The median solvency ratio of Ontario defined benefit pension plans rose during the first quarter of 2023, from 112 per cent at the beginning of the year to 115 per cent at the end of March, according to the Financial Services Regulatory Authority of Ontario’s latest pension solvency report.

During the quarter, pension fund investment returns averaged 4.3 per cent, pushing the median solvency ratio to a new all-time high. The report projected 86 per cent of pension plans to be fully funded on a solvency basis, a five per cent increase from last quarter. Only two per cent of plans had a solvency ratio below 85 per cent, unchanged from the previous quarter.

Read: Median solvency ratio of Canadian DB pensions rose to 116% in Q1 2023: report

Inflation in Canada slightly declined from the fourth quarter of 2022, but remained higher than the Bank of Canada’s target range. The Canadian government bond yield curve was more inverted than in the previous quarter, with the two-year benchmark yield falling by 32 basis points to 3.74 per cent and the benchmark 10-year yield falling by 40 basis points to 2.9 per cent.

“Most pension plans in Ontario continue to be well funded and this is good news for many pension plan members,” said Caroline Blouin, executive vice-president of pensions at the FSRA, in a press release. “The funded status of a pension plan can change rapidly based on market conditions as we saw at the onset of the [coronavirus] pandemic. With plans being well funded, plan sponsors and administrators may find it an opportune time to pause and assess their asset allocation in light of their liability profile and risk management strategy.”

Read: Canadian pension plans’ average funded ratio reaches 120% in first quarter: report