Pension Indices by TELUS Health: July 2024

In July, a typical pension plan experienced a positive change in funding levels, with gains noted on both solvency and accounting bases. A representative pension plan portfolio saw an investment return of 3.2 per cent for the month, fueled by strong performances in equity and bond markets. The MSCI ACWI, a global equity index, posted a 2.6 per cent return in Canadian dollar terms, while the Canadian equity index, the S&P/TSX Composite, surged by 5.9 per cent.

Government bond yields decreased, with short-term yields dropping by approximately 0.53 per cent and long-term yields by 0.17 per cent. Corporate bond credit spreads remained stable, and market expectations for long-term inflation saw a slight decrease to 1.78 per cent.

Gavin Benjamin, a Partner in TELUS Health’s Consulting practice, noted the divergence in global monetary policy with central banks in Japan, the U.K., and the U.S. taking different actions in recent weeks. This divergence has the potential to create market volatility, which can impact pension plans. He emphasized the importance of ongoing pension risk management to ensure that pension plans are prepared for potential market fluctuations, including interest rate volatility.

As we move forward, the actions of the Bank of Canada will be closely watched, particularly in relation to the Federal Reserve's policies. Ensuring that pension plans are resilient against market shocks should be a priority for plan sponsors.

Click here to read the July report.