Mercer data show most plans well funded despite recession scare and rate uncertainty
Canadian defined benefit pension plans posted another quarter of solid gains, with most schemes sitting comfortably above full funding even as the broader economy wobbled through a brief recession.
That is according to new figures from Mercer, which found the median solvency ratio across the plans in its database climbed to 128% as of 30 June 2026, a five percentage point improvement over the previous quarter.
The firm's Pension Health Pulse tracker credited the gain largely to robust investment returns during the quarter. Those gains were partially eroded by a modest dip in interest rates, which pushed up the value of pension liabilities, along with sponsors opting to take contribution holidays.
Mercer's data showed 65% of plans had reached a solvency ratio of 120% or higher by quarter end. Nearly nine in ten plans, 89%, were at or above full funding, leaving just 11% still running a deficit.
Samantha Allen, a Mercer principal based in Toronto, said the resilience of pension funding was a bright spot against a difficult economic backdrop.
"Geopolitical developments continue to shape Canada's economy which briefly entered a technical recession early in 2026. While many organizations are feeling the impact of these challenges, it is reassuring to see that they have not translated into issues for Canadian defined benefit pension plans," Allen said.
Solid solvency positions give pension plan members reassurance that their schemes are equipped to withstand ongoing turbulence. They also give sponsoring organizations more room to manoeuvre, whether through contribution holidays or early retirement offers, as they navigate a challenging operating environment. Mercer cautioned that employers should still be measured in how they approach surplus strategies, noting that geopolitical uncertainty persists and some plans could see their financial footing weaken if conditions deteriorate sharply.
The Bank of Canada left its benchmark rate unchanged at 2.25% for a second straight quarter. Where rates go from here is unclear. May inflation came in above the central bank's target, a factor that could put upward pressure on rates.
Canada's economy technically slipped into recession in March, but growth returned in April with GDP expanding 0.5% for the month. The central bank faces a balancing act in the months ahead, weighing the need to support growth against the goal of keeping inflation in check.
