The solvency positions of Canadian defined benefit pension plans rebounded along with stock markets in the first quarter of 2019, once again nearing 100%, according to Aon plc (NYSE:AON), the leading global professional services firm providing a broad range of risk, retirement and health solutions. The late-2018 equity selloff meant pension plans’ financial health capped last year in decline, but the first-quarter equity rally saw the Aon Median Solvency Ratio erase those losses.

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“The first quarter was very good for pension asset returns, particularly coming on the heels of a year that most institutional investors would rather forget,” said Calum Mackenzie, Partner, Head of Investment, Canada, for Aon. “Domestic and global equity markets rallied, while the volatility that marked the fourth quarter of 2018 receded. The question is, what now? Bond yields are falling, and a flattening yield curve is signalling caution for economic and market conditions going forward. That trend might not only raise pension plan liabilities, but also diminish expected risk-asset returns through the year. Market volatility is unlikely to stay missing-in-action for long, given continuing uncertainty over developed-market monetary policy, global economic growth and political risk. While the first quarter in 2019 was positive, many plan sponsors continue to be complacent and play the waiting game. However, given the economic backdrop, we believe it’s prudent for plan sponsors to revisit investment strategies to ensure gains made in recent years are not eroded.”

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