Funding levels climbed to 112.6% as higher yields helped offset a choppy market backdrop
Canadian defined benefit pension plans ended 2025 on firmer financial ground, according to Aon’s latest Pension Risk Tracker, with funding levels continuing to improve despite a turbulent investment environment.
The aggregate funded ratio for plans linked to the S&P/TSX Composite Index rose to 112.6% as of December 31, 2025, up from 111.9% at the end of the third quarter with the result marking a notable improvement from the 107.5% funded position recorded at the close of 2024.
Aon’s analysis shows that modest asset growth combined with shifting interest rate conditions helped drive the improvement.
Pension assets increased by 0.6% during the fourth quarter, while liabilities declined as discount rates moved higher. The long-term Government of Canada bond yield rose by 18 basis points over the quarter, and credit spreads tightened by seven basis points. Together, those changes pushed the discount rate up by 11 basis points to 4.69%.
While markets remained unsettled through much of the year, the overall outcome points to resilience among plan sponsors navigating an uncertain landscape.
“Pension plan performance was solid in 2025,” noted Nathan LaPierre, partner for Wealth Solutions in Canada at Aon. “This performance occurred despite the significant volatility and uncertainty experienced by investors throughout the year. Plan sponsors continue to be resilient and to contemplate how they may defend their plans against the uncertainty that will continue into 2026,”
For pension stakeholders, the stronger funded position offers some breathing room, but the outlook remains closely tied to interest rate movements and broader market conditions. For 2026, sponsors are expected to stay focused on risk management and funding strategies to help preserve recent gains in an environment where uncertainty is likely to persist.
