Commuted Value Interest Rate and Mortality Assumptions at February 1, 2011
This page is being provided to ensure that all actuaries across Canada have access to a consistent model for the calculation of the interest rates, underlying inflation calculations, and adjustment factors which need to be calculated to determine pension commuted values. As a comparison, I have updated the interest rates required by the previous standards from 2005 and 1993; this update will end with the interest rates as of January 2011. However, I will retain the rates, ending January 2011, in the previous standards for historical purposes.
Two important changes have been made to the calculation of commuted values with a valuation date on and after February 1, 2011. First, if the valuation date is on or after February 1, 2011, the actuary should select economic assumptions that depend on the reported rates for applicable CANSIM series for the calendar month immediately preceding the month in which the valuation date falls. If the valuation date is on or before January 31, 2011, the actuary should select economic assumptions that depend on the reported rates for applicable CANSIM series for the second calendar month preceding the month in which the valuation date falls. Second, if the valuation date is on or after February 1, 2011, the actuary should select mortality rates equal to the UP-94 Table with generational projection using mortality projection scale AA.
The Actuarial Standards Board (ASB) approved the Final Standard for Revised Standards of Practice for Pension Commuted Values on December 8, 2008. The effective date is April 1, 2009, It should be noted, however, that in some provinces the new Standard cannot be used until any appropriate pension legislation or regulation has been amended.
Early implementation is permitted for pension solvency valuations and hypothetical wind-up valuations with a valuation date on or after the date of publication of the final Standard (i.e. December 12, 2008) if appropriate to the circumstances of the plan and if permitted by any applicable pension regulator. Early implementation is also permitted for the calculation of commuted values in any jurisdiction that prescribes the use of this Standard with an effective date prior to April 1, 2009. Early implementation is not otherwise permitted.
Section 3840.04 of the Standard states that "The commuted value of a fully or partially indexed pension should be at least equal to the commuted value applicable to a non-indexed pension in the same amount and having similar characteristics." I have therefore assumed, when calculating each interest rate applicable to partial indexing, that the indexing rate would be a minimum of 0.0% (ie. - no deflation or no deindexation).
Commuted Value Mortality Assumption Change at October 1, 2015
The Actuarial Standards Board (ASB), at its meeting on June 9, 2015, decided to promulgate the use of the following mortality table for commuted values, effective October 1, 2015. The table is the 2014 Canadian Pensioners Mortality Table (CPM2014) combined with mortality improvement scale CPM Improvement Scale B (CPM-B). Use of the mortality improvement scale CPM-B1D2014 is acceptable as an interim measure for calculations up to and including December 31, 2016. This change is effective for most of the provinces as of October 1, 2015. For Ontario, the date is December 15, 2015 rather than October 1, 2015.
Marriage Breakdown Assumptions for Capitalized Value of Pension Benefits
I am providing the calculation of the interest rate assumptions which would be used to calculate the capitalized value of pension plan benefits, according to CSOP 4300 effective as of January 2012. However, I will retain the rates, ending December 2011, in the previous standards for historical purposes.
Ontario Legislation Bill 133 - Marriage Breakdown Assumptions for Capitalized Value of Pension Benefits
I am providing the calculation of the interest rate assumptions which would be used to calculate the capitalized value of pension plan benefits, according to Ontario Legislation Bill 133 effective as of January 1, 2012 using commuted value intererst rates for valuation dates on or after January 1, 2012. However, I am also providing the interest rates required by Bill 133 for valuation dates prior to January 1, 2012 ==> see Worksheet Ontario (Bill 133) Prior Rates.
Annuity Proxy Interest Rate for Solvency Calculations
I am providing my calculation of the annuity proxy interest rate for solvency calculations in actuarial reports, based on the Annuity Proxy Guidance provided by the CIA. However, I am only providing the monthly CANSIM rates rather than the weekly or daily rates mentioned in the Guidance.
Interest on Employee Required Contributions
I am providing the 12 month average rates which are used to calculate interest on employee required contributions.
I have made every attempt to ensure that the rates provided in this spreadsheet are correct and they have been reviewed by another actuary prior to posting to this web site. HOWEVER, anyone who uses these rates must do so at their own risk. I would certainly welcome feedback from anyone who disagrees with any rate calculated in this spreadsheet. Peer review and feedback are an essential part of ongoing quality control in any process.
To save this spreadsheet to your own computer, right click on the name of the file, select 'Save Target As', chose a location and download the file.