The PBI Canadian Pension Solvency Index illustrates the development of solvency positions for a sample pension plan.
Canada’s economy grew at 1.1% over the twelve months ending March 2016. This was less than half of the 2.5% GDP growth experienced in 2014 and the slowest since the 2009 recession. The slower pace of growth is expected to continue throughout 2016 as the economy continues to adjust to low oil and other commodity prices. The Bank of Canada accordingly cut its forecasted GDP growth for 2016 from 1.7% to 1.4%. However, it expects the growth rate for 2017 will improve to 2.2%.
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 108% funded status in March 2014, the Pension Solvency Index has declined in almost every successive quarter. At the end of June 2016, the PBI Canadian Pension Solvency Index stands at 92%.
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