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CIA Pension Seminar April 15, 2009 Plan Innovation in Canada Robert L. Brown Institute of Insurance and Pension Research University of Waterloo. A Fine Balance: OECP. PBA and ITA should allow and encourage plan innovation (not true today). Size matters:.

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Presentation Transcript
slide1

CIA Pension Seminar

April 15, 2009

Plan Innovation in Canada

Robert L. Brown

Institute of Insurance and Pension Research

University of Waterloo

a fine balance oecp
A Fine Balance: OECP
  • PBA and ITA should allow and encourage plan
  • innovation (not true today)
  • Size matters:

- Lower admin costs per unit

- Lower investment expense ratios

- Can hire in-house investment expertise

- Diverse investment opportunities (e.g., private placement)

- Pooling of some risks (e.g., mortality)

  • $10 Billion in assets may be needed
  • May require allowing smaller plans to commingle assets

CIA Pension Seminar/Régimes de retraite de L'ICA

a fine balance oecp1
A Fine Balance: OECP
  • Create a Pension Champion and a new Pension
  • Community Advisory Council to advise government
  • and regulator
  • The better the plan governance, the less the need for
  • invasive regulation
  • Improve joint governance and transparency of information
  • Include retirees in governance
  • File a governance and funding policy
  • More and clearer info to plan participants

CIA Pension Seminar/Régimes de retraite de L'ICA

slide4

Encourage MEPPs, JSPPs and Jointly Governed Target

  • Benefit pension plans (JGTBPPs)

- automatic participation (but can opt out)

- for worker, plan is target DB

- for plan sponsor, it is DC

- can be used for SEPPs

- require a Pension Advisory Committee (with some

retirees) if not jointly governed

CIA Pension Seminar/Régimes de retraite de L'ICA

slide5

A Fine Balance: OECP

  • Encourage commingling of small/medium size plans
  • to achieve the advantages of size
  • Establish an Ontario Pension Agency for stranded
  • pension assets, or
  • Allow existing MEPPs / JSPPs to service new,
  • less-connected, members
  • Model = OMERS or TIAA-CREF
  • Management could be private (so long as expenses
  • < 0.5% of assets) or
  • Expand the C/QPP (second tier) or create a comparable
  • provincial plan
slide6

Ontario Budget, March 26

  • Allows OTPP to take on new and different clients
  • Consistent with goal of commingling of assets
  • Already allowed for OMERS
slide7

Province of Quebec

Member-Funded Pension Plans

  • A DB target benefit plan
  • For employer/plan sponsor, it is a DC plan
  • A commingled asset plan, not individual accounts
  • Indexation of benefits, both before and after retirement
  • is contingent on the funding health of the plan
  • Can be a MEPP or a SEPP
  • Is meant to be fully funded at all times
slide8

Promises to KeepThe Nova Scotia Pension Review Panel

  • States that existing rules inhibit innovation
  • Notes that special MEPPs and JSPPs are DB but with
  • some contingent benefits
  • These plans have joint governance
  • The panel likes this model, says it should be utilized
  • more broadly
  • Suggests decreased regulation balanced by transparency
  • of information and balanced governance (including retirees)
  • Suggests a new promotion division to promote plans
  • (separate from superintendent)
slide9

Finally suggests a new province-wide plan

- Anyone could join (but voluntary)

- Administered by independent provincial agency

- Could accept commuted value of orphans

- Could move poorly managed plans in

- A DC target benefit plan

- Joint trusteeship

slide10

Getting our Acts TogetherAlberta / British Columbia (ABC)

  • Create a pension advocate to promote pensions
  • along with a joint advisory council to advise the
  • minister and regulator
  • Encourage plan innovation
  • Each plan should have a governance policy which
  • includes a funding policy (if DB)
slide11

Start a new provincial ABC plan

- Available to anyone

- Commingled assets ( = size)

- Pooling of risks

- Total expenses < 0.4% of plan assets

- A DC plan (specified contribution)

- But also a target D.B. plan

  • No benefit improvement unless plan funding is
  • healthy

- Auto default is “you are in”

- Can opt out (i.e. not mandatory)

  • Board of Governors decides investment direction
  • (at arm’s length from government)
slide12

Conclusion

  • Strongly similar recommendations
  • (at least at big picture level)

- Four panels / five provinces

- Wise and independent

- Must be content worthy of further discussion