DB plans rise 3.6%, bringing year-to-date growth to 4.3% despite economic headwinds
Canadian pension funds notched another quarter of solid performance, buoyed by resilient equity markets and easing inflation pressures that helped offset a cooling domestic economy.
According to Northern Trust Canada’s latest performance update, the median Canadian defined benefit plan gained 3.6% in the third quarter of 2025 and is up 4.3% year-to-date through September 30. The results mark a continuation of the momentum seen earlier in the year, suggesting that most plans remain on track despite a turbulent global backdrop.
The broader economic setting was far from stable with inflation remaining stubborn, softening labour and central banks around the world shifting policy direction.
In Canada, employment conditions weakened and consumer spending slowed, prompting the Bank of Canada to trim its key rate by 25 basis points in September to 2.50%, its first cut in over a year, while south of the border, the Fed lowered rates to a 4.00–4.25% range in response to mounting signs of slower growth.
Despite these macroeconomic clouds, markets rallied strongly with the S&P/TSX Composite Index up 12.5% in Canadian dollar terms, powered by the materials sector as gold and silver prices surged. US equities followed suit, with the S&P 500 Index up 10.3% in CAD, driven by gains in technology, communication services and consumer discretionary stocks.
Global developed-market equities rose 6.9%, while emerging markets delivered an even stronger 13.1%, aided by rising demand for commodities and consumer goods.
Bonds also contributed modestly to overall portfolio returns. Mid-term Canadian issues outperformed both short- and long-duration maturities, and corporate bonds provided better results than federal or provincial debt.
“Resilience and strength continue to dominate the Canadian pension landscape despite persistent inflation, softening labour markets, and shifting trade policies,” says Jeff Alexander, president and CEO of Northern Trust Canada Canadian. “Canadian pension plans showed their adaptability and the effectiveness of their diversified investment strategies as they navigated the complex and uncertain macroeconomic environment we experienced in the quarter.”
Looking ahead, industry analysts expect pension plans to stay cautious but optimistic. If inflation continues to cool and rate cuts gain traction, both equity and fixed-income assets could provide continued support.
However, with geopolitical uncertainty and uneven global growth still looming, the coming quarters are likely to test whether Canadian funds can sustain their winning streak.
