How did equity and bond performance affect plan performance last year?
Strong equity market performance led DC plans to significantly outperform DB plans in 2014.
“Equity markets performed well in 2014, and had a positive impact on Canadian pension plans, as did the falling Canadian dollar on foreign asset returns,” said Diane Alalouf, Investments Leader for Eastern Canada.
“This was great news for most defined contribution members, but unfortunately was insufficient to offset the negative impact of the level of long term interest rates for defined benefit sponsors, which skimmed 60 year lows at the end of 2014.”
The equity market trend should continue in 2015 after Mercer’s 2015 Fearless Forecast predicted markets to post returns between 7.5 and 8 per cent. Alternative asset classes are expected to post returns between 5 per cent (real estate and diversified hedge funds) and 7.5 per cent (private equities) in 2015.
The Mercer Pension Health Index, which tracks the solvency financial position of a hypothetical defined benefit pension plan, fell from 106 per cent at the end of 2013 to 95 per cent at the end of 2014.
While the solvency financial position of almost all defined benefit plans will have deteriorated, the magnitude of the deterioration will vary significantly depending on factors such as asset mix policy, liability characteristics and level of funding contributions made in 2014.
“Equity markets performed well in 2014, and had a positive impact on Canadian pension plans, as did the falling Canadian dollar on foreign asset returns,” said Diane Alalouf, Investments Leader for Eastern Canada.
“This was great news for most defined contribution members, but unfortunately was insufficient to offset the negative impact of the level of long term interest rates for defined benefit sponsors, which skimmed 60 year lows at the end of 2014.”
The equity market trend should continue in 2015 after Mercer’s 2015 Fearless Forecast predicted markets to post returns between 7.5 and 8 per cent. Alternative asset classes are expected to post returns between 5 per cent (real estate and diversified hedge funds) and 7.5 per cent (private equities) in 2015.
The Mercer Pension Health Index, which tracks the solvency financial position of a hypothetical defined benefit pension plan, fell from 106 per cent at the end of 2013 to 95 per cent at the end of 2014.
While the solvency financial position of almost all defined benefit plans will have deteriorated, the magnitude of the deterioration will vary significantly depending on factors such as asset mix policy, liability characteristics and level of funding contributions made in 2014.
