Canada's pension funding levels rise

TORONTO—Canadian pension plans have reached their highest funding levels in nearly five years due to favorable investment returns, although they still are well short of their peak in 2002, according to a study by Watson Wyatt Worldwide.

For a typical pension plan, the funded ratio—the ratio of plan assets to liabilities—increased to 98% at the end of first quarter of 2007 vs. 86% at the beginning of 2006.

The improvement was driven by a combination of rising stock markets and a modest increase in bond yields, the study concludes.

Despite the recent gains, pension plan funding levels remain well below first-quarter 2002 levels, when plans were nearly 110% funded. In 2002, stock markets and bond yields, which are used to determine liabilities, were falling and resulted in a decline in the funding status of most Canadian pension plans.