Canadian defined benefit pension plans work through headwinds from geopolitical uncertainty to improve overall financial health in Q3 

Toronto, October 2, 2025 — Mercer, a business of Marsh McLennan and a global leader in helping clients realize their investment objectives, shape the future of work and enhance health and retirement outcomes for their people, today shares that the overall financial health of Canadian defined benefit (DB) pension plans improved in the third quarter, despite persistent challenges from tariffs and other geopolitical uncertainty.

The Mercer Pension Health Pulse (MPHP), a measure that tracks the median solvency ratio of the defined benefit pension plans in Mercer’s pension database, shows the solvency ratio was 126% at the start of the third quarter, and improved to 129% as of September 30. The solvency ratio is one measure of a pension plan's financial health.

Throughout the third quarter of 2025, Canadian DB pension plans generally experienced positive returns on equities and fixed income, which were partially offset by increased liabilities. Overall, these outcomes generated an improvement in solvency ratios. DB pension plans that used fixed income leverage may have experienced stable or improved solvency ratios over the quarter. 

Additionally, 64% of plans in Mercer’s database have a solvency ratio above 120%, which is an increase from 59% at the start of the quarter. Further, the number of plans in Mercer’s database with a solvency ratio above 100% also improved from 89% to 91%. 

“During a quarter marked by tariffs and trade disruptions, continued stock market highs, and unease in the Canadian economy, the overall financial health of DB pension plans for Canadian workers continues to be generally secure from a solvency perspective,” said Jared Mickall, a Mercer Principal and Wealth Practice Leader in Winnipeg. “Equities performed well throughout the quarter. Meanwhile, overall fixed income yields slightly declined during the quarter which resulted in an overall increase in liabilities and a general increase in fixed income assets.”

Inflation in Canada for June, July, and August has been between 1.7% to 1.9%¹, all within the Bank of Canada policy target range and below the midpoint of the range. On September 17, the Bank of Canada decreased the overnight rate to 2.5%² from 2.75% which is the first change since March 12. While the overnight rate declined, DB plan sponsors may be keen to understand the movement of interest rates and credit spreads on Canadian bonds with longer maturities and how it may impact their obligations, both in the short- and longer-term. 

Improvement or persistency of overall funded levels will likely be welcomed by DB pension plan sponsors. However, the trends in Canada include expectations of a weaker economy, which has been influenced by many factors including the evolution of tariffs and changing trade relationships. Mercer suggests that Canadian DB pension plans continue to monitor the financial position of their plans, both assets and liabilities, as part of the risk management of their plans.

“With the uncertainty surrounding the Canadian economy, DB plan sponsors are encouraged to make sure that their risk management framework is ready to adapt and respond to an evolving economic environment. We believe that these frameworks will be tested in the coming months,” continued Mr. Mickall.

“Monitoring a plan’s financial position is part of good governance and plans should continue identifying, quantifying and assessing their risks, evaluating risk transfer options such as annuity buy-outs or annuity buy-ins and risk reduction opportunities, including hedging strategies,” said Mr. Mickall. 

The Mercer Pension Health Pulse tracks the median ratio of solvency assets to solvency liabilities of the pension plans in the Mercer pension database, a database of the financial, demographic and other information of the pension plans of Mercer clients in Canada. The database contains information on 471 pension plans across Canada, in every industry, including public, private and not-for-profit sectors. The information for each pension plan in the database is updated every time a new actuarial funding valuation is performed for the plan. 

The financial position of each plan is projected from its most recent valuation date, reflecting the estimated accrual of benefits by active members, estimated payments of benefits to pensioners and beneficiaries, an allowance for interest, an estimate of the impact of interest rate changes, estimates of employer and employee contributions (where applicable), and expected investment returns based on the individual plan’s target investment mix, where the target mix for each plan is assumed to be unchanged during the projection period. The investment returns used in the projections are based on index returns of the asset classes specified as (or closely matching) the target asset classes of the individual plans.   

¹ StatCan, 2025

² Bank of Canada, 2025

Mercer, a business of Marsh McLennan (NYSE: MMC), is a global leader in helping clients realize their investment objectives, shape the future of work and enhance health and retirement outcomes for their people. Marsh McLennan is a global leader in risk, strategy and people, advising clients in 130 countries across four businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman. With annual revenue of over $24 billion and more than 90,000 colleagues, Marsh McLennan helps build the confidence to thrive through the power of perspective. For more information, visit mercer.com, or follow on LinkedIn and X.

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