The median solvency ratio of Canadian defined benefit pension plans increased two per cent in the first quarter of 2024, according to a report by Mercer.

The report, which tracks more than 450 DB pension plans, found the median solvency ratio grew to 118 per cent, as at March 29, 2024, from 116 per cent at the end of the fourth quarter of 2023. It found the typical balanced portfolio posted a 3.8 per cent return at the end of March. Plans that used fixed income leverage also saw stable or improved solvency ratios. Indeed, thanks to positive asset returns and a decrease in liabilities, most plans saw a strengthening of solvency ratios, said the report.

Read: Median solvency ratio of Canadian DB pension plans declines in Q4 2023: reports

“Members of DB pension plans likely saw continued improvement in the financial health of their plans over Q1,” said Jared Mickall, principal and leader of Mercer’s wealth practice in Winnipeg, in a press release. “Solvency ratios were raised by strong equity performance and interest rate increases.”

Meanwhile, Aon’s quarterly pension risk tracker found the aggregate funded ratio for Canadian DB pension plans in the S&P/TSX composite index increased to 105.1 per cent from 100.7 per cent at the end of December.

It also noted pension assets gained 2.9 per cent as at March 31, 2024. Long-term Government of Canada bond yields increased 32 basis points relative to the previous quarter and credit spreads narrowed by nine basis points, resulting in an increase in the interest rates used to value pension liabilities from 4.42 per cent to 4.65 per cent.

“The financial health of pension plans in Canada continues to improve,” said Nathan LaPierre, a partner in Aon’s wealth solutions practice, in a press release. “As a result, we expect de-risking and risk transfer activities to continue apace.”

Read: Median solvency ratio of Canadian DB pension plans up in Q3: reports