CIA selects FTSE Russell to represent Canada bond market for commuted-value calculations

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Three golden eggs with a calculator on business and financial reports : Investment concept © wisitporn /123RF Stock Photos The Canadian Institute of Actuaries has selected FTSE Russell to represent the provincial and investment-grade corporate bond spread to be used for the CIA’s new market-based commuted-value calculation.

The calculation is used to determine how much to pay a member of a registered defined benefit pension who leaves the plan and elects to receive their pension entitlement as a lump-sum payment. Historically based on the yields of long-term Government of Canada bonds, it will now also reflect blended spreads of provincial and investment-grade corporate bond yields.

“We gave it a great deal of thought and sought feedback from across the Canada actuarial and pension community when we decided to modernize our approach to commuted-value computation,” said Michel St-Germain, president of the Canadian Institute of Actuaries, in a press release. “And when we decided to go to a more market-based approach to the determination of commuted-value interest rates, FTSE Russell Canada was the natural choice. . . . We also appreciate that FTSE Russell Canada is making the relevant index values accessible on their website to all those who need this information.”

The changes to the commuted-value standard, published by the CIA’s actuarial standards board in January 2020, will take effect on Dec. 1, 2020. FTSE Russell Canada has introduced a dedicated online portal for members and clients to access the index values used in determining commuted-value interest rates and learn more about commuted value and how it’s calculated.

“We are so excited to be selected by the CIA to provide the underlying market data to support the new market-based commuted value computation,” said Marina Mets, head of Americas fixed income and multi-asset product management at FTSE Russell. “We are also happy to work with the CIA going forward to educate Canada actuaries, pension plan managers and the public on our indexes as this new association with the CIA will provide a much broader platform of engagement.”

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