The value of a typical Canadian defined benefit pension plan’s assets declined in September, according to LifeWorks Inc.’s latest monthly report.
An investment portfolio designed to mimic typical Canadian DB portfolios saw its assets shrink by 2.8 per cent over the month. The value of the benchmark portfolio, which is composed of 50 per cent equities and 50 per cent fixed income, remained 15.4 per cent lower than at the beginning of the year.
On a solvency basis, the portfolio also declined, dropping from 102 per cent to 100.1 per cent. Despite the deterioration of asset values, the solvency index remained stronger than it had been at the beginning of the year as a result in falling costs. The pension expense index, which measures anticipated costs relative to the beginning of the year, fell from 58.7 per cent in August to 53.2 per cent at the end of September.
Overall returns were hampered by the poor performance of equities, with the MSCI ACWI index dipping 5.1 per cent over the month. Canadian equities saw similar losses, with the S&P/TSX composite index also declining 4.3 per cent.
Returns for Canadian bond indices were negative during the month, with yields on non-indexed short-term bonds increasing by 0.15 per cent and long-term term bonds by 0.15 per cent. Market expectations for long-term inflation dropped by 0.07 per cent, reaching 1.65 per cent. The moderate dip followed the release of inflation data from Statistics Canada showing the consumer price index fell to seven per cent on a year-over-year basis in August.