DB pension funding rebounds in Q4: FSRA

After a rough year, defined benefit (DB) pension plans in Ontario had virtually returned to their pre-pandemic funding levels by the end of 2020, according to a new report from the Financial Services Regulatory Authority of Ontario (FSRA).

The agency released its latest solvency report for DB plans, which found that pensions more or less finished the year where they started, with a median solvency ratio of 98%, up from 94% in the third quarter and almost at the 99% level recorded before the pandemic struck.

The improvement in the median solvency ratio in the fourth quarter was attributed to positive investment returns, the report said, with average fourth-quarter net returns estimated at 4.1%.

Additionally, solvency discount rates increased due to changes in actuarial standards.

The report noted that 45% of plans were projected to be fully funded at the end of 2020, up from 34% in the previous quarter.

Similarly, the share of plans that are less than 85% funded dropped from 26% in the third quarter to 13% by the end of the year.

“While there is cautious optimism about a gradual economic recovery, it is still important for plan administrators to continue to review their funding and investment strategies and prudently manage their plans,” the report said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.