The median solvency ratio among Canadian defined benefit pension plans was 132 per cent as of Dec. 31, 2025, an increase of seven per cent during the year, including three per cent in the final quarter, according to a new report by Mercer Canada.
The report, which analyzed more than 470 plan sponsors, found Canadian DB pension plans generally experienced strong returns on equities and modest returns on fixed income. Interest rates increased, which resulted in a slight decrease in the value of pension promises.
Overall, the report noted these outcomes contributed to a significant improvement in solvency ratios. DB pension plans that used fixed income leverage may have experienced stable or lower solvency ratios over the quarter.
Read: Average solvency ratio of DB pension plans increased 3% in Q4 2024: report
More than two-thirds (68 per cent) of plans have a solvency ratio above 120 per cent, an increase from 55 per cent of plans at the start of the year. The number of plans with a solvency ratio above 100 per cent also increased from 88 per cent to 92 per cent in 2025.
“Fuelled by tariffs, trade disruptions and geopolitical risks, the Canadian economy experienced a turbulent year,” said Brad Duce, a principal at Mercer, in a press release. “Thanks to diversification and strong risk management frameworks, the overall financial health of DB pension plans continues to be generally secure from a solvency perspective for Canadian workers and retirees.”
A separate report by Aon found the aggregate funded ratio for Canadian pension plans in the S&P/TSX composite index increased to 112.6 per cent in the quarter, up from 111.9 per cent in the previous quarter and 107.5 per cent during the same period last year.
It found pension assets increased 0.6 per cent, while the long-term Government of Canada bond yield increased 18 basis points relative to the previous quarter rate, and credit spreads narrowed by seven bps. This combination resulted in an increase in the discount rate of 11 bps, to 4.69 per cent.
“Pension plan performance was solid in 2025,” said Nathan LaPierre, partner for wealth solutions in Canada at Aon, in a press release. “This performance occurred despite the significant volatility and uncertainty experienced by investors throughout the year. Plan sponsors continue to be resilient and to contemplate how they may defend their plans against the uncertainty that will continue into 2026.”
Read: Average solvency ratio of Canadian pension plans drops 3% in Q1 2025: report