the quarter, with Canada 10-year
yields down 9 basis points and Canada long bond yields down 24 bps.
Lower yields increase pension plan liabilities, and negatively
impacted pension plan solvency over the quarter.
- Pension assets returned 3.1% in Q4 2017, in the previous
quarter, asset returns were 0.1%.
- Emerging Market and U.S. equities were the strongest performers
among asset classes in Q4, returning +7.6% and +6.8%, respectively,
through the quarter. International MSCI EAFE (4.4%), global MSCI
World (5.7%) and Canadian equities (4.5%) indices all posted strong
returns in the quarter.
- In Canadian fixed income, falling bond yields bolstered bond
performance in Q4 2017. FTSE TMX Long Term bonds ended the quarter
up 5.2%, while FTSE TMX Universe Bonds were up 2.0%.
- Real asset returns were also strong this quarter, with global
infrastructure up 1.8%, and global real estate up 3.8%, both in
Canadian dollar terms.
A graphic accompanying this announcement is available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/df632699-925d-4241-abb0-f9028bc359ce
About Aon’s median solvency ratio surveyAon’s
median solvency ratio measures the financial health of a defined
benefit plan by comparing total assets to total pension liabilities
on a solvency basis according to the different legislations. It is
the most accurate and timely representation of the financial
condition of Canadian DB plans because it draws on a large database
and reflects each plan’s specific features, investment policy,
contributions and solvency relief steps taken by the plan sponsor.
The analysis of the plans in the database takes into account the
index performance of various asset classes, as well as the
applicable interest rates to value liabilities on a solvency
basis.
ENDS
About AonAon plc (NYSE:AON) is a
leading global professional services firm providing a broad range
of risk, retirement and health solutions. Our 50,000 colleagues in
120 countries empower results for clients by using proprietary data
and analytics to deliver insights that reduce volatility and
improve performance.
Media contactsFor further information please
contact Alexandre Daudelin (+1.514.982.4910)
Aon (NYSE:AON)
Historical Stock Chart
From Aug 2024 to Sep 2024
Aon (NYSE:AON)
Historical Stock Chart
From Sep 2023 to Sep 2024