A Watson Wyatt news release said the typical Canadian pension plan’s funded ratio climbed to 105% at the end of September 2007 on a Generally Accepted Accounting Principles (GAAP) basis – up from 89% a year earlier.
Where the improvement in 2006 was driven by a combination of strong investment returns and rising interest rates, Watson Wyatt said the upturn in 2007 has been caused primarily by higher interest rates and that market returns “have not been a measurable help.”
According to the announcement, aggressively invested funds have fared only marginally better than more conservatively allocated programs this year, and, although the typical balanced fund has seen a positive return year to date in 2007, this has fallen short of the expected return built into the liability calculations.
“Canadian pension plans have not been this well funded since April 2002,” said David Burke, retirement practice director of Watson Wyatt’s Canadian offices. “And while this is good news, cost volatility is still with us.”