Interest rates undermine investment returns and pension plan infusions

Annual study of DB plan funding looks at key finanical results
By Steve Bonnar
|Canadian HR Reporter|Last Updated: 09/18/2006

Over the last two years, plan sponsors have made record levels of contributions to pension plans and the typical pension fund has experienced double-digit investment returns.

In spite of this, the average funded status of large Canadian corporate pension plans remained stuck at about 84 per cent of obligations at the end of 2004. Why? While pension fund assets have grown dramatically from large contributions and good returns, pension fund obligations have grown even faster.

That is what Towers Perrin found in its fifth annual review of defined benefit (DB) pension plan funding at major Canadian corporations. The review covered the 90 largest Canadian companies traded on the Toronto Stock Exchange. The study compared a number of key financial results for 2004, as disclosed in each company’s annual report. Excluded were companies with no DB pension arrangements, as well as financial institutions, since their financial structure looks quite different from others’.