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New rules lead to a six-per-cent reduction in commuted values

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Pension/Retirement / Canada

New rules lead to a six-per-cent reduction in commuted values

TORONTO--()--Released today, the monthly Morneau Shepell Pension Indices condense the journey that pension plans have experienced over the last year into a few key statistics. The indices also provide an early indicator of the challenges that are yet to come for plan sponsors and administrators to help with the monitoring and management of their pension plans.

December 1, 2020, saw the introduction of new rules for calculating commuted value lump sum payments from defined benefit pension plans in Canada. The Morneau Shepell index shows the overnight change for the average plan was a six-per-cent reduction, but the new methodology moves with market conditions and may produce higher or lower payouts in future. Plan members considering whether to exit a defined benefit plan should always seek impartial and balanced views on whether or not taking a lump sum transfer is suited to their circumstances and will or will not best support their long-term financial wellbeing.

Given that pension plans in Canada pay billions of dollars a year in cash lump sums to their members, this change could reduce cash outflows from plans by hundreds of millions of dollars each year,” said Murray Wright, senior consultant, retirement solutions. “Pension plans have, in general, been very successful at weathering the storm of volatile markets and uncertain economic conditions in 2020. Despite this, further challenges lie ahead and we encourage plans to look behind the current pension plan balance sheet to ensure they understand the underlying risks and how these have changed over the course of the year. The new year will likely bring further volatility, continued low interest rates and further pressure on accounting measures and cash requirements. A proactive approach to risk management is a must for pension plans given that the only certainty for 2021 is that we will see further uncertainty.”



December 31,
2019 Index


November 30,
2020 Index



Solvency Index







Commuted Value Index







Accounting (Balance Sheet) Index







Accounting (Pension Expense) Index







Plan Asset Index







*Commuted Value Index changes to 104.0 on December 1, 2020, a fall of six per cent.

For more detail on the indices and the assumptions behind them please review the summary report

About Morneau Shepell

Morneau Shepell is a leading provider of technology-enabled HR services that deliver an integrated approach to employee wellbeing through our cloud-based platform. Our focus is providing world-class solutions to our clients to support the mental, physical, social and financial wellbeing of their people. By improving lives, we improve business. Our approach spans services in employee and family assistance, health and wellness, recognition, pension and benefits administration, retirement consulting, actuarial and investment services. Morneau Shepell employs approximately 6,000 employees who work with some 24,000 client organizations that use our services in 162 countries. Morneau Shepell is a publicly traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit


Heather MacDonald
Morneau Shepell