TELUS Health has published its May 2024 Pension Indices report, showing a month of mixed results for pension plans. “While the funded position of a typical pension plan saw an increase on a solvency basis, it experienced a decrease on an accounting basis,” the company states. “However, the overall investment return was positive, coming in at 2.7 per cent for a representative pension plan portfolio. This boost was thanks to strong performances in both the equity and bond markets.”
The report looks at global equity market performance, Canadian equity index returns and the bond market where they point out that short-term and long-term Government of Canada bond yields dropped by approximately 0.17 per cent and 0.21 per cent, respectively. Corporate bond credit spreads remained stable, they add.
It also reviews the Bank of Canada’s recent decision to reduce its policy interest rate by 0.25 per cent. “Despite anticipation of further rate cuts, the relationship between central bank policy and long-term bond yields impacting pension liabilities is more difficult to predict, particularly in an environment of significant economic and financial market uncertainty,” states TELUS Health’s associate partner.
According to the May report, the TELUS Health solvency index (January 1, 2024 the index = 100) sits at 108.3, up from 106.4 in April. The report also looks at changes in the estimated annuity purchase premiums since the start of the year, provides an indication of the changes in the accounting funding level of an average plan, along with changes in asset levels for an average pension plan since the start of the year. The commuted value index, which measures changes in commuted values for plan members, dropped to 95.9 as of May 31, down from 102.1 at the end of April 2024.