Solvency ratios went down in the first quarter and are likely to move lower
The ability of Ontario’s defined benefit pension plans to meet their financial obligations has been weakened by uncertainty around tariffs.
The province’s Financial Services Regulatory Authority (FRSA) says that in the first quarter of 2025, the median solvency ratio of DB pension plans slipped three percentage points compared to the previous three month period at 119%.
Its Q1 2025 Solvency Report for Defined Benefit Pension Plans also estimates that the median solvency ratio likely dropped another five points in the first week of April as tariffs were announced and an adverse market reaction followed.
Investment returns for Q1 averaged a net 0.9% and most pension plans remain resilient with healthy levels of funding.
"While we've seen a decline in the solvency ratio over the past few months, pension plans remain resilient," said Andrew Fung, FSRA Executive Vice-President, Pensions. "However, with this global trade war and ongoing economic uncertainty, it's critical for plan administrators to proactively manage risk and regularly reassess their investment strategies to ensure long-term sustainability."
The percentage of pension plans that were projected to be fully funded on a solvency basis as at March 31, 2025, was 89% compared to 91% as at December 31, 2024. Only 3% of plans had a solvency ratio below 85%, a 1% increase since last quarter.
Recent reports from Aon and Mercer also show how DB pension plans nationwide have been impacted by uncertainty and tariffs, while a BNY report reveals the strong position that plans started 2025 in thanks to their investment performance in 2024.
