CANADA - The funding levels of corporate pension plans remain higher than expected considering the downturn in the equity markets, rating agency DBRS said.
The firm found that aggregate funding levels for companies in 2008 was 92% - only moderately lower that the 98% level in 2007.
DBRS said: "Most are in a relatively strong position, considering the poor equity market performance and falling interest rates that have affected returns and increased the size of total obligations."
Managing director Peter Schroeder said: "In fact, with the past emphasis on reducing pension deficiencies, pension plans are in a strong position to fulfill this goal over the medium term, once an economic recovery begins."
Schroeder said most companies found their pension obligations to be manageable, particularly considering recent regulatory relief.
Federal and provincial governments have passed solvency relief measures that ease the pressure on companies to use cash flow to shore up underfunded schemes.
Schroeder said that funding challenges usually arise when solvency levels fall below 80%, but DBRS does not expect this to happen. He said the firm does not expect there to be any ratings actions against companies because of their funding levels.
DBRS reviewed 70 defined benefit plans of Canadian companies, which had combined assets of C$141bn (US$131.6bn).
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Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
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