A new report from Standard & Poor’s Ratings Services finds that some companies in Canada continue to experience rating pressure because of the size of their pension and other benefit obligations.

“The primary reason for the lack of improvement in pension returns is the decline in long-term interest rates. All companies in this study have had to lower their discount rates used in estimating the present value of their pension obligations,” says Standard & Poor’s credit analyst Kenton Freitag.

“Should rates remain low, it is likely that the funding deficits will increase in 2005, barring strong equity returns for the balance of the year,” he adds.

“In the longer term, the situation is unsettled; given the sensitivity of post-retirement obligations to interest rates, an increase in long-term interest rates could do much to increase the funding levels of these companies,” Freitag concludes.