Aon plc has published its most recent update to the Aon Pension Risk Tracker, showing the aggregate funded ratio for Canadian defined benefit (DB) pension plans in the S&P/TSX Composite Index increased to 116.7 per cent by the end of June 30. This is up from 111.4 per cent at the close of the first quarter.
“Pension assets gained 1.6 per cent over the second quarter of 2025. The long-term Government of Canada bond yield increased 33 basis points (bps) relative to the previous quarter rate and credit spreads narrowed by nine bps,” the firm writes in its quarterly statement. “This combination resulted in an increase in discount rate of 24 bps to 4.67 per cent.”
Nathan LaPierre, partner for wealth solutions in Canada for Aon says market performance benefited pension plans, allowing them to make up for ground lost in the first quarter of the year.
In a conversation about the quarterly results with the Insurance Portal, he says discount rates reversed their trajectory in the second quarter of 2026, where they had been going up previously. “That was interesting. Discount rates going down normally means that the funded ratios will suffer. Liabilities will go up and the funded ratios will suffer, but equity markets did very well in the quarter. That more than offset the drag from higher liabilities.”
He notes that funded ratios have generally been going up since the beginning of the COVID-19 pandemic. “They haven’t gone up every single quarter, but funded ratios are certainly much higher than they were,” he says. “It was a story of interest rates going up. Last quarter it was really equity markets that were the story.”
Overall, he says pension plans are in well-funded positions, thanks to good returns in recent years. “The risk really is (if) that reverses.”
