The funded status of a typical defined benefit pension plan in Canada increased on both a solvency basis and on an accounting basis in September, according to a new report by Telus Health.
The solvency index for plans grew to 107.4 per cent, compared to 105.8 per cent at the end of August, while the accounting index increased slightly to 107.5 per cent from 107.2 per cent the previous month.
A representative pension plan portfolio returned 3.9 per cent for the month, driven by strong gains across equity and bond markets, the report said. Indeed, Canadian equities provided a 5.1 per cent return, while global developed and emerging equities returned five per cent.
Read: Solvency ratio of average DB pension fund increases to 105.8% in August: report
Short-term Government of Canada bond yields decreased by 0.17 per cent and long-term Government of Canada bond yields decreased by 0.21 per cent. Meanwhile, corporate bond credit spreads slightly tightened across all durations, decreasing to 0.05 per cent.
Despite the positive performance, underlying macroeconomic signals remain mixed, with persistent uncertainty clouding the outlook, said Amy Pun, an associate partner with Telus Health’s consulting team, in the report.
“Concerns around growth and inflation continue to surface and the longer-term impact of evolving tariff policies adds another layer of complexity. . . . Pension plans are not out of the woods — [third-quarter] trends offered relief, but they also reinforced the need for disciplined risk management, dynamic asset allocation and scenario-based planning.”
Read: Average DB pension plan’s solvency ratio jumps to 103.7% in June: report