The
2014 Projection Assumption Standards are now
available. This essential tool for financial planners is updated
yearly. This is its seventh 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 2014, the standards are:
- Borrowing rate: 5.00%
- Inflation: 2.00%
- Short-term returns: 3.00%
- Fixed income returns: 4.00%
- Canadian shares returns: 6.50%
The Projection Assumption Standards are based on
sources such as the Quebec Pension Plan, the Bank of Canada
and private actuarial companies.