BUSINESS

Solvency ratio of Canadian defined benefit pension plans falls to 90.6% in 2014

12/31/2014 11:06 EST | Updated 03/02/2015 05:59 EST
TORONTO - Consulting firm Aon Hewitt says a decrease in long-term interest rates has left Canadian defined benefit pension plans worse off in 2014.

The company, citing a survey of 449 plans it administers, says the drop in long-term interest rates more than offset investment returns.

According to the survey, the median solvency funded ratio, stood at 90.6 per cent as of Dec. 31.

That represented a decline of 0.5 percentage points from Sept. 30, and a 2.7 percentage point drop from plan solvency at Dec 31, 2013.

Long-term interest rates, which are used to calculate a pension plan's liabilities fell nearly one full percentage point in 2014, increasing the amount needed by pension plans.

Meanwhile, the survey also showed the number of plans that were more than fully funded fell to 18.5 per cent as of Dec. 31, down from 23 per cent the previous quarter and 26 per cent at the end of 2013.