The 2012
Projection Assumption Standards are now available. This
essential tool for financial planners is updated yearly. This is
its fifth year, since it was first presented at the 2008 IQPF
Congress.
A tool for better projections
An important aspect of financial planning is to make a variety
of projections: retirement needs and retirement income, insurance
needs, children’s education funding needs, etc. To make these
projections, financial planners must estimate future inflation and
borrowing rates, returns, life expectancy… In short, they must make
assumptions. How, then, can they make sure they draw realistic
scenarios?
This is why we created the Projection Assumption Standards: to
help financial planners make their projections. Judicious use of
these assumptions should protect both the client and the financial
planner.
Put together by Nathalie Bachand, A.S.A., F.Pl., Martin Dupras,
A.S.A., F.Pl., and Daniel Laverdière, A.S.A., F.Pl., the document
includes estimates for the inflation rate, borrowing rate, life
expectancy and three types of returns: short-term, fixed income and
Canadian shares.
For 2012, the standards are:
- Borrowing rate: 5.25%
- Inflation: 2.25%
- Short-term returns: 3.25%
- Fixed income returns: 4.50%
- Canadian shares returns: 7.00%
The Projection Assumption Standards are based on sources such as
the Quebec Pension Plan, the Bank of Canada and private
actuarial companies.