Solvency funded status of typical employer-provided pension plan was stable in third quarter, opening door to adjustments in risk management
TORONTO, Oct. 31, 2024 /CNW/ - Two new investment and pension management reports released today by TELUS Health - Pension Indices and Performance Universe - indicate enhanced stability in pension plan solvency and consistent positive returns for the third quarter of 2024. This is a welcomed overall indicator for the financial security of individual employees and retirees, as well as the improving health of the economy in general. Solvency stability is good news for pension plan administrators who will be better equipped to adjust risk management approaches in response to new guidelines from the Canadian Association of Pension Supervisory Authorities (CAPSA).
"When individuals are confident in their future financial security, especially when it comes to long-term retirement planning, they are more likely to spend money and stimulate economic growth," said Philip Mullen, Vice-president, Employer Solutions Consulting, TELUS Health. "Reliable pension plans can also lead to more stable investment strategies that contribute to overall market stability. Additionally, they have labour market effects that can impact retirement planning, employee retention and job satisfaction – all important contributors to individual financial wellness."
Pension Indices: Positive investment return driven by strength of equity and bond markets
The September 2024 Pension Indices by TELUS Health, which includes a detailed overview of results from the third quarter of this year, show that the funded status of a typical pension plan increased on a solvency basis in the last month, but decreased on an accounting basis. When looking back across the entire third quarter, solvency actually remained unchanged with the accounting index increasing by 1.6 per cent.
"While the funded ratio of a typical pension plan improved by roughly 8 per cent on a solvency basis during the first nine months of 2024, largely driven by strong equity markets returns during this period, the solvency funded ratio stabilized in Q3. Defined benefit pension plans continue to be well funded heading into the fourth quarter of the year," said Gavin Benjamin, Partner at TELUS Health's Consulting practice and leader of the Pension Indices team. "Pension plans remain in a solid position heading into the fourth quarter, but financial market risks continue to pose a potential threat to their stability, warranting additional focus on risk management in many cases."
Performance Universe: Positive returns for Q3, but below benchmarks
The second report, TELUS Health's Performance Universe of Pension Managers' Pooled Funds, found that in the third quarter of 2024, diversified pooled fund managers posted a median return of 6.2 per cent before management fees and 13.3 per cent since the beginning of the year.
"The financial position of a typical pension plan at the end of the third quarter was nearly identical to that we noted on June 30," said Jean Bergeron, Partner - Investment Consulting, TELUS Health and head of the Performance Universe group. "During the third quarter of 2024, diversified pooled fund managers performed, on average, 0.4 per cent lower than the return of the benchmark portfolio used by many pension funds."
Stock and bond markets continued to progress during the third quarter of 2024. Key highlights of the Performance Universe report include:
- The S&P/TSX Composite Index of Canadian equities posted a return of 10.5 per cent for the quarter.
- The MSCI World Index posted a return of 5.0 per cent (in Canadian dollars).
- The S&P 500 equity index increased by 4.4 per cent (in Canadian dollars).
- The Emerging Markets Index rose by 7.3 per cent (in Canadian dollars).
- For fixed income securities, the Canadian bond market increased by 4.7 per cent.
High solvency ratio offers more flexibility to adapt to new guidelines
The strong pension plan solvency funded ratios open the doors for pension plan administrators to more quickly adjust to new guidelines for risk management, adopted by CAPSA in September. The new guidelines set the industry standard for the management of Canadian pension plan risk, consolidating and updating approaches to cybersecurity, leverage, third-party advisors and service providers, investment governance, and environmental, social and governance (ESG) policies. The next step is for pension plan administrators to review their risk management framework to align their practices with the new guidelines. Conducting such a review now, while plans remain well-funded, is the recommended approach for administrators, as the options available to manage a pension plan's financial risks tend to be much more affordable compared to when a plan has developed a significant deficit.
"Our focus on wellbeing is what drives us. Our expert team is constantly combing through data to provide the most current information to the industry supporting critical decision-making in pension plan management helping managers mitigate risk, all with sustainability and financial wellbeing in mind," added Mullen.
About TELUS Health's Investment Management reports
Pension Indices are released by TELUS Health on a monthly basis, while the Performance Universe report is published at the end of each fiscal quarter. As a major supplier of analytical expertise to employers across Canada, TELUS Health investment management experts harness the power of data and technology to help clients and industry stakeholders make informed business decisions. Our regular reports include:
- Pension Indices by TELUS Health: Providing valuable insights into the state of pension plans in Canada, TELUS Health Pension Indices condense the journey that pension plans have experienced during the year into a few key statistics, offering an early indicator of the challenges and opportunities that lie ahead for plan sponsors and administrators. Reports are released monthly, with significant data announcements at the end of each quarter. To access the September 2024 report, please visit here.
- TELUS Health Performance Universe of Pension Managers' Pooled Funds: These quarterly reports analyze the performance of about 311 pooled funds managed by nearly 45 investment firms in Canada. The managers who contribute to the Universe manage assets totaling approximately $470 billion, including pension fund assets of over $230 billion. The data from these reports have provided leading portfolio managers key insights for over four decades, and help them make informed decisions and ensure the long-term financial health of a sponsor's pension plans. To access the full report for Q3 2024, please visit here.
Investment management services are provided by TELUS Health Investment Management Ltd. (THIM). THIM is registered as a portfolio manager, investment fund manager and exempt market dealer in various provinces across Canada with the Ontario Securities Commission as its principal regulator. THIM is a wholly owned subsidiary of TELUS Health (Canada) Ltd. and is indirectly owned by TELUS Corporation, a public company trading on the TSX ("T") and NYSE ("TU").
About TELUS Health
TELUS Health is on a mission to become the most trusted wellbeing company in the world by enhancing the overall efficiency of healthcare and championing workplace wellbeing. By integrating advanced healthcare technology with comprehensive employee support services, TELUS Health provides a holistic approach to primary and preventive health and wellbeing for over 75 million people across 160 countries. Our innovative digital health platforms, including electronic medical records (EMRs) and virtual care solutions, empower healthcare professionals, individuals, employers and governments to deliver personalized care efficiently. Our employee wellbeing programs offer extensive support through Employee Assistance Programs (EAPs), mental health resources, financial counselling, and workplace wellness initiatives. At TELUS Health, we are committed to revolutionizing healthcare to ensure people receive the support they need and employees thrive both personally and professionally. Together, let's make the future friendly. For more information, visit: www.telushealth.com.
For media inquiries, please contact:
Jill Yetman
TELUS Media Relations
jill.yetman@telus.com
SOURCE TELUS Health
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