Global Pension Risk Survey 2019 - Canada Findings

Executive Summary

Welcome to the Canadian findings of our 2019 Global Pension Risk Survey. The survey is part of a global series of surveys that follows defined benefit (DB) plan sponsors’ risk management attitudes and practices around the world. We carry out the Global Pension Risk Survey every two years and looking back over the last decade we can see how the pensions landscape has developed.

Since the global financial crisis in 2008, pension plans in Canada have been making slow progress towards returning to fully funded status. In 2018, Aon’s median solvency ratio crossed the 100% threshold for the first time in over a decade, only to fall back to 95.3% at the end of the year due to falling bond yields and equity market volatility. For those looking to adjust the risk profile of their plan, this made 2018 both the best of times and the worst of times depending on how quickly they were able to react.

Aon's Median Solvency Ratio Survey measures the financial health of defined benefit plans by comparing defined benefit plans' solvency assets to solvency liabilities to calculate their solvency funded ratio. It draws on a large database of DB plans and reflects each plan’s specific features, investment policy, contributions and solvency relief measures.

In spite of the market volatility in 2018, or perhaps as a direct consequence, we have seen a big increase in the number of plan sponsors working towards a long-term goal of sustainability. The number of risk settlements among private sector sponsors was smaller than expected given that most plans would have crossed the 100% solvency funding threshold in 2018, a good proxy for plan settlement costs. This is an area where risk monitoring, longevity and long-term objectives are particularly important.

The investment trends of more global diversification and use of alternatives continued in this year’s survey responses with illiquid alternatives and foreign real estate being of particular interest. Regulatory change also had an impact on investment strategy, particularly for Quebec plan sponsors. As the range of sophisticated investment solutions continues to grow and governance requirements become more demanding, it is also not surprising that delegated assets under management grew by another 50% since the 2017 survey.

In addition to examining the impact of funding reform on plan sponsor investment and funding strategy, this year’s survey looks at the issue of cyber risk for pension plans for the first time. As an emerging risk, it is an increasing threat to modern businesses and pension plans are not exempt from it. Our survey responses show that much work remains to be done in this area in the coming years.

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