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The funded position of a typical defined benefit pension plan rose both on a solvency basis (2.8 per cent) and an accounting basis (2.3 per cent) during February, according to Telus Health’s latest pension index.

It found the solvency of the average DB plan rose to 103.6 per cent in February, up from 100.8 per cent in January. 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 103 per cent in January to 105.3 per cent in February.

Read: Ontario DB pension plans’ average solvency ratio increased to 119% in Q4 2023: FSRA

For a representative pension plan portfolio, the investment return was 1.9 per cent for the month, attributed to positive returns in equity markets. The MSCI ACWI returned 5.9 per cent, while the Canadian S&P/TSX composite returned 1.8 per cent. In February, short-term Government of Canada bond yields increased 0.18 per cent and long-term Government of Canada bond yields increased 0.08 per cent.

Meanwhile, the credit spreads for corporate bonds of all durations decreased by between 0.06 per cent
and 0.07 per cent. Market expectations for long-term inflation were approximately 1.73 per cent at the end of February, increasing by 0.09 per cent since the end of January.

“2024 has started very well for most Canadian pensions plans,” said Murray Wright, Telus Health’s associate partner of retirement and benefits solutions. “Equity markets have had a very strong start to the year with global equities up by around eight per cent year to date. Incredibly, global equities are up more than 20 per cent compared to a year ago, led by the U.S. market. At the same time, long-term bond yields have increased in 2024, which tends to lead to a higher discount rate and therefore lower plan liabilities. We are seeing improvements in accounting and solvency positions as we head towards the end of Q1, which is great news.”

Read: Average Canadian DB pension plan returns 8.4% in Q4 2023: report