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FPSC and IQPF update unified Projection Assumption Guidelines

By The IJ Staff | May 02 2018 11:30AM

Photo: Freepik

The Financial Planning Standards Council (FPSC) and Institut québécois de planification financière (IQPF) have released updated unified Projection Assumption Guidelines for financial planners across Canada. The 2018 Guidelines came into effect May 1.

The guidelines are developed and updated annually by a committee of professional financial planners and actuaries to help financial planners make longterm financial projections (10 or more years) that are free from potential biases or predispositions, says the FPSC.

A reduction in projected fixed-income returns

Changes in the 2018 guidelines include: a reduction in projected fixed-income returns to account for the appreciation in historical bond prices that cannot be explained by changes in interest rates; inclusion of the S&P 500 Composite Index in the calculation of the guidelines for Foreign Developed Market Equities; and the addition of the S&P 500 Composite Index for U.S. equities in the Historical Rates and Standard Deviations 50-year data.

The Projection Assumption Guidelines for 2018 are as follows:

Inflation rate:

2.0%

Return rates

Short-term:

2.9%

Fixed-income:

3.9%

Canadian equities:

6.4%

Foreign developed market equities:

6.7%

Emerging market equities:

7.4%

YMPE or MPE growth rate

3.0%

Borrowing rate:

4.9%

 

To learn more, consult the guidelines here.

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