Canadian pension plans are the healthiest ever thanks to higher interest rates, says report

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Photo by Osarieme Eweka/Getty ImagesHigher interest rates more than compensated for stock market losses to help lift the solvency of Canadian defined-benefit pension plans to a record level, says a new report from Marsh & McLennan Companies Inc.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe Marsh Pension Health Pulse said the median solvency ratio — one way to gauge a plan’s financial health — of the 435 defined-benefit (DB) pension plans tracked by the company reached an all-time high of 132.5 per cent in the third quarter.This advertisement has not loaded yet, but your article continues below.The current median solvency ratio indicates the average DB plan holds an extra 32 cents for every dollar promised to date.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try again“While investment returns were slightly negative over the third quarter, higher interest rates reduced actuarial liabilities significantly and more than offset the investment declines,” Marsh said in a press release on Tuesday.The Bank of Canada has held its overnight lending rate at 2.25 per cent since it cut rates last October, but bond yields have been climbing as investors worry about the effects of elevated oil prices on inflation and the rising debt load of governments and corporate borrowers such as the tech giants.The yield on the 10-year Government of Canada bond dipped at the start of the year, but has since risen about 25 per cent to 3.9 per cent as of midday Tuesday, the highest level since 2023.DB pension plans’ median solvency ratio increased four per cent in the third quarter, following a five per cent increase in the second quarter, which combined wiped out the declines in the first quarter.“Canadian defined-benefit pension plans continue to show strong resilience despite ongoing market and geopolitical volatility,” Brad Duce, a principal at Marsh based in Toronto, said.This advertisement has not loaded yet, but your article continues below.Marsh said 69 per cent of DB plans have a solvency ratio of more than 120 per cent, 89 per cent had a solvency ratio of 100 per cent or more and 11 per cent were in a deficit position with a ratio of below 100 per cent.The Financial Services Regulatory Authority of Ontario said in a pension update in August that DB plans in the province had a median solvency ratio of 127 per cent at the end of the second quarter, up from 122 per cent at the end of the first quarter.With funds looking at surpluses, Marsh said the time might be right for plans to look at tweaking their investment strategy.A global poll of 430 portfolio managers released by Marsh at the end of September said Canadian asset owners were “leading the way” in cutting exposure to United States equities, and 66 per cent said they planned to invest more in infrastructure.The latter intention is “a trend that aligns with recent discussions among Canadian pension investors, including at the Canada Investment Summit in Toronto,” Marsh said.We apologize, but this video has failed to load.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. 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