Despite strong 2024, uncertainty looms for Canadian pensions
The funded ratios for Canadian defined benefit pension plans in the S&P/TSX Composite Index saw a marginal decline during the fourth quarter of 2024, according to a report released by Aon plc on Thursday. The aggregate funded ratio fell to 105.5%, down from 105.8% in the previous quarter, though it remained higher than the 100.7% recorded at the end of 2023.
The findings were derived from Aon’s Pension Risk Tracker, which assesses the aggregate funded status of defined benefit plans for companies in the S&P/TSX Composite Index based on accounting measures.
Key highlights from the fourth quarter include:
- Pension asset performance: Pension assets grew by 2.3% during the quarter.
- Impact of bond yields: The long-term Government of Canada bond yield rose by 20 basis points, while credit spreads tightened by 29 basis points. These factors collectively contributed to a decrease in the discount rate from 4.42% to 4.33%.
“Most pension plans performed well in 2024, with a meaningful uptick in funded ratios,” said Nathan LaPierre, partner in Wealth Solutions at Aon. “Uncertainty is the name of the game for 2025. Many plan sponsors likely still have room to derisk and should consider doing so in light of healthy funded positions and that uncertainty.”
Aon plc, a global professional services firm, provides a range of solutions designed to enhance decision-making for organizations across more than 120 countries.
