Strategy & Goals
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Transcript Strategy & Goals
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
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
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.