Pension funding reaches five-year high

Plan sponsors might re-think changing plan designs
||Last Updated: 07/23/2007

Rising stock markets and a modest increase in bond yields have restored pension funding in Canada to the highest level in almost five years, according to a recent report.

An analysis by consulting firm Watson Wyatt has found that the pensions funded ratio (the ratio of plan assets to plan liabilities) for a typical pension plan increased to 98 per cent at the end of first quarter of 2007. This is up from 86 per cent at the beginning of 2006.

"These improving funded ratios will be welcomed by CFOs,” said Ian Markham, a senior consultant and director of pension innovation at Watson Wyatt. “Smaller deficits will mean a lesser impact on company balance sheets.”