The funded status of a typical defined benefit pension plan in Canada declined on a solvency basis for the second month in a row, according to a new report by Telus Health.
Its monthly pension index found the typical DB plan decreased from 100.7 per cent on Feb. 28 to 98.8 per cent on March 31 on the solvency index. However, plans advanced on the accounting index from 100.5 per cent to 100.9 per cent.
Read: Report finds solvency ratio of typical DB pension plan decreased to 100.7% in February
A representative pension plan portfolio produced a negative 3.8 per cent return during March, primarily due to weaker performance. The equity market in particular produced losses from both global developed and emerging equities (negative five per cent) and Canadian equities (negative 3.4 per cent).
Short-term Government of Canada bond yields increased by 0.43 per cent and long-term Government of Canada bond yields increased by nearly 0.25 per cent over the month. Corporate bond credit spreads increased by 0.05 per cent for short-term bonds and 0.07 per cent for long-term bonds.
“Rather than trying to predict the future, plans will be best served by staying the course,” said Ryan Yeo, principal at Telus Health, in a press release. “The recent sell off should not have changed much for pension plans.”
The report also noted market expectations for long-term inflation increased by 0.02 per cent since the end of February to 2.05 per cent in March.
Pension plans have up the year-to-date gains over March because of a sell off across global equity markets, he added. “However, funded positions have remained relatively stable as rising interest rates have reduced liabilities to offset asset losses.”
Read: Report finds solvency ratio of typical DB pension plan increased to 101.7% in January