Ontario's pension plans see slight funding dip, highlighting the need for proactive risk management
The Financial Services Regulatory Authority of Ontario (FSRA) released its Q3 2024 Solvency Report for Defined Benefit Pension Plans, indicating that the median solvency ratio remains strong at 121 percent.
This marks a two-percentage-point decline from the previous quarter's 123 percent, breaking a seven-quarter upward trend.
Lester Wong, chief actuary, Pensions at FSRA, stated, “With inflation trending downward, potential interest rate declines could negatively impact funding levels. This serves as an important reminder for plan sponsors and administrators to stay alert, future-focused, and strategic in managing risks as market conditions evolve.”
Despite the drop, the percentage of fully funded plans remained steady at 90 percent, while only 2 percent of plans reported solvency ratios below 85 percent.
Investment returns across all asset classes averaged a net positive return of 6.3 percent in Q3 2024, which partially offset the impact of declining solvency discount rates that increased pension liabilities.
The solvency report emphasised the need for pension plan sponsors to actively manage risks through tools such as stress testing, modelling, and reassessment of investment strategies to ensure resilience against fluctuating market conditions.
FSRA publishes its quarterly solvency reports to provide timely insights into the financial health of Ontario’s defined benefit pension plans.
The reports aim to inform plan members and promote transparency about economic trends both nationally and internationally.
