The median solvency ratio of Canadian defined benefit plans improved throughout the second quarter of 2025, reaching 126 per cent as at June 30, according to a new report by Mercer.
It noted the average DB plan started the second quarter with a solvency ratio of 122 per cent, which declined to 121 per cent in April and then increased to 123 per cent at the end of May.
Read: Average solvency ratio of Canadian pension plans drops 3% in Q1 2025: report
The report found Canadian DB pension plans generally experienced decreased liabilities and positive returns on equities, partially offset by negative returns on Canadian fixed income.
Nearly two-thirds (59 per cent) of plans have a solvency ratio above 120 per cent, an increase from 53 per cent at the start of the quarter. The report also noted plans with a solvency ratio above 100 per cent increased from 88 per cent to 89 per cent.
“Equities experienced significant volatility throughout the quarter but ended on a positive note,” said Jared Mickall, principal and wealth practice leader at Mercer, in a press release. “Meanwhile, overall increases in fixed income yields resulted in an overall decline in liabilities and a general decline in fixed income assets.”
Read: Solvency ratio of average pension fund increased to 101.1% in May: report
A separate report by Aon found the aggregate funded ratio for Canadian pension plans in the S&P/TSX composite index rose to 109 per cent, up from 105.5 per cent in the first quarter.
According to the report, long-term Government of Canada bond yields increased 33 basis points relative to the previous quarter rate, while credit spreads narrowed by nine basis points. This combination resulted in an increase in discount rate of 24 basis points to 4.67 per cent.
Pension assets gained 1.6 per cent, which helped regain the ground lost in the previous quarter, said Nathan LaPierre, partner for wealth solutions in Canada at Aon, in a press release. “Pension plan sponsors continue to evaluate how they may shield their plans from that uncertainty.”
Read: Average funded ratio of Canadian DB pension plans down 2% in Q1 2025: report