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Financial planners can expect equity returns between 6% and 8% in the coming decade, and fixed-income returns of around 2.7%, according to FP Canada and the Institut québécois de planification financière.

The associations’ 2021 Projection Assumption Guidelines published Wednesday are designed to help financial planners make financial projections for 10 years or more.

Canadian equities are projected to return 6.2%, compared to 6.6% for foreign developed market equities and 7.8% for emerging market equities.

The guidelines assume an annual inflation rate of 2% and return rates of 2.3% and 2.7% for short-term and fixed-income investments, respectively.

The guidelines are based on a variety of sources, including the Canada Pension Plan Actuarial Report and the Quebec Pension Plan Actuarial Valuation, and historical data from the S&P/TSX composite index, the S&P 500 index and the MSCI EAFE index.

For both the short-term and fixed-income assumptions, the guidelines didn’t include the 50-year historical average rate as a data source, since “these historical variables may so significantly depart from future expectations,” the report said. This resulted in lower rate forecasts for the asset classes.

In the 2020 guidelines, developed before the onset of the Covid-19 pandemic, short-term return rates were 2.4% and fixed-income returns were projected at 2.9%. Last year’s equity projections were slightly lower than in the new guidelines.

Despite historically low interest rates, the guidelines set the borrowing rate at 4.3%.

“It is prudent professional practice to consider the potential for borrowing rates to increase for purposes of assessing the relative benefits and risks associated with leveraging,” the report said.