The CBC/Radio-Canada Pension plan has led the way with its LDI strategy, but public sector plans have also faced some tough critics and even tougher markets.
Debra Alves, the plan’s managing director and CEO, describes the challenges of managing a public sector pension plan in a rough environment.
How would you respond to critics of public sector pension plans attacking them as “pension Ponzi schemes”?
You could make that comment about the whole of our economy, really, because when you look at the demographics of developed countries, seniors are a growing percentage of the population. That’s a broader [issue] for society: that we have more boomers who are entering retirement age and [fewer] young people entering the workforce.
Will the 10% reduction in the CBC/Radio-Canada budget mean layoffs and, therefore, fewer employees as active contributors to the plan?
These reductions have been factored into the current actuarial valuation. Even with a conservative forecast for membership, we still have 123% of assets to meet the liability payments on a going-concern basis. What happens with layoffs is, people may retire sooner, so it shifts the date of the payments that were forecasted.
We’ve also noticed an interesting trend: as people are let go, they keep their pension with us as opposed to taking the money out, so we’ve had an increasing number of deferred members. They now represent 7.5% [of the total plan members].
What is the biggest issue that the pension plan faces?
The biggest risk to the sponsor is contribution volatility. Our LDI strategy responds to the need for contribution stability by following an investment policy that looks to match the performance of the assets with that of the liabilities. With a 91% solvency [ratio], we’re in the top 10 percentile of [Canadian] pension plans, without having received any special contributions from the sponsor.
I think we’ve managed quite well in a time when demographics are such that there are more pensioners than contributors.
Sheldon Gordon is a freelance writer based in Toronto. firstname.lastname@example.org
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