Pension Indices: August 2022

The Pension Indices by LifeWorks, released monthly, condense the journey that pension plans have experienced during the year into a few key statistics. More importantly, they also provide an early indicator of the challenges and opportunities that are yet to come for plan sponsors and administrators to help with the monitoring and management of their pension plans.

Highlights:

• Over the month of August, the funded position of a typical pension plan declined on both a solvency basis and an accounting basis.
• The investment return was -2.4% for the month for a representative pension plan portfolio. The return for the first eight months of the year for the plan was -12.9%.
• The Canadian equity index finished the month with a weak return of -1.6%. Also, returns for Canadian bond indices were negative as yields increased, especially for bonds with short and median durations. Short-term Government of Canada bond yields increased by 0.68% during the month, whereas long-term Government of Canada bond yields increased by approximately 0.25%
• Market expectations for long-term inflation (the break-even inflation rate) were approximately 1.78% at the end of August, which represents a 0.06% decrease from the end of July.
• The accounting pension expense index saw an increase in August, but is still well below the expense index at the beginning of the year.