In September, the funded status of a typical pension plan improved on both the solvency basis and accounting basis.
The representative pension plan portfolio decreased by 0.6 per cent in September, driven by negative returns in both Canadian equity and fixed income markets.
The global developed and emerging equity markets index returned 1.3 per cent in Canadian dollar terms and Canadian equities finished the month with a return of -2.6 per cent.
Short-term Government of Canada bond yields increased by approximately 0.36 per cent and long-term Government of Canada bond yields increased by approximately 0.16 per cent over the month. Corporate bond credit spreads reduced by 0.03 per cent for short-term bonds and 0.04 per cent for long-term bonds.
Market expectations for long-term inflation (the break-even inflation rate) were approximately 2.32 per cent at the end of September, which represents an increase of 0.12 per cent since the end of August.
“Last month, we noted that strong funded positions should not lead to complacency, especially considering continued U.S-Canada trade tensions. September continued the trend we've seen for much of the year. The funded status of a typical pension plan improved again on both a solvency and an accounting basis. Long-term Government of Canada bond yields rose to approximately 4.30 per cent at month-end, up from 4.14 per cent at the end of August, which lowered liabilities for both solvency funding and accounting more than offsetting the slightly negative asset returns over the month. Through the first three quarters of 2026, pension plans have been relatively insulated from global geo-political events" says Michael Reid, Partner in TELUS Health's Retirement & Benefits Solutions practice.
"For sponsors looking to take advantage of improved funding, buying annuities is one of the most direct ways for a sponsor to reduce pension risk. Higher interest rates lower annuity premiums, but a lower price doesn't automatically mean better value. What really matters is how annuity pricing compares with the plan's own liabilities. On that measure, conditions are also favourable. In our Q2 Pension Risk in Focus report, we observed a competitive Canadian annuity market, with insurers continuing to price aggressively and reinsurers giving plans more ways to reduce risk. Annuity purchases reached $1.7 billion in the first half of 2026, more than double the $0.8 billion over the same period in 2025. We expect the full-year total to be close to $6 billion, with activity building toward year-end as it usually does. Sponsors are being presented with a potentially excellent opportunity to reduce their exposure to the continued uncertainty at home and abroad. However, a transaction takes preparation: clean member data and agreement across finance, investment, legal and governance teams. Sponsors thinking about a purchase in the coming months should start preparing now."