Pension Indices: November 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.
- The funded positions of a typical pension plan deteriorated on both solvency and accounting bases over the month of November.
- Investment returns were positive, with a typical pension plan achieving approximately 0.4%. The discovery of Omicron, a new COVID-19 variant, spooked investors, sending global equity indices lower towards the end of the month, in local currency terms. The strength of the US dollar cushioned negative US equity returns for unhedged Canadian investors as the Canadian dollar depreciated 3.3% relative to the US dollar. Returns for most local bond indices were positive as yields decreased across the curve. Corporate credit spreads widened.
- Market expectations for long-term inflation increased by approximately 9 bps over the period. Non-indexed 30-year Government of Canada bond yields decreased by 13 bps, while the equivalent but indexed bond yield decreased by 22 bps.
- The accounting pension expense index continues to register a significant fall in next year’s anticipated pension expense compared to the start of the year.