In September, the funded ratio of a typical pension plan increased slightly on a solvency basis but dipped on an accounting basis. A solid investment return of 2.3 per cent for the typical pension portfolio was driven by strong performances across both equity and bond markets. The global MSCI ACWI equity index rose by 2.6 per cent in Canadian dollar terms, while the S&P/TSX Composite equity index surged by 3.2 per cent. In addition, yields saw declines across short-term and long-term Government of Canada bonds, with credit spreads for corporate bonds also narrowing.
Through the first nine months of 2024, the funded ratio of the typical pension plan improved by roughly 8 per cent on a solvency basis and 9 per cent on an accounting basis, benefiting from strong equity market returns. While pension plans remain in a solid position heading into the fourth quarter, financial market risks continue to pose a potential threat to their stability.
Adding to the landscape, the Canadian Association of Pension Supervisory Authorities (CAPSA) released its "Guideline for Risk Management for Plan Administrators" in September. This new guideline sets the framework for pension plan risk management across Canada. With plans currently well-funded, administrators are encouraged to align their risk management practices with this guideline sooner rather than later, as managing risks is more affordable when plans are financially strong.
As Q3 ends, pension plan administrators have a unique window of opportunity to review and strengthen their risk management frameworks, positioning themselves well for the uncertainties ahead.
Click here to read the September report.