The median solvency ratio for Canadian defined benefit plans rose to 100.7 per cent in October as equity markets continued to rally, according to Aon Hewitt’s monthly median solvency ratio survey.

The figure is 1.4 percentage points higher than the beginning of October and the highest level since the survey recorded 102 per cent in 2002. Of surveyed plans, 51.5 per cent were more than fully funded as of Nov. 1, 2017, up 3.8 percentage points from the previous month.

The gross pension asset return was 3.3 per cent as all equity classes had positive results, according to the survey. Emerging market equities rose 6.7 per cent, followed by U.S. stocks at 5.5 per cent. Global and international equities increased by five per cent and 4.6 per cent, respectively. Canadian stocks, meanwhile, rose by 2.7 per cent. Infrastructure (4.6 per cent) and global real estate (2.6 per cent) led growth in alternative asset classes.

During the month, bond yields fell, lowering annuity purchase rates, which effectively increased pension liabilities. However, strong asset returns more than offset the adverse effect on solvency.

“The ongoing equity market rally at home and abroad has led to the highest Aon median solvency ratio in 15 years, despite the decline in long-term interest rates in October,” said Ian Struthers, a partner and investment consulting practice director at Aon Hewitt.

“Over the last few months, a rising interest-rate environment and strong stock returns have meant that pension assets are growing while liabilities are lower due to higher bond yields. It’s a Goldilocks moment for pensions, but plan sponsors know it can’t last forever. That’s why we’re seeing more of them leverage their plans’ exceptional financial health to employ de-risking strategies, increase their interest rate hedge ratios and thoroughly review their approach to diversification.”