During October, the funded status of a typical pension plan increased on a solvency basis and on an accounting basis.
The investment return for a representative pension plan portfolio was -0.2 per cent for the month, primarily due to the negative performance in the bond market. The global developed and emerging equity markets index, the MSCI ACWI, returned 0.9 per cent in Canadian dollar terms. The Canadian equity index, the S&P/TSX Composite, also finished the month with a return of 0.9 per cent.
Short-term Government of Canada bond yields and long-term Government of Canada bond yields increased by approximately 0.15 per cent over the month of October. Credit spreads for mid-term and long-term corporate bonds decreased during the month of October.
Market expectations for long-term inflation (the break-even inflation rate) were approximately 1.75 per cent at the end of October, increasing by 0.11 per cent since the end of September.
“Pension funding levels showed modest improvement in October, with slight increases in both solvency and accounting funded positions. For a typical pension plan, funding levels were approximately 8 to 9 per cent higher than at the start of the year. On October 23, 2024, the Bank of Canada implemented a larger than usual rate cut, reducing its policy rate by 0.50 per cent to 3.75 per cent. This significant move has led to speculation among market observers that a similar cut may follow in December, particularly as inflation has fallen to near the Bank’s 2 per cent target” says Andrea Knoll, Partner and West Region Lead of the Consulting practice at TELUS Health.
Click here to read the October report.