The financial position of Canadian pension plans showed marked improvement in 2024, driven by strong investment returns and stable costs, according to Normandin Beaudry’s Pension Plan Financial Position Index.
As of Dec. 31, 2024, the average funded ratio for pension plans on a going concern basis reached 129%, up 2% in the fourth quarter and 12% year-over-year. Solvency ratios also improved, with the average climbing to 114%, a 4% increase since the start of the year, though it remained unchanged in the final quarter.
The gains were largely attributed to robust stock market performance, which saw the MSCI World Index surpass a 20% return for the second consecutive year, said Normandin Beaudry. Additionally, the depreciation of the Canadian dollar following the U.S. election bolstered returns on foreign investments.
Bond markets remained stable, with central banks, including the Bank of Canada, cutting key interest rates in response to slowing inflation and economic conditions. The Bank of Canada reduced its rate by 1% in the fourth quarter, ending the year at 3.25%.
Despite these gains, Normandin Beaudry cautioned that market risks remain. High concentration in major stock indices and elevated price-to-earnings ratios for tech companies make them vulnerable to potential market adjustments.
The positive financial position has allowed some pension plans to explore strategic options, including the potential use of surpluses—a scenario not seen since the late 1990s. The firm recommended that organizations consider conducting complete actuarial valuations or financial forecasts to ensure up-to-date data informs their decision-making.
“These tools are critical for governance and risk management,” said Normandin Beaudry, adding that they align with CAPSA’s new Guideline No. 10 on fiduciary duties.
The index, which excludes pension plans in Quebec’s municipal and university sectors, is based on financial data from Normandin Beaudry’s Canadian clients.
