Canadian defined benefit pension plans started 2026 off on strong financial footing, after robust returns on equities and modest returns on fixed income boosted median solvency ratios by 7% last year, according to financial services consulting firm Mercer.
Data released by Mercer on Tuesday showed the median solvency ratio for Canadian defined benefit pension plans reached 132% as of Dec. 31, 2025. The combination of strong returns on equities and stable returns on fixed income, along with the effect of higher interest rates slightly decreasing the value of pension promises, lifted the solvency ratios.
Over two-thirds (68%) of tracked plans have a solvency ratio above 120%, up from 55% at the beginning of 2025, according to Mercer. And more than nine-tenths (92%) of plans have a solvency ratio above 100%, up from 88% a year ago.
The current financial cushion that defined benefit plans have will let plan sponsors prepare for unfavourable economic times and adapt risk management strategies, Mercer said in a release. “Monitoring economic volatility will be key for plan sponsors in 2026 … However, stakeholders must be cautious in using a surplus, as the financial health of some pension plans has deteriorated quickly in the past.”
In the new year, stakeholders may pressure Canadian pension funds to boost their investments in the local economy, driven by concerns about reducing dependency on trade with the U.S., and a desire to improve productivity.
Mercer tracked the median ratio of solvency assets to solvency liabilities of 471 Canadian pension plans.