The average solvency ratio of Canadian pension plans declined three per cent as at March 31, 2025, according to a new report by Normandin Beaudry.
At the end of the first quarter of 2025, the average solvency ratio reached 111 per cent. The decrease was attributed to a combination of increased liabilities and investment performance, which was slightly below return expectations and discount rates decreased slightly.
Read: Average funded ratio of Canadian DB pension plans down 2% in Q1 2025: report
Pension funds are leveraging diversified portfolios, reducing the risks associated with the maturity of their plans and incorporating margins for adverse deviations into their funding in response to current geopolitical tensions causing increased short-term volatility.
It also found the average pension plan funded ratio of Canadian plans declined two per cent to 127 per cent as at March 31, 2025. The decline was also attributed to poor investment performance and decreases in discount rates.
Investments took a hit at the start of the year due to significant volatility in the equity market in reaction to the decisions and announcements of U.S. President Donald Trump, the report said. However, bond markets saw generally positive returns with short-term bonds posting a better performance.
“Consumers, businesses and governments around the world have been affected to varying degrees by the introduction of tariffs. In fact, the [Organisation for Economic Co-operation and Development] has issued a downward revision of the 2025 economic growth outlook for many countries, including Canada and the United States. As no one is able to predict the impacts of such a trade dispute, uncertainty is at its peak.”
Read: Report finds average Canadian DB pension plan returns 2.8% in January