Soaring

stock markets

helped boost the solvency of Canadian

defined-benefit (DB) pension plans

to a record high at the end of 2025, according to a new report by Mercer (Canada) Ltd.

The median solvency ratio of 471 DB pension plans was 132 per cent on Dec. 31, 2025, a record high based on data going back to 2008, when the Mercer Pension Health Pulse first started tracking the data.

“The vast majority of the increase has been due to the strong equity returns in the year,”

Brad Duce, a principal at Mercer in Toronto,
said, attributing the “vast majority”
of the increase to supersized stock performance in 2025.

For example, the

S&P/TSX composite index

closed 2025 up 28 per cent, beating the

S&P 500 index

, which was up almost 17 per cent. Stock markets in Europe also recorded blockbuster returns, with the Stoxx 600 index rising 16 per cent, its largest gain since 2021.

The DB pension plans’ median solvency ratio rose seven per cent during the year, with almost half of that increase coming in the final quarter of 2025. The current median solvency ratio indicates that for every dollar promised to date, the plan holds an extra 32 cents.

There was more good news for DB pension plan holders.

Mercer said 68 per cent of such plans had a solvency ratio above 120 per cent, up from 55 per cent at the start of the year, and the share of plans with a solvency ratio above 100 per cent rose to 92 per cent from 88 per cent over the same time period. Those shares were also the highest on record since 2008.

The plans’ solvency ratios also improved on rising interest rates on long-term government bonds, which helped to bring down liabilities “slightly,” Duce said.

The DB pension plans included in Mercer’s index come from the public, private and non-profit sectors. A

pproximately 80 per cent of the plans Mercer tracks are in the private sector.

“
Fuelled by tariffs, trade disruptions and geopolitical risks, the Canadian economy experienced a turbulent year,” Duce said. “
Thanks to diversification and strong risk management frameworks, the overall financial health of DB pension plans continues to be generally secure from a solvency perspective for Canadian workers and retirees.”

According to Statistics Canada data released in June 2025,

7.2 million Canadians

had either a DB pension plan, a defined-contribution plan or some type of hybrid plan. DB plans accounted for about two-thirds of employer- and union-sponsored pensions in Canada.

Mercer said pension plan funding has steadily improved over the past five years and that the “significant surpluses” they have amassed will “serve as security margins as they head into the new year.”

But it said pension plan managers shouldn’t take these surpluses for granted and that surpluses have been known to evaporate faster than expected.

“The current cushions allow plan sponsors to prepare for potential unfavourable scenarios and adapt their risk-management frameworks accordingly

,” Duce said.

Still, surpluses do give pension plan operators room to manoeuvre and they can be used for contribution holidays and to undertake strategic redesigns.

Canadian pension plans have been under pressure to increase their investments in domestic infrastructure, something that could continue given that the federal government, through its Major Projects Office, is looking to accelerate the construction of infrastructure projects that have been earmarked as being of national importance.

But Mercer said pension plan managers should remain focused on the needs of the plan members, not the government’s needs.

“Pension plan sponsors need to ensure that they’re following their fiduciary duty, and that is to ensure the security and long-term sustainability of providing the pensions that have been earned,” Duce said.

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• Email: gmvsuhanic@postmedia.com