After a tumultuous 9 months, Canadian pension plans recover in fourth quarter

TORONTO, Jan. 7 /CNW/ - Good stock market returns and a slight rebound in long-term federal bond yields in the fourth quarter allowed Canadian pension plans to make up for most of the losses incurred in the second quarter. The Mercer Pension Health Index* stands at 73 percent on December 31, up 5 percent over the quarter but down 1 percent on the year.

"Stocks delivered another strong performance in the fourth quarter and in 2010 overall, both domestically and abroad, with the biggest gains observed in Canadian stocks, signaling continued increase in consumer and investor confidence," said Yvan Breton, Leader of Mercer's Investment Consulting business in Canada and Latin America. "The typical pension plan experienced a return on assets of almost 4 percent in the fourth quarter, improving the Mercer Pension Health Index by about 2 percent."

"After dropping 70 basis points in the second and third quarters of the year, long-term federal bond yields rebounded by roughly 20 basis points in the fourth quarter, which, together with a slight drop in the cost of purchasing annuities, bumped the index up about 3 percent," said Scott Clausen, Retirement, Risk and Finance professional leader for Canada. "Over the year, strong asset performance was offset by the overall drop in long-term federal bond yields.  Any increase in the actual funded status of pension plans in 2010 is likely due to employers pouring cash into their plans," Clausen added.

Mercer expects that the funded ratio of most pension plans as shown in year-end 2010 corporate disclosures will drop compared to last year, even after employer contributions are accounted for, since corporate bond yields used to value obligations for that purpose have dropped around one percent since the start of the year, due in part to a continued decline in credit spreads.

To view "Ratio of assets to liabilities", "Changes in Bond Yields", and "Asset Class Returns" charts, please use the following link:

A typical balanced portfolio would have returned 9.2 percent during 2010 and 3.6 percent in the last quarter of 2010. This return does not capture any impact from active management of any asset class.

Canadian equities was the best performing asset class in 2010 with a return of 17.6 percent. The S&P/TSX returned 9.4 percent in the last quarter.

  • The best performing sectors for the year ending 2010 were Health Care (+57.0%), Materials (+36.5%) and Consumer Discretionary (+25.3%) according to the S&P/TSX sector indices. The worst performing sectors were Information Technology (-11.6%), Consumer Staples (+10.3%) and Financials (+10.5%).
  • Small cap stocks returned 35.1 percent (S&P/TSX SmallCap Index), significantly outperforming large cap stocks (S&P/TSX 60 index) which returned 13.8 percent.
  • Value stocks outperformed growth stocks as shown by the S&P Canada BMI value and growth indices, which returned 20.6 percent and 16.5 percent respectively.

Canadian bond performance, as measured by the DEX Universe Bond index, returned 6.7 percent in 2010, led by long-term bonds which gained 12.5 percent, followed by mid-term bonds (7.8%) and short bonds (3.6%). During 2010, overall bond yields (measured by the DEX Universe Bond index yields), started the year at 3.32 percent, reaching a high of 3.62 percent in April and fell to a low of 2.72 percent in October before settling at 3.11 percent for the year.

The strengthening of Canadian dollar versus most other major currencies had an overall negative impact on foreign equities during 2010.

  • International equities, as measured by the MSCI EAFE (CAD) index, provided a return of 2.6 percent in 2010. In local currency terms the MSCI EAFE returned 5.3 percent.
  • In the US, the S&P500 (CAD) returned 9.1 percent in 2010. In US dollar terms, the S&P500 returned 15.1 percent.
  • Emerging markets, as measured by the MSCI Emerging Markets (CAD) index, returned 13.0 percent in 2010.

* The Mercer Pension Health Index shows the ratio of assets to liabilities for a model pension plan. The ratio has been arbitrarily set to 100 percent at the beginning of the period. The Index assumes contributions equal to current service cost and no plan improvements. Assets: Passive portfolio with asset mix shown below.  Liabilities: 50 percent active members, 50 percent retired members; Canadian Institute of Actuaries transfer values (April 2009 standard after April 1, 2009) without the two-month lag for active members and annuity purchase proxy values for retired members. Results will vary by pension plan.

Asset mix: 42.5% DEX Universe Bond Total Return Index; 25% S&P/TSX Composite; 15% S&P 500 (CAD); 15% MSCI EAFE (CAD); 2.5% DEX 91 day T-Bills

About Mercer

Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer's investment services include investment consulting and multi-manager investment management. Mercer's 20,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges. For more information, visit


For further information:


Nancy Altilia
416 868 2364

Profil de l'entreprise


Renseignements sur cet organisme


Jetez un coup d’œil sur nos forfaits personnalisés ou créez le vôtre selon vos besoins de communication particuliers.

Commencez dès aujourd'hui .


Remplissez un formulaire d'adhésion à CNW ou communiquez avec nous au 1-877-269-7890.


Demandez plus d'informations sur les produits et services de CNW ou communiquez avec nous au 1‑877-269-7890.