TORONTO, Jan. 4, 2021 /CNW/ -- Aon plc (NYSE: AON), a
leading global professional services firm providing a broad range
of risk, retirement and health solutions, announced today
that the aggregate funded ratio for Canadian pension plans in
the S&P/TSX Composite Index increased from 90.8 % to 91.2%
during the past 12 months, according to the Aon Pension Risk
Tracker.
The Aon Pension Risk Tracker calculates the aggregate funded
position on an accounting basis for the companies in the
S&P/TSX Composite Index with defined benefit (DB) plans. To
access Aon's interactive tracker, which dates back to 2013, click
here. The tool uses Aon's Risk Analyzer platform, which allows plan
sponsors to track their individual plan's funded status on a daily
basis. Versions of the Pension Risk Tracker are also available for
the S&P 500 in the U.S. and for a number of indices in the UK;
moving to this platform in Canada
allows Aon to take a global view of pension plan funded status.
Key Findings:
- During 2020, the aggregate funded ratio for Canadian pension
plans in the S&P/TSX Composite index increased slightly,
from 90.8% to 91.2%, according to the Aon Pension Risk Tracker. The
funded status deficit decreased only slightly, by $0.2 billion, which was driven by asset increases
of $18.7 billion, offset by liability
increases of $18.5 billion year to
date.
- Pension assets returned 9.9% over 2020 and were positive in Q4,
ending the quarter up 3.9%.
- The year-end long-term Government of Canada bond yield dropped 55 basis points
(bps) relative to the last year-end rate, and credit spreads
widened by 13 bps. This combination resulted in a decrease in the
interest rates used to value pension liabilities from 2.92% to
2.50%. Given a majority of the plans in Canada are still exposed to interest rate
risk, the increase in pension liability caused by decreasing
interest rates offset the positive effect of asset returns on the
funded status of the plan.
"Equity markets performed strongly in 2020 and helped funded
ratios improve," said Erwan Pirou,
Canada Chief Investment Officer,
Retirement Solutions, Aon. "However, some pension plans did not
realize the full benefit of the equity market rally, as some active
equity managers underperformed their benchmark. 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."
"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," said Nathan
LaPierre, Partner, Retirement Solutions, Aon. "Plan sponsors
who are in de-risking mode should redouble their efforts to lock in
improved funded positions, while those with ongoing DB plans will
need to grapple with lower return expectations stemming from
ultra-low interest rates."
About Aon
Aon 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.
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SOURCE Aon plc