The Financial Services Regulatory Authority of Ontario (FSRA) has published its quarterly report on the solvency of the province’s defined benefit (DB) pension plans, saying these continued to show “remarkable resilience” in the first quarter of the year.
The latest solvency report, Quarterly update on Estimated Solvency Funded Status of Defined Benefit Pension Plans in Ontario states that 90 per cent of DB pension plans were fully funded in the first quarter of 2024. The median solvency ratio was 122 per cent, which FSRA says is the third all-time high reported within a year. The figure is a three per cent increase over the 119 per cent reported at the end of December 2023.
The estimated solvency ratios, FSRA says, is one of the supervisory tools it uses “to improve outcomes for pension plan beneficiaries and to proactively engage in a dialogue with plan sponsors where there may be a concern over the security of the pension benefits,” the report states.
It adds that the percentage of plans falling below an 85 per cent solvency ratio was two per cent, unchanged from the last quarter.
“Positive asset returns with persisting high interest rates strengthened the funded status,” the regulator’s report states. DB plans averaged net investment returns of 2.3 per cent during the quarter. They also say a marginal change in solvency discount rates also resulted in a decrease in pension liabilities, contributing to a surplus position for the majority of Ontario’s DB plans.
“While the current state of affairs should be celebrated, plan administrators and sponsors need to be prepared for potential future changes, particularly in long-term interest rates,” the regulator warns.
