The PBI Canadian Pension Solvency Index for the Period Ending September 30, 2016

Investment Opportunity Research

The PBI Canadian Pension Solvency Index illustrates the development of solvency positions for a sample pension plan.

Canada’s real GDP fell 1.6% during the second quarter of 2016 triggered by the wildfires in Fort McMurray which lowered petroleum output and exports.  As a result, the Bank of Canada revised its growth outlook downwards to 1.3% for 2016 and 2.2% for 2017 from April’s projections of 1.7% and 2.4% respectively.  As oil prices and the C$ have recovered from the 2015 year-end lows, the drop in Q2 GDP is likely temporary and the Canadian economy is expected to rebound with positive GDP growth in Q3.

Gains made in a typical pension plan’s solvency since mid-2013 have been eroded by the combination of lower yields, negative capital market returns and the adoption of the CPM 2014 mortality table.  Since reaching a cycle high of 108% funded status in March 2014, the Pension Solvency Index has declined in almost every successive quarter.  At the end of September 2016, the PBI Canadian Pension Solvency Index stands at 90%, down from 92% at the end of June 2016.

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PBI Canadian Pension Solvency Index for the Period Ending June 30, 2016

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