On the strength of surging financial markets, Ontario’s defined benefit (DB) pension plans are enjoying exceptionally healthy funding positions, the Financial Services Regulatory Authority of Ontario (FSRA) reports.
The regulator said that in the fourth quarter of 2021, 81% of DB plans were more than fully funded, marking the highest level since the financial crisis (December 2009). At the start of the year, just 45% of plans were fully funded.
Conversely, by the fourth quarter, only 2% of plans had a solvency ratio of under 85%, which was down from 13% at the start of 2021, it said.
FSRA also reported that the median projected solvency ratio at the end of the year was 110%, up from 106% at the start of the fourth quarter and 98% at the start of the year.
“The median solvency ratio is now at its highest level since monitoring began,” the regulator said.
The stronger solvency positions were driven by robust investment returns in the fourth quarter, FSRA’s report noted.
During the quarter, the S&P/TSX Composite index rose by 6.5% and the FTSE Canada Universe Bond index was up by 1.5%, FSRA said.
Global market returns were even stronger, with the MSCI World Total Net Return Index gaining 7.5% in the quarter, and the FTSE TMX Long Bond Index up 4.8%.