Commuted Values Indexes

Author: FTSE Russell

Publication date: 24-01-2020

Version: Current

Language available: English only

FTSE Canada Fixed Income indices for Commuted Value Calculation

In Canada, a member of a defined benefit pension plan who terminates their membership may receive their pension entitlement in the form of a lump sum. This “commuted value” (CV) is the present value of the expected monthly lifetime retirement pension that they would have received from the plan.

The method for calculating CVs is prescribed by pension legislation, using the CIA’s actuarial Standards of Practice published by the Actuarial Standards Board. Section 3500 of the Standards of Practice contains detailed guidance on the assumptions and methods to be used to calculate CVs.

To calculate a CV payable from certain defined benefit pension plans, the interest rate assumption is determined monthly based on bond yields, historically using only Government of Canada bond yields. However, beginning December 1, 2020, the Standards of Practice have been updated with requirements for a more market-based calculation that also reflects yield information from provincial and corporate bond indices.

The CIA has selected FTSE Russell to provide these monthly bond market yields.


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Categories: Practice

Topics: Pensions, Post-employment benefits

Format: HTML

Accession no.: 222176