Ontario DB pension solvency up again in third quarter: FSRA

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Ontario 3D waving flag illustration. Texture can be used as background. © Birgit Schmidt /123RF Stock PhotosThe median projected solvency ratio of Ontario’s defined benefit pension plans increased to 94 per cent as of Sept. 30, 2020, up from 90 per cent at the end of June and 85 per cent at the end of March, according to a report by the Financial Services Regulatory Authority of Ontario.

The FSRA’s projections showed the latest growth is due to positive investment returns, which averaged just above two per cent. Another factor was an increase in solvency discount rates, with increases of 10 basis points in the non-indexed commuted-value discount rates and 28 basis points in non-indexed annuity purchase discount rates.

“Six months after the COVID-19 pandemic began, global equity markets have made a remarkable recovery,” the report said. “There remains much uncertainty with respect to the economy as the world awaits the development of effective vaccines and therapeutics to treat COVID-19.”

The regulator also projected that 34 per cent of the province’s DB plans are fully funded on a solvency basis. However, it noted 26 per cent still have a solvency ratio below 85 per cent.

“Despite the rebound in asset values the past two quarters, most plans opened the year in a stronger funded position on a solvency basis. It remains as important as ever for plan administrators to review their funding and investment strategies so they can prudently manage their plans through the cycle. Many have already completed their reviews or are in the process of doing so – others are urged to do likewise.”

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