The average Ontario defined benefit pension plan is in the best funded position since December 2009, according to the Financial Services Regulatory Authority of Ontario’s latest quarterly solvency report.
It found 81 per cent DB plans had a solvency ratio greater than 100 per cent at the end of 2021, compared to 67 per cent at the end of the third quarter of 2021 and 45 per cent in the last quarter of 2020. In addition, it found the median projected solvency ratio at the end of 2021 was 110 per cent, compared to 106 per cent at the end of September 2021 and 98 per cent at the end of 2020.
Ontario’s DB plans also had a positive fourth quarter of 2021 for investment returns. Average gross and net return, after expenses, was at 5.2 per cent and 4.9 per cent, respectively.
“The significant improvement in the health of pension plans over the last several quarters is good news for all pension stakeholders,” noted the report. “However, it must be tempered with the understanding that constant vigilance and good governance are essential to managing and mitigating risks of a deterioration in the funded position.
“While the future is always uncertain, plan sponsors and administrators can and should understand how these uncertainties may affect their pension plan. This will enable them to have strategies and processes in place to adapt to emerging conditions.”