Ontario-based defined benefit pension plans returned, on average, 0.7 per cent on their investments in the second quarter of 2023, according to a new report by the Financial Services Regulatory Authority of Ontario.
It found the positive return contributed to a small increase in the median projected solvency ratio, which increased to 116 per cent. The percentage of pension plans that were projected to be fully funded on a solvency basis remained unchanged at 86 per cent, with two per cent of plans falling below an 85 per cent solvency ratio, also unchanged from the previous quarter.
Solvency discount rates for commuted values decreased while annuity purchase rates increased, essentially offsetting each other so plan liabilities were largely unaffected on an aggregate basis.
“While pension plans remain healthy in general and solvency ratios have improved in aggregate, a significant proportion of plans saw a deterioration in the funded ratio,” said the report. “This highlights how important it is for plan sponsors and administrators to assess and understand their own plan’s unique circumstances and actively manage their plan-specific risks. A starting point could be assessing whether a plan’s solvency ratio has improved or deteriorated since it was last measured and understanding the underlying reasons.”