Canadian private sector pension funds in good health

Watson Wyatt analysis shows pension fund assets up sharply

Toronto (13 April 2007) - The health of Canadian corporate pension funds is improving significantly, undermining widespread corporate claims that the cost of benefits paid to retirees is becoming increasingly unaffordable.

Consulting firm Watson Wyatt Worldwide released an analysis this week showing that the ratio of Canadian pension plan assets to liabilities has risen sharply, to 98% on average as of March 31 from 86% at the beginning of 2006. The funding ratio hovered around the 90% mark over the period from mid-2002 until the latter stages of 2006.

The new number means that pension plans in general have nearly enough money to cover all future obligations to retirees, although some funds continue to run deficits, the analysis indicates.

Christine Weidman, a University of Western Ontario accounting professor, said the report is "good news" overall for corporate pension funds.

Poor stock markets, which pulled pension fund performance down in the early years of the decade, have rebounded and are now "paying off" with improved funding ratios, she notes.

Watson Wyatt spokesman Ian Markham said higher yields in the bond market are also accounting for the rosier picture.

The National Union of Public and General Employees (NUPGE) has argued that the real pension "crisis" in Canada is about coverage, not the ability of either public or private plans in general to fund adequate benefits for retirees. NUPGE

More information:
• NUPGE releasing backgrounders on pensions
• NUPGE says real pension crisis about coverage, not funding
• NUPGE Pension Page