Securing Your
Retirement
Algonquin College Jan. 2013
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Overview
1. Pensions and politics
2. Why growth matters to you
3. Your role in promoting retirement security
4. Your benefits – a plan worth keeping
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Key Messages - Our mandate
The purpose of the CAAT
Pension Plan is to
improve the financial
security of members in
retirement with
appropriate and secure
benefits supported by
stable and affordable
contribution rates.
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Measuring success
Contribution rates
Secure promised benefits
 Minimize probability
of increases
 Avoid benefit
reductions (funding
level)
 Appropriate for
benefits earned
 Reduce volatility
 Paying post-2007
conditional indexing
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Key Message – Joint Governance adds value
Jointly-sponsored, multi-employer Plan
 Equal representation
 Bicameral governance structure
 29 employers and growing
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Board of Trustees – joint representation
 12 member Board
 Responsible for
 Administration
 Investments
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Sponsors’ Committee – joint representation
 8 member Committee
 Responsible for
 Benefit design
 Contribution rates
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Key Message - Healthy demographic profile
Active members: 20,500
Retired members: 12,100 (including survivors)
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Key Message - Well diversified asset mix
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Key Message - Strong financials
 Filed valuation with small surplus (01/01/2012)
* Preliminary results to September 30, 2012
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Overview
1. Pensions and politics
2. Why growth matters to you
3. Your role in promoting retirement security
4. Your benefits – a plan worth keeping
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Pension plans are facing headwinds
 Historically low-interest
rates
 Increasing longevity
 Hangover from the
economic crisis of 2008
 Onerous and changing
pension legislation
 Pension Envy
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Pensions, politics and the emerging reality
 Federal gov’t announces OAS to start at 67
 Drummond Report – calls for amalgamation
of plans for better administrative efficiency
 Budget 2012 – 50/50 cost sharing, JSPP
 William Morneau report - pooling of pension
funds under $40 Billion
 Pensions are on the political agenda in 2013
and will likely remain there
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JSPP framework
 Investment pooling
 Annual valuations
 Choose: benefit
reductions over
contribution
increases
 One size fits all
Hon. Dwight Duncan, Minister of Finance
 Pension expense
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Specifics of recent agreement
 Exempt from special legislation
 No forced participation in pooled investment
fund
 Granted longer valuation cycle for flexibility and
stability
 Governance decisions remain in the Plan
 Benefit restoration at 100% funded
 Funding Policy temporarily changed
 CAAT recognized as a model
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Forced pooling of pension assets? No Thanks
 Misaligned investments results in more
volatility
 Risk of too many eggs in one basket
 Diseconomies of scale in certain assets
 Governance structures across unrelated
sectors will create costly growing pains
 Untested
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Retaining control of investments means
 We continue with our diversified,
sophisticated investment program
 We manage investment risk to our tolerance
 We are focused on Plan needs
 With a single focus our asset size is not a
limitation
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Why retaining control matters
 Joint governance structure remains
independent
 Benefits and contributions decisions
geared to needs of college sector
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Change to Plan Funding Policy – to 2018
 If funding deficit arises
 Future benefits would be temporarily reduced
 Restoration at 100% funding
 Benefits earned remain protected
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CAAT is recognized as the model
 Jointly sponsored plan with good governance
 50-50 cost and risk sharing
 Top quartile investment performance
 Sustainable:
 Liabilities recognize longevity and lower expected
investment returns
 Conditional indexing
 Funding policy
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Should you be worried? No, and here’s why
 Pension benefits earned
to date are protected
 Plan governors are
focused on keeping
pensions stable, secure
 Reductions will be
minimized, temporary
 CAAT is a model
pension plan – tweaks
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More reasons for reassurance
 Changes already made put the Plan on a sound
financial footing
 Recognizing longer life span in assumptions
 Realistic assumptions about investment returns
 More diversified investments, aligned with liabilities
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Sign up to receive news directly from
the CAAT Pension Plan at your work
or personal e-mail address.
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Overview
1. Pensions and politics
2. Why growth matters to you
3. Your role in promoting retirement security
4. Your benefits – a plan worth keeping
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Inviting interested universities to join CAAT
 We propose university members join on a
future service basis
 Past debt remains the responsibility of the
university unless plan to fully fund
 Governance structure to be adjusted as
appropriate, but CAAT retains 50% of
representation
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Why the CAAT Plan is pursuing growth
 Growth in Plan membership improves
stability of pension funding
 Accelerates contribution rate reductions
 Similar demographic profile makes for lower
risk and better alignment
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How university members benefit
 Strong voice in a well-governed, transparent
pension plan
 More of contributions go to benefits than
to expenses – economies of scale, no PBGF
 Secure, well-funded, sustainable plan
offering good value
 Ready-made long-term solution
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How universities benefit
 Avoids solvency funding requirements
 Substantially lowers cost and risks
associated with pension administration,
investments, governance and compliance
 Stabilizes contribution rates
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How Ontario benefits
 An efficient postsecondary sector pension
plan achieved without legislation
 The proposal offers an immediate solution
 High interest in its success
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Advantages of postsecondary pension plan
 More predictable
contribution and
secure benefits
 Aligned with gov’t
objectives
 Postsecondary sector
 True joint governance
alignment
 Lower costs and risks  Permanent solvency
exemption
 Dedicated pension,
investment expertise  Proven solution
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Stay informed – sign up for direct updates
Sign up to receive news directly from
the CAAT Pension Plan at your work
or personal e-mail address.
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Overview
1. Pensions and politics
2. Why growth matters to you
3. Your role in promoting retirement security
4. Your benefits – a plan worth keeping
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Importance of adequate retirement income
60% of Canadians
do not have a workplace pension and
most will have
inadequate personal
savings at
retirement.
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DB are complex and ripe for oversimplification
The critics see pension plans as too generous,
unsustainable and unfair to Canadian taxpayers.
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“Canada’s pension system is a disaster waiting
to happen. Public sector pension plans at all
levels of government are massively
underfunded which will demand higher taxes
and strain Canada’s economy.”
Public Sector Pensions: A Runaway Train
Canadian Federation of Independent Business
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“We need to have a retirement scheme that
isn’t going to bankrupt the country. The money
is not there to cover these obligations.”
Gregory Thomas, National Director
Canadian Taxpayers Federation
(As quoted the Toronto Sun, August 29, 2012 referencing CD Howe
Institute’s estimate of the federal public service unfunded liability of billions
of dollars)
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Towers Watson study – results of pressures
 Many closing or freezing DB plans
 DC members behaviors will lead to
insufficient retirement income
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late entry, leaving money on the table
deferring retirement
not adequately prepared
buy high, sell low
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Solution isn’t viable in the long term
 Conversion to DC plans – people will pay
more and receive less
 DC plans are less efficient – will need to over
save to guard against individual risk
 In DB, risks are pooled
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Five truths about DB pensions worth sharing
1. Adequately funded
2. Shared risk
3. Plans are efficient, low cost operations
4. Provides long-term capital
5. Helps combat poverty among the elderly
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Stay informed – sign up for direct updates
Sign up to receive news directly from
the CAAT Pension Plan at your work
or personal e-mail address.
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Overview
1. Pensions and politics
2. Why growth matters to you
3. Your role in promoting retirement security
4. Your benefits – a plan worth keeping
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CAAT benefits comparable to other public plans
 Lifetime and bridge
benefits
 60% Survivor
benefits
 Pensions based on
best-5 years (60
consecutive months
 Conditional inflation
protection
 Flexible retirement
options
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Lifetime and bridge benefits
Before 65
 2% x service
After 65
 1.3% to YMPE
 2% over YMPE
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Flexible retirement options
 Retire
 as early as 50 with 20 years or (55 and 2)
 as late as 71
 Permanent early retirement provisions
 Unreduced dates (earliest)
 85 factor (age plus service)
 60 years of age and 20 years of service
 Reduction of only 3% per year from earliest
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Joint and survivor pension options
 60% survivor pension - included
 If you marry after retirement, your new
spouse automatically receives a survivor
pension – included
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Conditional inflation protection
 Inflation protection at 75% of the CPI
conditional on the funding status – subject to
the results of the Plan’s most recent filed
actuarial valuation.
 Highest priority
 First dollar of surplus
 First priority for reserves
 Perfect record
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Value
Member retires at 60
Lifetime pension: $21,967
Bridge paid to 65: $7,036
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www.caatpension.on.ca
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Sign up to receive news directly from
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or personal e-mail address.
Questions welcome
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