The funded status of a typical Canadian defined benefit pension plan decreased on a solvency basis but increased on an accounting basis in the month of February, according to a new report from Telus Health.
The monthly pension index found the typical DB plan decreased from 101.7 per cent on Jan. 31 to 100.7 per cent on Feb. 28 on the solvency index, but increased from 99.7 per cent to 100.5 per cent during the same period on the accounting index.
Read: Report finds solvency ratio of typical DB pension plan increased to 101.7% in January
A representative pension plan portfolio returned 2.6 per cent in February, due to strong performances by bonds and equities.
Canadian equities finished the month with a 6.9 per cent return, followed by global developed and emerging equity markets index which returned two per cent.
Short-term Government of Canada bond yields decreased by roughly 0.17 per cent and long-term Government of Canada bond yields decreased by nearly 0.25 per cent over the month. Corporate bond credit spreads increased by 0.10 per cent for short-term bonds and 0.13 per cent for long-term bonds.
Despite a strong performance at the start of the year, Canadian pension plans are facing a complex environment with recent market volatility introducing additional uncertainty, said Amy Pun, associate partner at Telus Health, in a press release. “The challenge is the combination of geopolitical developments, trade tensions around [the Canada-United States-Mexico Agreement] renegotiations, and broader economic factors that make it even harder than usual to predict funding trends.”
Read: Report finds solvency ratio of average DB pension plan increases to 109% in December