Canada’s DB pension plans post 5% return in Q4, close 2020 with 10% gain

The funded position of a typical Canadian defined benefit pension plan rose on both a solvency and accounting basis in April, according to Telus Health’s latest pension index.

It found the solvency of the average DB plan rose to 106.4 per cent in April, up from 106 per cent in March. The accounting index, which is an indication of changes in the accounting funding level of an average plan since the start of the year, increased from 106.3 per cent in March to 108 per cent in April.

A representative pension plan portfolio returned negative 2.3 per cent for the month due to losses in equities and bonds. The MSCI ACWI index and the S&P/TSX index each produced a return of negative 1.8 per cent, while long-term bond yields increased by 0.34 per cent, a very significant change in a one-month period, the report noted.

Read: Average Canadian DB pension plan’s funded solvency position up 2.8% in February: report

“We saw large increases in long-term interest rates in April, as market consensus moved towards delays in interest rate cuts,” said Andrea Knoll, a partner on Telus Health’s consulting team, in a press release. “This led to reductions in plan liabilities over the month.”

A separate report by WTW found the asset/liability performance of a hypothetical Canadian benchmark DB pension plan increased from 95.6 per cent to 100.7 per cent during the first quarter of 2024, largely due to the combined effect of decreased accounting liability measures and positive asset returns.

It noted U.S. equities, measured through the S&P 500 index, returned 13.3 per cent. Despite trailing the U.S., Canadian equities also experienced significant growth with a 6.6 per cent return during the quarter.

Read: Average Canadian DB pension plan returns 3.6% in Q1 2024: reports