In a year marked by economic turbulence, geopolitical tension, and persistent uncertainty about the global outlook, there is at least one piece of good news for Canadian workers and retirees: defined benefit (DB) pension plans are on solid footing and getting stronger.
According to a new report from pension consulting firm Mercer, the financial health of Canadian DB pension plans improved notably in 2025. The median solvency ratio climbed to an impressive 132 per cent by the end of the year, a seven-percentage-point increase overall and a three-point gain in the final quarter alone. In simple terms, many pension plans now have substantially more assets than they need to cover promised benefits.
This matters more than it might appear at first glance. For years, DB pensions have been portrayed as relics of the past too expensive, too risky, and too vulnerable to market swings. Employers have steadily shifted toward defined-contribution plans, placing more responsibility on individual workers. Yet Mercer’s findings challenge the narrative that DB plans are inherently fragile.
The numbers are telling. Sixty-eight per cent of plans in Mercer’s database now boast solvency ratios above 120 per cent, up sharply from 55 per cent at the beginning of the year. Even more striking, 92 per cent of plans are above the critical 100 per cent solvency threshold, meaning they can fully meet their obligations. That figure stood at 88 per cent just a year ago.
What makes this improvement especially noteworthy is the broader context. The Canadian economy did not enjoy a smooth ride in 2025. Trade disruptions, geopolitical risks, and ongoing global uncertainty created a challenging investment environment. And yet, pension plans benefited from strong equity performance and steady if unspectacular returns in fixed-income markets. Good governance, disciplined investment strategies, and diversified portfolios appear to be paying off.
Brad Duce, a Mercer principal in Toronto, summed it up well when he said that DB pension plans remain generally secure from a solvency perspective. That reassurance should not be underestimated. For retirees who depend on predictable monthly income and for workers planning their futures, pension security translates directly into peace of mind.
Still, this positive moment should not breed complacency. Markets can turn, interest rates can shift, and demographic pressures will continue to test pension systems over the long term. Policymakers, employers, and plan sponsors must use this period of strength wisely by strengthening funding policies, improving risk management, and resisting the temptation to underinvest during good times.
For now, though, the message is clear: despite a rocky economic backdrop, Canada’s DB pension plans proved resilient in 2025. In an era when financial security feels increasingly elusive, that resilience is something worth recognizing and protecting.
