A strong start to the year for equities did not stop a slight drop in Canadian pension funding levels, as market volatility returned toward the end of the quarter.
New data from Aon plc shows that the aggregate funded ratio for defined benefit pension plans in the S&P/TSX Composite Index stood at 111.4% as of March 31, 2026, which is down from 112.6% at the end of the previous quarter. Even with the decline, the figure remains above the 105.5% recorded a year earlier, meaning plans overall stayed in a surplus position.
The change was driven by lower asset values and shifts in interest rates used to value liabilities. Pension assets fell by 0.9% during the quarter. At the same time, the discount rate increased as market conditions changed. The long-term Government of Canada bond yield rose by three basis points from the previous quarter, while credit spreads widened by six basis points, bringing the discount rate up by nine basis points to 4.78%.
Together, these factors resulted in a modest overall decline in funded status.
Tracking figures since 2013, Aon’s Pension Risk Tracker measures the funded position of defined benefit plans on an accounting basis across companies in the index.
"The first quarter of 2026 was volatile, with strong equity returns in January and February, followed by declines in March amid the geopolitical context. Despite this environment, funded positions remained relatively stable with only one percent decline. However, as uncertainty might continue into 2026, plan sponsors should continue to look for strategies that will provide better outcomes,” said Nathan LaPierre, partner for wealth solutions in Canada for Aon.
The results come during a mixed period for markets. Canadian equities rose in the early part of the quarter before pulling back in March, with the S&P/TSX Composite Index recording its sharpest monthly drop in several months. Meanwhile, long-term bond yields remained elevated even as overall policy conditions shifted, contributing to higher discount rates used in pension valuations.
