In February, the funded status of a typical pension plan decreased on a solvency basis but increased on an accounting basis.
The representative pension plan portfolio returned 2.6 per cent in February, driven by strong performance across both bond and equity markets.
The global developed and emerging equity markets index returned 2.0 per cent in Canadian dollar terms and Canadian equities finished the month with a return of 6.9 per cent.
Short-term Government of Canada bond yields decreased by approximately 0.17 per cent and long-term Government of Canada bond yields decreased by approximately 0.25 per cent over the month. Corporate
bond credit spreads increased by 0.10 per cent for short-term bonds and 0.13 per cent for long-term bonds.
Market expectations for long-term inflation (the break-even inflation rate) were approximately 2.03 per cent at the end of February, which represents a slight decrease of 0.01 per cent since the end of January.
“Canadian pension plans continue to have to navigate a complex environment,” says Amy Pun, Associate Partner. “After strong gains in January and early February, recent market volatility has introduced additional uncertainty. The challenge is the combination of geopolitical developments, trade tensions around CUSMA renegotiations, and broader economic factors that make it even harder than usual to predict funding trends.”
These themes are consistent with the guidance offered throughout 2025. “Our messaging has remained consistent,” Pun notes. “The fundamentals haven’t changed - pension plans still need to stress-test assumptions and the effects of significant financial risks and prepare for volatility. What’s different now is the specific headwinds we’re navigating.”
The good news? Funded positions have held up relatively well so far. As Pun notes: “Despite the recent market volatility, pension plan funded positions on both solvency and accounting bases have remained relatively strong compared to the beginning of the year. That said, the early-year gains provided some cushion, but it’s too early to assess the full impact of recent market movements.”
Pension plans should focus on several key areas: review of asset allocation and de-risking approaches, stress-test across multiple scenarios including funding assumptions, interest rate movements, currency exposure, sector concentration, and liquidity scenarios. Then enhance communication with plan members about market conditions and long-term strategy.”