The Pension Indices by TELUS Health, released monthly, condense the journey that pension plans have experienced during the year into a few key statistics. More importantly, they also provide an early indicator of the challenges and opportunities that are yet to come for plan sponsors and administrators to help with the monitoring and management of their pension plans.
“One of the noteworthy developments in the financial markets so far in 2025 is the continued steepening of the Government of Canada yield curve. This represents a move to a more typically shaped yield curve, where longer term interest rates are higher than shorter term rates” says Gavin Benjamin, Partner in TELUS Health’s Consulting team.
“This is generally considered to be good news, as the yield curve was inverted for a period up to the middle of 2024. A yield curve is inverted when shorter term rates are higher than longer term rates. An inverted yield curve has sometimes been an indicator of a future recession. The changes we have seen in the shape of the yield curve during the past few years is a reminder that plan sponsors attempting to protect their plan against interest rate risk through a liability driven investment (“LDI”) approach need to be thoughtful about how their LDI strategy is implemented. For example, the sponsor should consider whether the LDI strategy is sophisticated enough to protect the plan from both shifts in and changes to the shape of the yield curve. Other considerations include how well the strategy protects the funded status of the plan from credit risk.”
Click here to read the October report.