OTTAWA - The health of some 400 Canadian defined-benefit plans deteriorated in the first half of the year, the federal pension watchdog said Thursday.

The average solvency ratio for the plans fell to an estimated 87 per cent as of the end of June, according to a semi-annual report from the Office of the Superintendent of Financial Institutions.

That means the plans only had 87 cents worth of assets for every dollar of pension liability at that date, on average.

"The deterioration in the estimated ratio was largely due to weak pension fund returns during the first half of the year," said Judy Cameron, Managing Director of OSFI's private pension plans division.

"Since June 30th, market conditions have remained volatile. Although pension fund returns have improved, there has been a substantial decline in long-term interest rates."

Equity markets and long-term interest rates have huge impacts on fund assets and their solvency ratios, which measure a pension plan's financial health, although they have no direct effect on current payments to pensioners.

The federal government has been working on reforms to the legislative and regulatory framework for the private pension plans regulated by OSFI, which doesn't oversee pensions of companies that fall under provincial jurisdiction.

A number of changes to federal pension legislation and regulations came into effect in July, including new solvency funding requirements. I wonder why they would do that?..Watch this space!

The federal watchdog says the solvency of the defined-benefit plans it supervises was down three points at mid-year, from 90 per cent at the end of 2009.

Reader this is the Federal watchdog so the real picture may not be what they at this time report as I say watch this space for changes

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