The financial status of the Royal Canadian Mounted Police pension plans showed significant improvement as returns for one of them hit a high of 16.3 per cent during its recent valuation period.
According to the organization’s latest actuarial valuation report, the RCMP’s three pension plans showed a combined actuarial deficit of $368 million at March 31, 2015. The figure is a significant improvement on those pension plans’ combined deficit of $880 million as of the 2012 valuation.
A key factor in the improvement was the strong market performance over the three-year period since the last valuation. One of the three plans saw rates of return of 10.7 per cent, 16.3 per cent and 14.5 per cent, respectively, for 2013, 2014 and 2015. That compares to expected returns of 5.1 per cent, 5.2 per cent and 5.3 per cent, the report noted.
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The report’s author, chief actuary Jean-Claude Ménard, predicts future real rates of return for the pension fund at about four per cent, a number Joe Nunes, president of Actuarial Solutions Inc., notes may not be realistic. “Right now, if you try to buy real-return bonds from our government, they’re going to pay less than one per cent,” says Nunes.
“The key thing for everyone to remember is that delivering these benefit promises . . . is contingent on finding investments that will generate better returns than the government is willing to guarantee. There is some risk — I’m not saying a great risk — that if the investments don’t turn out over time, this thing could end up costing [more].”
The RCMP retirement savings plan includes three components: a superannuation fund, for service prior to April 1, 2000; a pension fund, for service since April 1, 2000; and a retirement compensation arrangements account, which is for benefits in excess of Income Tax Act limits for registered pension plans.
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At March 31, 2015, the actuarial value of the assets in the pension fund was almost $7.3 billion. Its actuarial liability is more than $7.4 billion. The resulting actuarial deficit is $154 million compares to $781 million three years ago.
The superannuation fund, at March 31, 2015, shows a recorded balance of $13.2 billion and an actuarial liability of $13.4 million. The resulting deficit is $225 million, compared to $117 million three years ago.
Also at March 31, 2015, the balance of the retirement compensation arrangements account was $66 million and its actuarial liability was $55 million, which equals an actuarial excess of $11 million. At the 2012 valuation, its actuarial excess was $18 million.
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