Pension Indices by TELUS Health: June 2024

As we conclude the second quarter of 2024, Defined Benefit (DB) pension plan funded positions experienced a variety of movements, presenting opportunities but also providing a reminder of potential underlying risks. Notably, June saw a small decline in the funded positions of a typical pension plan on both a solvency and accounting basis. However, the month closed with a modest investment return of 1.3 per cent for a representative pension plan portfolio, thanks to gains in select equity and bond markets.

Global equities performed well, with the MSCI All Country World Index (ACWI) achieving a robust 2.6 per cent return in Canadian dollar terms. This strong performance in global developed and emerging equity markets was a bright spot amid a mixed economic landscape. In contrast, the Canadian equity market underperformed, as evidenced by the S&P/TSX Composite Index ending the month down by 1.4 per cent.

Canadian bond yields decreased in June. Short-term Government of Canada bond yields decreased by approximately 0.18 per cent, while long-term yields saw a smaller decline of around 0.08 per cent. Meanwhile, corporate bond credit spreads remained relatively stable through June.

Additionally, long-term inflation expectations showed a slight decrease, with the break-even inflation rate settling at approximately 1.80 per cent by the end of June, a marginal decline from the end of May.

Second quarter key takeaways for pension market stakeholders

The second quarter of 2024 was another good quarter for DB pension plan financials, as the funded positions of a typical pension plan improved on both a solvency and accounting basis. However, with continued uncertainty in the financial and economic markets, stakeholders should continue to monitor market trends closely, as they provide valuable insights into the overall stability and performance of pension plan funded levels moving forward.

As we advance into the latter half of the year, understanding these dynamics will be essential for making informed decisions and ensuring the long-term financial health of a sponsor’s pension plans.

Click here to read the full report.