The median solvency ratio of defined benefit pension plans in Canada increased during the third quarter of 2023, according to separate reports from Mercer and Aon.

Mercer’s report showed median solvency ratio rose from 119 per cent at June 30 to 125 per cent at Sept. 30, according to Mercer’s latest pension health pulse. The report, created from a database tracking nearly 500 DB plans in Canada, found 88 per cent were in a surplus position on a solvency basis in the third quarter of the year. It also noted only five per cent of funds have an estimated solvency ratio below 80 per cent.

Despite returns from pension fund assets being “mostly negative” in the reporting period, bond yields saw an uptick, meaning DB liabilities lowered.

Read: Median solvency ratio of Canadian DB pensions up in Q2: reports

In a press release, Ben Ukonga, principal and leader of Mercer’s wealth business in Calgary, said DB plans have enjoyed a satisfying environment throughout 2023, but that could change in the upcoming quarter. “Looking ahead, with interest rates expected to remain high in the short to medium term, plan sponsors should be reviewing their risk tolerances, the risks they are exposed too and taking steps to hedge or transfer the risks they do not want.”

Aon’s quarterly pension risk tracker also saw an increase in Canadian DB plans’ average funded ratio, from 101.7 per cent at the end of the second quarter to 105.4 per cent at the end of the third.

The tracker, which calculates the aggregate funded position on an accounting basis for companies in the S&P/TSX composite index with DB plans, also found pension assets lost five per cent during the third quarter.

“The continued upward trend of pension plan funded positions will likely lead to further de-risking opportunities, including increased interest in liability-driven investment solutions and annuity buy-in and buyouts,” said Nathan LaPierre, partner of wealth solutions with Aon, in a press release.

Read: Majority of Canadian DB pension solvency ratios above 100 per cent: report