The median solvency ratio of Canadian defined benefit pension plans increased to 125 per cent by the end of the fourth quarter of 2024, up from 122 per cent as at Sept. 30, 2024, according to a new report by Mercer.

The report, which tracks roughly 450 plans in Mercer’s database, found nearly nine in 10 (88 per cent) have a solvency ratio above 100 per cent — a slight improvement over the quarter (87 per cent) and a significant improvement from the start of the year (83 per cent).

Throughout the quarter, DB pension plans saw positive returns across major asset classes and stable or decreased liabilities, resulting in a meaningful improvement in solvency ratios.

Read: Average funded ratio of Canadian DB pension plans up 2% in Q2 2024: report

Meanwhile, a separate report by Aon found the aggregate funded ratio for Canadian pension plans in the S&P/TSX Composite Index decreased slightly to 105.5 per cent by Dec. 31, 2024, from 105.8 per cent at the end of the third quarter.

However, it also noted the average funded ratio of the plans in its study was a substantial increase compared to this same period a year ago (100.7 per cent). Indeed, the report found pension assets gained 2.3 per cent during the quarter. As well, long-term Government of Canada bond yields increased 20 basis points relative to the previous quarter rate and credit spreads narrowed by 29 bps, prompting a decrease in discount rates from 4.42 per cent to 4.33 per cent.

“Most pension plans performed well in 2024, with a meaningful uptick in funded ratios,” said Nathan LaPierre, a partner in Aon’s Wealth Solutions division, in a press release. “Uncertainty is the name of the game for 2025. Many plan sponsors likely still have room to de-risk and should consider doing so in light of healthy funded positions and that uncertainty.”

Read: Canadian pension plans’ average funded ratio reaches 120% in first quarter: report