Ukonga said the liability value has also declined, leading to a slight improvement for most DB plans.
The report noted that the median solvency ratio of the DB pensions plans in Mercer’s pension database increased to 10% at the end of June from 108% at the end of March. Of all the plans it had at the end of Q2, 73% were in a surplus position and only 6% had solvency ratios less than 80%.
The number of people with defined benefits plans has been declining for at least 20 years, and is more prevalent in the public sector and larger corporations, so Ukonga said advisors should be aware of whether their clients have one. He added that with all the ongoing uncertainty, plan administrators and sponsors should also take note of what’s happening.
“They should ensure that their plans have appropriate risk systems in place so that, when bad things happen, they have systems in place to deal with that so they’re not making rash decisions in the heat of the moment,” he said.
The current picture is also good for the plan sponsors because the improved financial positions means the plans will need less contributions, so the businesses may have excess cash to invest in their businesses. There won’t be more pressure from additional contributions being needed for the pension plans, which is good news if they’re struggling with other things going on right now.”
