More than two-thirds (69 per cent) of registered defined benefit pensions plans in Ontario have solvency ratios above 100 per cent, according to the Financial Services Regulatory Authority of Ontario’s second quarterly update.
The report found average funded ratios were up for the fifth consecutive quarter, with the median funded ratio reaching 106 per cent in the second quarter of 2021.
At the end of the first quarter of 2020, following the World Health Organization’s declaration of the coronavirus pandemic, the average funded ratio had dipped to 85 per cent. It was the most significant quarterly decline in projected solvency ratios since December 2009. According to the FRSA, just three per cent of DB plans had funded ratios below 85 per cent at the end of the second quarter of 2021.
Another recent report by the regulator found the value of the province’s DB plans had grown — up $63 billion to $700 billion in 2020 — even as the number of plans decreased. Indeed, the number of registered plans dropped from about 1,200 at the end of 2019 to 1,149 at the end of 2020. With the exception of the years 2016 and 2017, the total number of registered DB plans has been in decline since 2005.
However, while the number of DB plans registered with the FSRA has been declining, the report indicated that the populations of plan members has actually increased by about four per cent. About 3.4 million Ontarians are members of DB plans.
The FRSA also found that smaller DB plans performed better than larger ones. In 2020, returns for plans with more than $1 billion in assets averaged 11.37 per cent, while plans with less than $10 million under management saw average returns of 13.71 per cent.