In July, the funded status of a typical pension plan increased on both a solvency basis and on an accounting basis.
The representative pension plan portfolio returned 0.8 per cent for the month, as positive equity market performance was partially offset by weakness in fixed income markets.
The global developed and emerging equity markets index returned 2.7 per cent in Canadian dollar terms and Canadian equities finished the month with a return of 1.7 per cent.
Short-term Government of Canada bond yields and long-term Government of Canada bond yields increased by approximately 0.17 per cent to 0.19 per cent over the month of July. Meanwhile, corporate bond credit spreads tightened across all durations, declining by 0.09 per cent to 0.11 per cent.
Market expectations for long-term inflation (the break-even inflation rate) were approximately 2.00per cent at the end of July, which represents an increase of 0.09per cent since the end of June.
“As we approach the one-year anniversary of the Canadian Association of Pension Supervisory Authorities (CAPSA) releasing their new Guideline for Risk Management for Plan Administrators (Risk Guideline), it’s an opportune time for pension plan administrators to evaluate their progress on addressing the contents of the Risk Guideline” says Gavin Benjamin, Partner in TELUS Health’s Consulting team.
“Based on the Risk Guideline, administrators should establish a risk management framework that effectively identifies, evaluates, manages, and monitors the material risks to their pension plan. Furthermore, the Guideline indicates that a plan administrator should create a written statement outlining the overall risk appetite, risk tolerance, and risk limits for their plan. By tailoring the timely implementation of the Risk Guideline requirements to the specific circumstances of their plan, administrators can not only meet the expectations of pension regulators but also safeguard the pension benefits of plan members amid a period of ongoing economic and geopolitical uncertainties.”
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to read the July report.