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.
2025 closed on a strong note, delivering another solid quarter for most pension plans.
Equity markets generally posted positive returns — albeit with some regional variability — while a modest increase in Canadian interest rates further supported liability gains. These factors more than offset this quarter’s 10 basis points (bps) narrowing in Canadian Institute of Actuaries (CIA) proxy credit spreads published as of December 31, 2025 (30 bps decrease year-to-date).
The windup funded position of the DB plans for which WTW is the appointed actuary in Canada has improved between 1% and 3% over Q4, depending on their level of maturity and de-risking. Although a brief downturn in early April caused a temporary dip — April 8 marked the lowest funded positions of the year — the majority of pension plans experienced year-over-year improvements ranging from 3% to 10%.
Surplus activity continues to rise among Canadian DB plan sponsors.
Based on the most recent actuarial valuations performed and filed by WTW, 69% of the DB plans have accessible surplus, with 74% of those plans’ sponsors intending to use that surplus for DB or defined contribution (DC) contribution holidays.
At the same time, we are seeing increased interest in alternative uses of surplus. In fact, 35% of sponsors are either considering or have already planned uses beyond contribution holidays. Plan sponsors are exploring a range of strategic actions, including:
With funded positions improving over the past year, surplus management is poised to remain a key focus for plan sponsors in 2026.
Volume of transactions in Q4 accounted for over half of the total market volume, bringing the total market volume during 2025 just under $7B.
With more than 45 transactions completed, Q4 2025 was one of the busiest quarters to date in the Canadian group annuity market. Despite the high level of activity, insurers demonstrated strong execution capabilities, often bidding on multiple transactions on the same day. This highlights the resilience and agility of market participants in supporting plan sponsors seeking to capture favourable market conditions.
This surge in activity was driven by competitive pricing and an economic environment that remained advantageous for pension plans. Strong engagement from both consultants and insurers also played a key role, encouraging plan sponsors to transact in 2025 in anticipation of lower overall market volume. Supported by strong funded positions and a favourable pricing environment, this momentum is expected to continue into 2026.
Insurer participation rate in 2025 exceeded 2024 levels across all types of transactions, including smaller deals and more complex annuity purchases, such as those involving a high proportion of deferred vested members or intricate plan provisions. These transactions, which typically draw limited insurer engagement and were often completed on an exclusive basis in 2024, saw broader and more competitive participation during the year.
As was the case in 2024, larger transactions continued to attract the strongest insurer engagement, resulting in more competitive pricing and reaffirming that scale remains a key driver of market competition.
Implied spreads on non‑indexed group annuities, as published by the CIA, declined from 140 bps above Government of Canada (GoC) 10‑year yields at December 31, 2024, to 110 bps at December 31, 2025 — the lowest level seen since the pricing improvements that began in 2019. However, throughout 2025, actual spreads offered by insurers generally ranged between 120 and 130 bps, broadly consistent with historical norms.
Despite the contraction in spreads, absolute annuity yields remained attractive, hovering just below 5% in the second half of the year. These levels remain well above pre‑2022 averages, resulting in lower absolute annuity costs relative to long‑term historical benchmarks.
At several points during 2025, implied annuity yields exceeded those available on high‑quality (AA) corporate bonds. This dynamic led to multiple transactions being completed at a balance sheet gain, with annuity premiums pricing below corresponding accounting liabilities - a particularly favourable outcome for plan sponsors. From this perspective, annuity pricing during the year ranked among the most competitive observed to date.
The CIA also adjusted its guidance during the year to reflect improved pricing on indexed annuities. Based on our transaction experience, for larger transactions, insurers continue to offer pricing on indexed annuities that is more competitive than what the updated CIA guidance suggests.
Total market volume has remained stable at approximately $7 to $8 billion annually since 2021, with the exception of a record year in 2024, when activity reached roughly $11 billion. Consistent with trends observed in the U.S. market, we expect a steady cadence of transactions going forward, with annual volume continuing to depend largely on the occurrence of very large (“jumbo”) transactions exceeding $500 million.
Market conditions remain supportive for plan sponsors, with a stable cohort of insurers actively participating in transactions of varying sizes and levels of complexity. With the right strategy, planning, and execution, we estimate that the Canadian group annuity market now has the capacity to accommodate transactions of up to $4 billion in a single day.
Mortality is poised to be a central focus for plan sponsors in 2026. The Canadian Institute of Actuaries (CIA) has published its highly anticipated mortality research report on March 11, 2026. While the updated mortality improvement scale introduced in 2024 indicated continued increases in life expectancy for Canadian pensioners, many plan sponsors have chosen to wait for the new tables and related CIA guidance before updating their mortality assumptions.
As a result, most plan sponsors are expected to undertake a comprehensive review of their mortality assumptions in the course of 2026. To support this process, WTW will introduce an enhanced version of its socio‑economic assessment tool, the Postal Code Mortality Tool (PMT). The PMT is designed to align the new mortality tables and improvement scales more closely with plan‑specific demographic profiles, providing sponsors with more precise guidance to set the mortality assumption.
Based on discussions with key pension risk transfer participants, the new mortality table is expected to have a limited immediate impact on annuity pricing. Most insurers and reinsurers continue to rely on proprietary mortality tables and improvement scales, and the information released to date appears broadly consistent with current pricing assumptions. Nonetheless, the evolution of mortality trends will require careful monitoring over the next several years.
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 for the last six years in annuity placement volume, representing over 40% of the total market and 80% of the indexed annuity market over the last two years.
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.
