Canadian Pensions Hit Record Solvency Amid Rate Surge

Canadian defined benefit pension plans reached a new all-time solvency high in the third quarter of 2026. Median solvency hit 132% as of September 30, according to the Marsh Pension Health Pulse.

Higher interest rates drove a sharp reduction in pension liabilities, offsetting slightly negative investment returns during the period. The median solvency ratio gained four percentage points over the second quarter, surpassing the previous record set earlier in 2026.

Interest rates reshape DB funding

The Bank of Canada held its overnight rate steady at 2.25% for the third consecutive quarter in 2026. Despite that stability, yields on long-term Government of Canada bonds climbed steadily, reaching levels not seen since 2023.

Higher long-term yields reduce the present value of pension liabilities, which is calculated by discounting future benefit payments. This was the dominant force behind this quarter’s solvency improvement, even as investment portfolios delivered modest negative returns.

At quarter-end, 69% of Canadian DB pension plans had a solvency ratio of 120% or more, and 89% sat above the 100% fully funded threshold. Approximately 11% of plans remain in a deficit position, Marsh reported.

“Canadian defined benefit pension plans continue to show strong resilience despite ongoing market and geopolitical volatility,” said Brad Duce, a Principal at Marsh based in Toronto. “Plan sponsors can use this period of strength to review risk, consider de-risking options with an aim of reinforcing their funding policies’ position.”

Options for plan sponsors

The current funding environment provides plan sponsors with options they have not had for much of the past two decades. Canadian DB plans entered 2026 with record solvency cushions and growing strategic flexibility, and that window has only widened since.

Marsh’s report outlines several paths sponsors can take. Plans may choose to stress-test their portfolios against adverse economic scenarios, adopt additional risk controls, or offload exposure by purchasing group annuities from insurers.

Adjusting funding policies to regulate the use of surplus assets—whether for contribution holidays, benefit improvements, or drawdowns—is also on the table.

Marsh’s 2026 Global Asset Owner Barometer found that 66% of Canadian asset owners planned to increase their infrastructure allocations, replacing some of the US equity exposure they have been trimming.

That kind of asset mix shift can be advanced more decisively when solvency ratios provide a meaningful buffer. Whatever strategy sponsors pursue, Marsh cautioned that fiduciary duties must remain central to every decision. The purpose of a pension plan is to pay benefits to members at a reasonable cost, and any use of surplus needs to be evaluated against that core mandate.

Wealth management opportunities

For wealth management professionals advising plan sponsors, the current environment points to an unusually clear opportunity. With plan funding at levels that give sponsors genuine strategic latitude, conversations about de-risking, liability-driven investing, and annuity purchases are increasingly moving from theoretical to practical.

The Marsh data covers plans across every industry and across public, private, and not-for-profit sectors in Canada, making it one of the broader snapshots of DB plan health available nationally. The next Pension Health Pulse will cover the period ending December 31, 2026.