Canadian DB Plans Seeing Major Funding Improvements

April 13, 2007 ( - Canadian pension plans have reached their highest funding levels in nearly five years on the back of favorable investment returns, according to a study by Watson Wyatt Worldwide.

news release from the consultant’s Canadian unit said the funded ratio for a typical pension plan increased to 98% at the end of first quarter of 2007 vs. 86% at the beginning of 2006.

According to the announcement, the improvement was driven by a combination of rising stock markets and a modest increase in bond yields.

However, pension plan funding levels remain well below first-quarter 2002 levels, when plans were nearly 110% funded, according to Watson Wyatt.

Other study conclusions were, according to the announcement:

  • Since December 2005, aggressively invested funds (i.e. those with a higher commitment to equities) have fared better than more conservatively invested funds with a lesser commitment to equities. All have performed better than long term expectations.
  • As a result, with interest rates having little difference at March 30, 2007 than at December 31, 2005, there has been a general improvement in funded ratios since January 1, 2006.