Mercer reports that jittery stock markets and drops in federal bond yields hurt the financial health of Canadian pension plans in the second quarter of 2010. The Mercer Pension Health Index stands at 67% on June 30, down 7% over the quarter.
“Long-term federal bond yields dropped 40 basis points, ending the quarter at their lowest level since the ‘flight to quality’ of December 2008,” said Scott Clausen, retirement, risk and finance professional leader for Canada. “This resulted in higher pension liabilities measured on a solvency basis, decreasing the Index by about 5%.”
“Poor stock market performance is responsible for the remainder of the decline, with Canadian, US and international equity indices losing between 5% and 10% over the quarter,” said Yvan Breton, Leader of Mercer’s investment consulting business in Canada. “Pension plans that do not hedge foreign currency exposure benefitted from a weakening Canadian dollar, as US and international equity returns were even worse in local currency.” READ MORE