The funded status of a typical Canadian defined benefit pension plan increased on a solvency basis but decreased on an accounting basis during the month of November, according to a new report by Telus Health.
The monthly pension index revealed the typical DB plan grew slightly from 107.3 per cent in October to 107.4 per cent on the solvency index. However, on an accounting basis, it declined to 107.9 per cent in November from 108.1 per cent the previous month.
A representative pension plan portfolio returned 0.7 per cent in accordance with mixed performance across equity markets and positive performance in bond markets, the report said.
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Global developed and emerging equity markets posted a negative 0.5 per cent return, while Canadian equities offered a 3.7 per cent return. Meanwhile short-term and long-term Government of Canada bond yields remained relatively stable, with corporate bond spreads also showing stability.
The market expectations for long-term inflation are about 1.97 per cent at the end of the month, a slight 0.02 per cent rise from October.
Canadian pension plans are experiencing improved funded positions, which is leading plan sponsors to increasingly shift their focus to surplus management, said Andrea Knoll, partner and West region lead at Telus Health’s consulting team, in a press release.
“Key among these considerations is intergenerational equity and ensuring that surplus management decisions are fair and balanced across different membership groups and considering how decisions around benefit improvements, contribution holidays or surplus withdrawals impact each cohort differently, both in the short and long term.”
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