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Pension Indices: December 2021

Pension Indices: December 2021

December 31, 2021

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:

  • The funded positions of a typical plan improved on both solvency and accounting bases over the month of December, ending 2021 in a significantly better position relative to December 31, 2020.
  • In December, investment returns were positive. A typical pension plan achieved a return of approximately 2.6%. Canadian as well as foreign equity markets largely rose as worries surrounding Omicron, the latest COVID-19 variant, appeared to abate. Returns for Canadian bond indices were also positive, as yields decreased across the curve. Corporate credit spreads remained broadly stable.
  • Over the course of 2021, most pension plans benefited from the combination of positive equity returns and increasing bond yields, the latter helping to push liability measures lower. Looking ahead to 2022, plan sponsors continue to face considerable financial market uncertainty.
  • The accounting pension expense index shows an anticipated 22% reduction in next year’s pension expense as compared to December 31, 2020.