The Meaning of Security

A Guaranteed Pension

In 2001, losses on the world’s major stock markets highlighted the value of an OPTrust pension. Through your contributions – and those made by your employer – you earn the right to a lifetime pension. Your pension is calculated using a set formula, based on your years of service and average salary.

Unlike most RRSPs and other individual investments, the value of your OPTrust pension is guaranteed. Once you retire, your pension will be adjusted annually for inflation. That adds up to stability now and security for your future.

A Long-Term Perspective

To pay for your pension, OPTrust invests to achieve long-term growth, while keeping risk within acceptable limits. Like that of all major institutional investors, however, the Plan’s annual return is closely tied to the performance of the markets. With the global retreat of stock prices in 2001, OPTrust posted an investment loss of 3.5% for the year.

More important than the single-year return, is OPTrust’s ability to grow the pension fund over a much longer period. Since 1995, we have achieved an 11.3% average annual return on investments. As a result, the Plan has reduced its unfunded liability, enhanced benefits, reduced member contributions and built up the reserve that was used to offset the investment loss experienced in 2001.

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Stability

Investment returns vary based on a wide range of factors. That is why OPTrust maintains a diversified investment portfolio. This allows us to moderate exposure to market risks, while positioning the Plan for growth over the long-term. In 2001, we improved the Plan’s diversification by increasing the proportion of the fund invested in international stocks.

We also enhance the stability of the Plan by recognizing – or "smoothing" – each year’s investment returns over a four-year period. As a result, earnings held in reserve from 1998-2000 more than offset the portion of the 2001 losses recognized at year-end. This contributed to a $202 million increase in the financial statement surplus to $1.8 billion. The unrecognized portion of the 2001 investment loss will reduce the surplus over the next three years.

Every three years, OPTrust reviews the Plan’s funding status. Any "gains" (or losses) are shared equally between the members and pensioners and the Government of Ontario. The results of the next funding valuation will be ready in mid-2002.

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Delivering Service

In addition to a secure pension, members and pensioners have told us that you count on OPTrust for useful information and prompt, reliable service. In 2001, we took a number of steps to better meet these needs:

• We launched a new client service system to give you faster telephone access to our staff, better follow-up on major transactions and a continued focus on personal service.
• We redesigned our Web site and newsletters and launched a new series of pension information seminars in communities across Ontario.
• We initiated an ongoing client satisfaction survey to track improvements, identify areas where we can do better, and help us continue to respond to your needs.

Looking ahead, OPTrust is committed to ensuring the long-term security of the pension promise, and to responding to your changing needs.

Stanley F. Sanderson Chair		Paul Sharkey Vice-Chair

Stan Sanderson (left) and Paul Sharkey are the Chair and Vice-Chair of the OPTrust Board of Trustees.

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