Rising rates could bring multi-billion-dollar windfall to Canadian companies with big DB pension plans

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Rising rates could bring multi-billion-dollar windfall to Canadian companies with big DB pension plans — via financialpost Finance pensionplan

That’s because managers of DB plans have spent the past several years working to offset the impact of low rates, which require higher up-front contributions to meet long-term obligations and avoid deficits.

They estimate that if long-term bond yields stay at current levels, there could be an aggregate surplus of $29 billion by the end of this year for a basket of companies in the S&P/TSX 60 with defined-benefit plans, plus Air Canada and Bombardier Inc., which have DB plans but are no longer in that index.Article content

“Based on our calculations, the increase in long-term bond yields thus far in 2022 will result in material pension surpluses, which should enable companies to significantly reduce cash contributions to DB pension plans over the next two years and take contribution holidays,” the analysts wrote in a recent report.

 

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