Markets pummelled pension plans in May

TORONTO — Canadian pension plans were pummelled by plunging stock markets and bond yields in May.

TORONTO — Canadian pension plans were pummelled by plunging stock markets and bond yields in May.

Human resources consultant Mercer says the solvency ratio of a typical Canadian pension plan fell by seven per cent last month, when financial markets were rocked by renewed fears about the eurozone crisis.

It says May’s seven per cent decline on its pension health index represents a larger movement than is usually recorded during an entire quarter.

Mercer says that dropped most plans into negative territory for the year, more than reversing gains made in the first four months of the year.

Equity markets were down five to seven per cent during the month while Canadian long bond yields fell by 30 basis points to their lowest level in several decades.

The solvency ratio is the amount of money available to pay for earned benefits — known as liabilities under a plan — compared with the cost of buying annuities to cover those benefits in the event of an immediate plan windup.

Mercer’s pension health index, which shows the ratio of assets to liabilities for a model pension plan, was at 63 per cent at the end of March.

The ratio has been arbitrarily set to 100 per cent at the beginning of the period.

The index assumes contributions equal to current service cost and no plan improvements with 50 per cent active members and 50 per cent retired members.

Scott Clausen, partner, retirement, risk and finance said May’s volatility is a reminder of the risks that pension plan sponsors face, though monthly variances don’t impact pension payouts to plan members.

“May was a little painful for pension plans, it had that perfect combination of falling equity markets and falling bond yields,” he said.

“That’s a very large drop for a single month period compared to many of the updates that we’ve done where in a quarter it moves up or down a few per cent.”

Mercer’s next regular quarterly update is expected at the end of June.

Just Posted

Red Deer grassroots movement growing

Online support for Stand Up For A Safe Community

Red Deer students support cancer awareness campaign

West Park Elementary students wear blue

VIDEO: B.C. deer struggles with life-preserver caught in antlers

Campbell River resident captures entangled deer on camera

4 dead, including suspect, after Maryland warehouse shooting

ABDERDEEN, Md. — An employee at a Rite Aid warehouse opened fire… Continue reading

Trek to scale Alberta mountain ends in hospital for climbers caught in slide

JASPER, Alta. — Two people suffered serious but non-life-threatening injuries when they… Continue reading

Surrey man wins $500K, plans to build house, buy toys and ‘nice dinner’

Sukhwinder Sidhu bought winning ticket at store in Newton

Nominations open again for Toronto election after province’s legal victory

TORONTO — Nominations are once again open for candidates wishing to take… Continue reading

The Gap steps into the men’s athleisure game

NEW YORK — The Gap is stepping in to the men’s athleisure… Continue reading

Giant bong, huggable buds: Marijuana museum opens in Vegas

LAS VEGAS — A glass bong taller than a giraffe. Huggable faux… Continue reading

Buoyant stocks lift US household wealth, mainly for affluent

WASHINGTON — A rising stock market lifted U.S. household wealth to a… Continue reading

Polish police looking for man who threw stone into synagogue

WARSAW, Poland — Polish police are looking for a man who threw… Continue reading

Most Read