Canadians’ pension plans have never been healthier despite the ongoing economic uncertainty and

stock market volatility, according to a new report by human resources consultant Mercer (Canada) Ltd.

The solvency ratio — the funds available to cover pension liabilities, including future payouts — for defined-benefit pension plans rose to a record level of 126 per cent at the end of June, according to the Mercer Pension Health Pulse, which tracks the median ratio of 471 plans in the public, private and not-for-profit sectors.

“Since we’ve been doing the quarterly (pension pulse) publication, this is a high at any quarter end,” said Jared Mickall, a principal and wealth practice leader at Mercer, adding that the index’s solvency during the second quarter gyrated with the markets.

“Equities definitely fuelled the assets, and liabilities came down a little bit because of

interest rate movements going a little bit off during the quarter,” he said. “So, overarching, it’s a great story for stakeholders of defined-benefit finance.”

From the troughs of those declines, the S&P/TSX composite is up 19.5 per cent the S&P 500 is up 25 per cent.

Mickall said record solvency levels should provide holders with an oasis of calm “in the face of all this other financial uncertainty that we’re seeing in our daily lives.”

Defined-benefit pension plans are considered the gold standard in retirement planning because they are managed for the employee and are set up to provide a guaranteed payout once that person retires.

In previous years, the solvency of these plans had been a worry, with their solvency levels falling to a bit less than 70 per cent in 2009, meaning there were not enough funds to cover payouts.

As of 2023, about a quarter of paid workers covered by a registered pension plan had a defined-benefit plan, compared with seven per cent for a defined-contribution plan and five per cent for other types of plans, according to Statistics Canada data released in June.

But there was an increase in the number of Canadians with some form of pension coverage. Membership in defined-benefit plans grew by 4.2 per cent in 2023, even though the share of such plans as a percentage of overall pension membership was flat at 68.1 per cent.

The number of defined-contribution plans, where retirement benefits are not guaranteed and rely on the size of the investment pot at a member’s retirement, grew by 4.1 per cent compared with 2022. Most members with this type of plan, which hasn’t been around for as long as defined-benefit pensions, work in the private sector.

Overall, however, only 37.7 per cent of workers are covered by a workplace pension, which has forced many to hope that the sale of their homes will fund their later years in life, even though there are issues with that strategy.

Sixty-two per cent of people surveyed by the Healthcare of Ontario Pension Plan (HOOPP) said homeownership is “a key part of their retirement strategy, either as a financial investment or a source of stability in retirement.”

Forty-four per cent said they were depending on the sale of their home to put a retirement fund in place, up from 42 per cent last year and 38 per cent in 2023.

  • Pension membership on the rise in Canada
  • Pension conference relocates to Canada

“When people are younger, they have to save for two key assets in life, one being a house and one being retirement,” Jennifer Rook, HOOPP’s vice-president of strategy, global intelligence and advocacy, said. “As the house becomes more expensive, you are kind of forced to choose a little bit more. What we are seeing is people are really still striving for the house and putting stock in (it).”

One-third of homeowners said they would remortgage their homes to fund their retirement.