The average projected solvency ratio for Ontario defined benefit pension plans increased slightly to 117 per cent in the third quarter of 2023, with more than three-quarters of plans projected to be fully funded, according to a new report by the Financial Services Regulatory Authority of Ontario.
While the percentage of DB plans projected to have a solvency ratio greater than 100 per cent decreased to 85 per cent from 86 per cent in the second quarter, the percentage of plans falling below an 85 per cent solvency ratio remained unchanged (at two per cent). However, the percentage of plans with a solvency ratio between 85 per cent and 100 per cent increased to 13 per cent, up slightly from 12 per cent as of June 30, 2023.
Ontario plans reported an average investment return of negative 4.5 per cent for the quarter, according to the report, which found, while equity markets declined, bond yields increased and steepened. As well, the Canadian dollar fell in value relative to the U.S. dollar.
“It’s important to ensure pension plans are protected and benefits are available to members and their families when they are ready to retire,” said Andrew Fung, the FSRA’s acting executive vice-president of pensions, in a press release. “To remain in a position of strength, FSRA encourages all plans to adopt appropriate risk management strategies. FSRA has found that pension plans that focus on reducing risks show more positive results, especially during this period of global economic volatility.”