The funded ratio of the average Canadian defined benefit pension plan, excluding the effect of asset smoothing, reached 124 per cent as at March 31, 2024, up seven per cent from the fourth quarter of 2023, according to a new report by Normandin Beaudry.

It found the average solvency ratio of Canadian pension plans was up three per cent to 113 per cent. The U.S. market, driven by technology and artificial intelligence stocks, continues to dominate the major stock markets, with a return of 13.5 per cent.

Read: Median solvency ratio of Canadian DB pension plans up 2% in Q1 2024: reports

Bond market returns were negative but less so than stock market gains, said the report, noting corporate bonds, having benefitted from narrowing credit spreads, and shorter-maturity bonds, which are less sensitive to interest rate movements, mitigated bond market losses. Negative yields throughout the quarter were attributed to rising bond interest rates, which were caused by increasing expectations from investors for fewer key rate cuts from central banks taking place this year.

The financial position of the average DB plan benefited from favourable market conditions with strong returns that helped increase plan assets while rising interest rates decreased liabilities, the report noted. It also said long-term expectations for a variety of asset classes have been revised upwards giving higher discount rates as at Dec. 31, 2023.

Read: Average Canadian DB pension plan’s funded solvency position up 2.8% in February: report