Members > Newsletters > Special Edition Summer 2009

A well-charted path

It seems as if pensions have been in the news more than ever in recent months. Companies are struggling. Individuals are concerned. Governments are casting a watchful eye. It's been called a "perfect pension storm." There is a growing anxiety that for some individuals, their pension might not be there for them when they need it. Everyone has an opinion, and everyone seems to agree that change is needed.

Another point that has been made a number of times is that those with a public sector pension are the lucky ones. Happily for us, the CAAT Plan would be viewed as a part of this group.

Despite the current hard times, a College pension is one you will be able to rely on, regardless of the recent market volatility. The Plan's governors and administrators are committed to running a reliable, cost-efficient, well-managed operation that is focused on fulfilling the pension promise indefinitely.

Strength in numbers?

Among other things, last year's report of Ontario's Expert Commission on Pensions recommended that larger, more inclusive pension plans be created, to help spread investment risk over a larger population.

Such plans could help two different groups: those individuals who are not currently members of a defined benefit plan, and plans that believe they could benefit from working with a larger pool of capital by banding together.

The government has expressed some interest in both models. Large Ontario plans that believe they could be a "superfund" manager have endorsed the latter model. The one concrete example that has been discussed in the news is Ontario's universities, which are being encouraged to pool their 15 funds to create a $13 billion fund.

There's no doubt about the merits of this suggestion in principle. Newer or bigger funds may open up opportunities for more sophisticated investment structures and greater risk sharing, for those coming from a smaller plan environment.

For larger plans such as ours, there are also some advantages to independence.

Like all plans, we have unique demographics, and are required to produce an asset mix that corresponds to our carefully developed asset/liability and risk management models.

As an independent plan, we are responsible for our own governance. Those in charge directly represent the employers and employees for whom the Plan exists. There is also a dedicated staff providing member services. The governors can make final decisions concerning Plan changes, secure in the knowledge that they are best positioned to know what is designed to produce the best result for our members, both active and retired.

As independent administrators, we're part of your total retirement income package. We have a duty of care to ensure that our members get paid what they are entitled to, promptly, and with suitable explanations. This duty of care could diminish as a fund grows larger and attempts to serve more, disparate populations. The requirement to act in the best interests of beneficiaries could take a back seat to other priorities.

Getting the government on board

The Expert Commission report made recommendations in many areas of pension policy, and the provincial government has indicated that it will review a number of possible changes to pension law. Ideas on the table for discussion apparently include making better use of economies of scale – the intent behind the "superfunds" idea – along with a provincial plan that mimics the concept and structure of the federal Canada Pension Plan, and subtler changes such as a solvency valuation exemption for jointly sponsored pension plans (see Actuarial valuation update and Questions and Answers).

All together now

It seems clear in this environment that some much-requested change in Canada's pension system is going to come from this public review. Pension coverage is declining for some Canadian workers, as a result of decisions by employers to close plans due to increasing volatility in costs and other competitive pressures arising from challenges such as globalization. Other plans continue to struggle with funding challenges. The time seems right for a new level of cooperation.

The news appears to be worse for people without the kind of defined benefit coverage that CAAT Plan members enjoy. Our members use their CAAT pension as a strong base to work together with their government pensions, and their personal savings. Over the years, our publications have touted the need to plan ahead using all three types of income.

Whatever changes do emerge from these volatile times, your CAAT pension will continue to be a reliable, cost-effective means of building retirement income.

July 2009