The funded status of a typical defined benefit pension plan in Canada increased on both a solvency basis and on an accounting basis in August, according to a new report by Telus Health.
The solvency index for plans grew to 105.8 per cent, compared to 104.3 per cent at the end of July, while the accounting index jumped to 107.2 per cent from 104.8 per cent the previous month.
Read: Average DB pension plan’s solvency ratio jumps to 103.7% in June: report
A representative pension plan portfolio returned 1.3 per cent for the month, due in part to strong results from equity markets, the report said. Indeed, Canadian equities provided a 4.8 per cent return, followed by 1.8 per cent return from global developed and emerging equities.
Short- and long-term government bond yields went in separate directions with short bonds decreasing by 0.12 per cent, while long bonds grew 0.07 per cent. Market expectations for long-term inflation increased by 0.04 per cent to reach 2.04 per cent, compared to 1.88 in June.
Pension plans saw favourable market conditions in August with particularly strong performance from Canadian equities, said Ryan Yeo, principal at Telus Health’s consulting team, in a press release.
“Underlying the ongoing bull market is a number of concerning factors, including uncertainty about the future of trade and a weakening Canadian economy, which have renewed expectations of rate cuts by the Bank of Canada.”
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