The funded position of a typical Canadian defined benefit pension plan rose on both a solvency and accounting basis in July, according to Telus Health’s latest pension index.
It found the solvency of the average DB plan rose to 107.8 per cent, up from 107.6 per cent in June, while the accounting index increased from 107.1 per cent to 108.4 per cent.
Read: Median solvency ratio of Canadian DB pension plans stays flat in Q2 2024: reports
A representative pension plan portfolio returned 3.2 per cent for the month due to strong performances by equities and bonds. The MSCI ACWI returned 2.6 per cent, while the S&P/TSX composite index returned 5.9 per cent.
Short- and long-term government bond yields decreased by 0.53 per cent and 0.17 per cent, respectively. Corporate bond credit didn’t materially change. Market expectations for long-term inflation decreased to 1.78 per cent.
“Pension plans need to continue discussions on risk management and strategy to ensure the risks posed by the pension plan are right-sized for the sponsor’s ability to take on risk,” said Gavin Benjamin, partner at Telus Health’s consulting practice, in a press release. “We cannot predict what is going to happen with interest rates and equity markets, but it is clear there is lots of room for significant volatility.”
Read: Average Canadian DB pension plan’s funded position on solvency, accounting basis up in April: report