Reforms to boost domestic investment appear to be paying off, Mercer report reveals
Canada’s retirement system gained ground in this year’s Mercer CFA Institute Global Pension Index, reflecting improved sustainability and transparency amid ongoing federal efforts to open new channels for pension investment at home.
The 2025 Index ranked Canada 12th globally, maintaining a B grade overall and raising its index score to 70.4 from 68.4 last year. Sub-index results were strong across the board: adequacy 67.2, sustainability 67.0, and integrity 80.2. The latter places Canada among the global leaders for pension governance.
The firm’s analysts attributed Canada’s higher score partly to “the new question in the Sustainability sub-index, updated economic growth data published by the IMF, and clarification of the protection of benefits from fraud and mismanagement.”
Canada’s retirement framework continues to rest on three pillars: a universal flat-rate pension with income-tested supplements, earnings-related national pensions, and a robust voluntary sector of occupational and individual savings plans. While defined benefit programs remain common, defined contribution arrangements continue to expand.
Canada could raise its ranking further by expanding occupational plan coverage in the private sector, developing more accessible retirement products for workers without employer-sponsored plans, increasing participation among older workers, and reducing both household and government debt levels.
Ottawa has been exploring ways to encourage pension fund investment in Canadian infrastructure, artificial intelligence, and venture capital.
Following a 2024 mandate, former Bank of Canada governor Stephen Poloz led a review that culminated in new measures to make domestic investment easier. Among them was the government’s decision to lift the 30% ownership cap on voting shares, a rule originally designed to limit pension funds’ influence in corporate governance.
The Mercer report puts this reform within a global movement, noting that many governments are “reviewing the ongoing role of private pension fund investments in the broader economy for the longer-term benefit of society.”
Canada’s approach favours policy incentives over mandates and aligns with one of Mercer’s eight guiding principles for balancing national priorities with fiduciary duty. As the report states, “Government initiatives that reduce the barriers to domestic investing by facilitating access to strategic asset classes will not only retain and attract capital from Canadian pension funds but also bring in additional capital from the much larger pool of foreign investors.”
While Canada’s B grade signals a strong and trustworthy framework, it also highlights the need for continued vigilance. With demographic pressures mounting and private savings gaps persisting, policymakers and advisors alike face the challenge of ensuring today’s pension reforms translate into durable retirement security for the next generation.
