Value. Stability.
Growth.
June 19, 2014
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Summary: CAAT has much to offer
 Valuable, secure and portable defined benefits
 Not for profit professional pension and investment
organization
 True joint governance by members and employers
 Focus on delivering pensions with stable and
appropriate contributions
 Transparent and award winning communications
 Top quartile investment performance
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Today’s discussion
 About us
 Security of benefits
 Key benefits
 Next steps
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Mandate of the CAAT Pension Plan
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.
Mandate is clear – no conflicts!
Staff alignment
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Current Board of Trustees
Board would expand by 2 for Queen’s
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Current Sponsors’ Committee
Committee could expand by 2 for Queen’s
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Independent, professional pension manager

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31 PSE employers and growing
37,000 members and growing
Not for profit
Joint governance and bicameral
structure
 Operating since 1995
 $7 Billion in assets
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How we measure success
Contribution rates
Minimize probability
of increases
Appropriate for
benefits earned
Reduce volatility
Secure benefits
Avoid benefit
reductions (funding
level)
Paying post-2007
conditional indexing
All success measures improve with pension
plan mergers.
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Our benefits are secure
 Pension Plan is fully funded
 $525 million dollar surplus (Jan. 2014)
 105% funded ratio
 Funding Task Force
Confirmed value and sustainability
Realistic assumptions and longevity
recognized
Contributions rates reflect desired security
Confirmed intergenerational equity
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Strong, consistent investment performance
Gross
Net
2013
14.5%
13.9%
2012
11.8%
11.3%
2011
4.1%
3.4%
2010
13.3%
12.6%
2009
15.2%
14.7%
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Our roadmap
 About us
 Security of benefits
 Key benefits
 Next steps
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Securing Benefits over the long-term
C+I=B+E
Expenses
Benefits
Investment
Contribution
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Long-term – maximize and secure benefits
C+I=B+E
Secure Valuable Benefits from:




higher Contributions
higher Investment returns
lower Expenses
Benefits are being valued correctly
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Over the long-term
Relative size of each
C
+
I=B+
E
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Contributions
 Keeping contributions reasonable is
dependent on investment returns
 A small drop in expected investment returns
requires large change in contributions
 Although member contribution rates are
higher, the total cost of pensions
(employer and member) is lower
 In a JSPP, the higher the contributions the
better and more secure the benefit
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Contributions in two parts
Basic
Cover cost of benefits currently being earned
Reflects longevity and reasonable assumptions
Stability (as needed)
Supplementary to secure/fund:
 conditional indexing
 future mortality improvements
 withstand market volatility
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Blended Contribution rate
Basic (8.2 / 11.8)
9.2%
Stability
3.0%
Contribution rate
12.2%
Stability rates determined by the
Funding Policy
Employers can pay part of
member contributions for a period
of time
Tax deductible
and matched by
the employer
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Contribution examples - 2014
Salary
Basic Blended Stability
Amount
Rate
Amount
Rate
$40,000
$3,280
8.2%
$1,200
3.0%
$60,000
$5,190
8.7%
$1,800
3.0%
$100,000
$9,910
9.9%
$3,000
3.0%
$150,000
$15,810
10.5%
$4,500
3.0%
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Will I get
good
value?
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A value example
Member retires at age 62 with 24 years of
service and HAPE of $130,000
This member contributed $171,774 during their
career and will receive
 Lifetime Pension: $54,235
 Bridge to age 65: $8,165
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Value
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Value
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Value
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Inflation protection is valuable
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Inflation protection is valuable
COLA
Initial
pension
Pension after…
20 years
25 years
30 years
0.75%
$54,235
$62,977
$65,374
$67,863
1.5%
$54,235
$73,047
$78,692
$84,774
2.5%
$54,235
$84,634
$94,594
$105,725
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Over the long-term
C
+
I=B+
E
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Diversified asset mix
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Annual rates of return (net) 2004 to 2013
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
-5.00%
-10.00%
-15.00%
-20.00%
-25.00%
Queen's
CAAT
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Investments
 Both pension plans offer quality investment
programs
 With a DB Plan, investment returns do not
affect benefits or ability to retire
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Over the long-term
C
+
I=B+
E
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Benefits
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B = Plan features
Inflation – salary scale (size of B)
Retirement patterns (when B starts)
Post retirement mortality (when B ends)
Queen’s past service defined benefits replicated
• any excess account balance owned by member
• conditional indexation on all service
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Our roadmap
 About us
 Security of benefits
 Key benefits
 Next steps
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Member Handbook
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The CAAT Pension Plan provides
 Predictable retirement income, paid monthly
 For life
 Defined benefit pension plan – based on your
years of work and salary
 Earned pension not affected by volatile market
or expensive annuity market
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How the CAAT Plan works for you
 Your pension builds throughout your career
 Earn service as you work and contribute
 Transfer in or purchase service, if you can
 Watch your pension grow each year
Saving for retirement
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CAAT key benefits
 Lifetime and bridge
 60% Survivor
benefits
benefits
 Pensions based on
 Conditional inflation
best-5 years (60
protection
consecutive months)  No service
 Flexible retirement
maximum
options
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Flexible retirement options
 Retire
 as early as 50 & 20 or 55 & 2
 as late as 71 – even if not retired
 Permanent early retirement provisions
 Unreduced dates (earliest)
 85 factor (age plus service)
 60 years of age and 20 years of service
 65 – Normal Retirement Age
 Reduction of only 3% per year from earliest
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Joint and survivor pension options
 60% pension - included
 If you marry after retirement, your new
spouse automatically receives a survivor
pension – included
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Pension formula
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Bridge formula
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Retiring at age 65 – Cynthia’s story
 Cynthia is planning to
retire at age 65
 She has worked for 29
years
 Her highest average
pensionable earnings
are $130,000
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Cynthia’s pension calculation
Cynthia’s highest average pensionable earnings: $130,000
$49,840
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$80,160*
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= Lifetime benefit from age 65
*HAPE - AYMPE
($130,000 - $49,840 = $80,160)
$65,282
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Retiring before age 65
Two types of early retirement pension
 Unreduced pension
 Reduced pension
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85 Factor
=
+
(Age)
85
(Unreduced pension)
(Service)
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60/20 Rule
60
(Age)
+
20
(Service)
=
60/20
(Unreduced pension)
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Comparison: How do you measure value?
1.3%
1.4%
Factor in:
 Indexation
 Survivor benefits
 Early retirement
features
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Retiring early – David’s story
• David, 56 is ready to retire
• His highest average
pensionable earnings are
$45,000
• He has 30 years in the Plan
including purchased service
• His pension will be
unreduced (56+30=86
points)
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Retiring early
David’s highest average pensionable earnings: $45,000
=
$45,000
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$0*
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Lifetime benefit from age 56
*HAPE - AYMPE
($45,000 - $49,840= $0, since negative)
$17,550
Retiring early – includes Bridge benefit
Because he is under 65, David will receive a bridge
benefit until he is 65. It will be also be unreduced.
$45,000
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= Bridge benefit paid to age 65
=
$9,450
$9,450
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David’s pension income
 David will receive $27,000 a year to age 65
 At age 65 when the bridge ends, he will
receive $17,550 / year for life
 Plus inflation protection
 Plus spousal benefits, if married
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David’s story at different earnings
Highest average
pensionable earnings
To age 65 (includes the
bridge benefit)
Starting at age 65
$45,000
$27,000
$17,550
$60,000
$36,000
$25,534
$80,000
$48,000
$37,534
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Your pension keeps growing
$17,550/year
$9,450
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Your pension keeps growing
$26,217/year
Lifetime benefit increases by 49%, less 108
fewer pension payments
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Retirement flexibility illustrated
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Conditional inflation protection
 Inflation protection at 75% of the CPI,
conditional on the funding status
 Highest priority
 First dollar of surplus
 First priority for reserves
 Perfect record
 With improving longevity, inflation protection
is critical to maintaining purchasing power
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Valuable inflation protection
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Your pension lasts a lifetime
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Purchasing past service and leaves
 Increases your pension and may lower your
early retirement reduction rate
 Can consolidate your pensions earned with
prior employers
 Accept past service from any registered
pension plan in Canada
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Income splitting
 Allocate up to 50% of pension income to
lower-income spouse
 Split your income at tax time to reduce
the amount of tax paid
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Canada Pension Plan (CPP)
Old Age Security (OAS)
 Does not impact your pension or bridge
benefit
 The choice is yours
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Our roadmap
 About us
 Security of benefits
 Key benefits
 Next steps
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New name, same reputation
We will change the name of the plan to reflect
university participation.
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How members benefit
 Members have a true voice in a wellgoverned, transparent pension plan
 More of contributions go to benefits than
to overhead – economies of scale
 Secure, well-funded, sustainable plan
offering valuable benefits
 Removes complexity of pensions from the
collective bargaining process
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How employers benefit
 Lowers cost and risks associated with
running single employer pension
administration, investments, governance and
compliance
 Stable contribution rates
 More of total compensation budget going to
valuable benefits (due to lack solvency
requirement, PBGF and overhead)
 Ready-made Defined Benefit solution
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Conclusion
 This is a viable solution that is unique
 Secure DB benefits
 Sector alignment
 Greater benefits delivered at lower risks and lower
overall costs
 Sustainable
 Proven
“Provides secure valuable defined benefits for
members while acting like a DC plan for
employers”
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Value. Stability.
Growth.