Results for Canadian defined benefit pension plans
The WTW Pension Index has increased in the third quarter, as a decrease in accounting liability measures was partially offset by negative asset returns. The net effect on our benchmark plan was an increase of 2.9% in the WTW Pension Index (from 96.6 to 99.4) for the quarter.
Canadian Interest Rates
The Bank of Canada increased its overnight lending rate by 0.25% in early July bringing the policy rate to 5.0%. It maintained the rate at this level through the quarter while continuing its policy of quantitative tightening. However, the yield on 30-year Canada treasuries increased during the quarter to finish 72 bps higher than it started, as concerns have increased that interest rates might remain higher for longer than anticipated. Credit spreads stayed relatively flat during the quarter, contracting by only 4 bps. The benchmark discount rate determined under the RATE:Link methodology used to determine defined benefit obligations increased by 75 bps, which combined with the effect of interest accumulation led to a decrease in accounting liability measures over the quarter.
Learn more here: https://www.wtwco.com/en-ca/insights/2023/10/pension-finance-watch-third-quarter-2023
