Despite positive returns posted in the fourth quarter of 2022, Canadian defined benefit (DB) pension plans posted losses in 2022, according to the most recent figures from RBC Investor and Treasury Services.

Although DB pension plan assets returned 3.8 per cent in the last three months of 2022, it was not enough to offset the first two quarters of the year when plans suffered heavy losses. The annual median return was a decline of 10.3 per cent during the year, the lowest returns observed since the 2008 financial crisis when DB plans posted an annual median decline of 15.9 per cent.

Foreign equities were the top performing asset class in the fourth quarter, returning 9.7 per cent, capping full-year losses at 11.3 per cent. Comparatively, the MSCI World Index declined 12.2 per cent during the period. Value stocks outperformed growth stocks during the quarter and Canadian equities returned 6.3 per cent, up from the 5.9 per cent returns posted by the TSX Composite Index. “Over the year, domestic stocks represented the top performing asset class, returning -3.6 per cent in the All Plan Universe, versus -5.8 per cent for the TSX Composite Index, attributable to a large exposure to commodity stocks,” RBC writes in publishing its latest figures.

They add that Canadian pensions suffered their largest annual fixed income decline in more than 30 years, losing 16.8 per cent over the 12-month period, compared to declines of 11.7 per cent reported for the FTSE Canadian Bond Index.

Despite the fact that it was a challenging year, Niki Zaphiratos, managing director, asset owner with RBC’s investor and treasury services, says the rapid rise in bond yields resulted in lowering of pension liabilities. “Most pensions ended the quarter in a better position,” she states.