This section provides a pulse on the risk management of DB plans on a quarterly basis, including the evolution of funded positions and related observations.
The funded status of nearly 400 defined benefit (DB) pension plans for which WTW serves as the appointed actuary in Canada continued to show robust improvement in the third quarter of 2025. This momentum was driven largely by strong equity returns across global markets. Additionally, the interest rate curve slightly sharpened its upward slope, primarily due to a decline in short-term rates, but this had limited impact on the funded position of most plans.
With DB surpluses persisting and growing in size, many plan sponsors are actively exploring strategies to mitigate the risk of trapped DB surplus assets. Currently, only about 25% of plans have a solvency ratio below 105%, while approximately 40% exceed a ratio of 125%.
In response, sponsors are considering a range of approaches to optimize their financing strategy. This includes implementing risk management solutions, enhancing member benefits, coordinating various types of pension and benefit plans with their DB plans, reducing employer contributions and expenses, and even applying for surplus refunds.
These strategies reflect a dynamic and innovative landscape in the Canadian pension market, as some organizations seek to shift the perception of DB plans from a company liability to a company asset.
High volume of transactions expected in Q4, estimated to bring the total market volume during 2025 to $7B.
Despite a high number of transactions, there are fewer jumbo transactions in 2025 compared to previous years, resulting in lower projected market volume.
As such, we saw good participation rates from insurers on all types of transactions, including small or complex annuity transactions (i.e., transactions with a high proportion of deferred vested members or complicated plan provisions) that usually attract less focus from insurers.
Annuity pricing remained competitive, with implied spreads holding around 120-130 basis points (bps) above Government of Canada (GoC) 10-year yields, even as credit spreads in publicly traded bonds narrowed during the quarter.
Throughout 2025, consultants and insurers were very vocal about the lower market volume and actively encouraged plan sponsors ready to transact to do so this year.
As a result, a significant number of transactions are scheduled in Q4. Some insurers are becoming more selective by prioritizing transactions with the highest probability of success to manage internal resource constraints. We estimate that more than 50% of the total annual market volume will be completed during Q4 2025, leading to an estimated total annual sales volume of $7B.
Despite the number of transactions, annuity pricing is expected to remain competitive as most insurers are still behind their sales targets for the year.
Market opportunities in 2025 sparked insightful discussions with many Canadian plan sponsors. This led to increased activities in the second half of 2025, as previously mentioned, but it also led several sponsors to engage in discussions that will likely lead to transactions during 2026.
This momentum, combined with a competitive annuity market and funded positions at an all-time high, will continue to fuel the annuity market in 2026.
In busy markets, transaction readiness is key to boost insurer participation. It includes, among many activities, cleaning membership data (e.g., performing survivor audits, locating members, etc.), engaging with insurers early in the process, and ensuring an appropriate investment strategy is in place to support an annuity transaction.
New improvement scale tables were published in 2024, showing an expected increase in the longevity of Canadian pensioners. However, most plan sponsors are waiting for the publication of the new mortality tables and related guidance before reflecting a change to their mortality assumptions.
Based on discussions with key market participants, this new report is expected to have limited impact on annuity pricing. Most insurers and reinsurers rely on their own proprietary mortality tables and improvement scales, and the information available thus far is aligned with their expectations and models.
The increase in annuity market activity in recent years sparked many discussions among insurers and reinsurers, with many considering joining the fun or incorporating innovative solutions to keep up with the growing demand.
Using our WTW Real-Time Annuity Tracker, we track the cost of annuities and assess the true competitiveness of quotes received from insurers by reflecting the evolution of credit spreads in real time. In addition, the WTW Real-Time Annuity Tracker reflects the mortality profile of specific cohorts based on socio-economic factors obtained from an analysis of the members’ data and postal codes.
The WTW Group Annuity Purchase Team has extensive expertise and experience in Canadian group annuities, helping to provide the best outcomes for our clients:
#1 firm in Canada over the last five years in terms of volume of annuities placed, including over 50% of the entire market and 90% of the indexed annuities market in 2024.
18 experienced specialists who are part of a growing team at the forefront of innovation.
$20B+ in liabilities transferred through group annuity purchases, representing over a third of the total historical volume in Canada, including multiple $500M+ transactions.
500+ robust and comprehensive financing strategies for pension plans developed by our team.
