In February, the funded status of a typical pension plan decreased on both a solvency basis and on an accounting basis.
The representative pension plan portfolio returned 0.3% for the month, as the positive performance in bond markets was tempered by declining equity markets.
The global developed and emerging equity markets index, the MSCI ACWI, returned -1.1% in Canadian dollar terms. The Canadian equity index, the S&P/TSX Composite, finished the month with a return of -0.4%.
Short-term Government of Canada bond yields declined by approximately 0.09% while the long-term Government of Canada bond yields decreased by approximately 0.12% over the month of February. Meanwhile, credit spreads for corporate bonds slightly widened across all maturities in February.
Market expectations for long-term inflation (the break-even inflation rate) were approximately 1.85% at the end of February, decreasing by 0.04% since the end of January.
"While economic indicators point to continued uncertainty ahead, the average Canadian pension plan has maintained its position of strength in the first two months of 2025, providing plan sponsors with a solid foundation from which to operate. This advantageous position offers plan sponsors the flexibility to focus on forward-looking risk management rather than reactive measures" says Andrea Knoll, Partner and West Region Leader in TELUS Health's Consulting practice.
"The current environment, characterized by fluctuating market conditions and ongoing economic challenges, reinforces the importance of maintaining a long-term perspective. While short-term market movements can be attention-grabbing, the true measure of a pension plan's health lies in its ability to meet long-term obligations and objectives. The combination of healthy funded positions and evolving market dynamics presents an opportune moment for plan sponsors to refine their risk management frameworks to protect against future challenges. This includes thoughtful evaluation of risk tolerance levels, careful consideration of diversification strategies, and implementation of robust governance practices.
As we progress through 2025, plan sponsors should leverage their strong financial positions to enhance their risk management strategies to help ensure pension plans remain resilient while effectively addressing both current and emerging challenges in the pension landscape.”
Click here to read the February report.