The average Canadian defined benefit pension plan returned 1.6 per cent during the fourth quarter of 2024, a decrease from 5.1 per cent in the previous quarter, according to a new report by RBC Investor Services.
It found Canadian DB plans closed the year with the strongest yearly median return in five years at 11.3 per cent for the period ending Dec. 31, 2024.
Read: Average Canadian DB pension plan returns 5.1% in Q3 2024: report
Global (4.1 per cent) and Canadian (3.2 per cent) equities underperformed the MSCI world index (6.3 per cent) and the TSX composite index (3.8 per cent). On a one-year basis, global equities returned 24.1 per cent while Canadian stocks delivered a 21.2 per cent return.
The Canadian fixed income (negative 0.2 per cent) and the FTSE Canada universe bond index (negative 0.04) both declined but still managed to offer positive annual results with a 3.6 per cent and 4.2 per cent return, respectively.
“Our analysis shows solid annual returns for RBCIS DB pension plans, but also emphasizes the need for diversification and active risk management, especially as we enter a year of uncertainty,” said Isabelle Tremblay, asset owner segment lead at RBC Investor Services, in a press release.
Read: Average funded ratio of Canadian DB pension plans up 2% in Q4 2024: report
A separate report by Northern Trust Corp. found the median Canadian pension plan returned 1.5 per cent in the fourth quarter of 2024 and 10.6 per cent for the entire year.
It noted while the North American economic backdrop is showing signs of stabilization, plan sponsors face waves of political uncertainty around the globe, which restarted volatility across most major markets.
International developed markets measured through the MSCI EAFE index returned negative 2.1 per cent for the quarter and 13.8 per cent for the year. Meanwhile, the MSCI emerging markets index returned negative 1.9 per cent during the quarter but increased 17.9 per cent in 2024.
“This past year presented both challenges and opportunities as the macroeconomic environment pursued stability and normality,” said Katie Pries, president and chief executive officer at Northern Trust Canada, in a press release. “Whether the economic tone is one of caution or optimism, plan sponsors are adapting well as they continue to modernize frameworks and implement strategies to secure consistent growth and protection of their respective pension plan investments both now and into the future.”
Read: Average solvency ratio of DB pension plans increased 3% in Q4 2024: report