The quarterly newsletter for members of the OPSEU Pension Trust
Winter 2007, Number 40
In this issue...
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Canada’s Aging Population – What It Means for You and Your Pension
The Canadian workplace is expected to undergo a significant facelift in the coming years as the aging population is projected to have a direct impact on the changing demographics of the workforce.
The increase in retirees relative to active members in the pension plan means that there are fewer people making contributions to help sustain pension benefits in the future. With life expectancies steadily rising and retirement ages dropping, it is expected that plans will be providing retiree benefits longer.
A look at our numbers
- The average age of OPTrust pensioners at retirement – 58.08 years old
- The ratio of active members to retirees = 44,636 active to 21,385 retirees, which translates to a 2.1:1 ratio. Based on current membership, it is projected that by the year 2025, there will be .81 active members for every retiree.
What are we doing to protect your pension?
OPTrust has always maintained a responsible approach to funding. The Plan Sponsors continue to use funds that were set aside from gains in earlier, prosperous years to stabilize member and employer contribution rates at normal levels – whereas some other large plans are continuing to increase contribution rates and doing away with inflation adjustments to cover their funding deficits.
Every three years we examine our experience based on funding assumptions to ensure that we can continue to adequately fund our pension obligations. We are also beginning to examine our funding policy through discussions with the Plan Sponsors, OPSEU and the Ontario Government, to raise awareness and identify potential options.
Population aging is a complex issue that concerns not only the well-being of our members but also broader areas and sectors affecting the total population, such as health, labour markets and public finances. While the alarm bells aren’t yet ringing, this situation does warrant closer attention from the country’s policymakers and planners who need to develop a plan for Canada’s future workforce. We are continuing to monitor any developments to help ensure the safety and protection of your financial future.
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New Chair and Vice- Chair
OPTrust’s Board of Trustees has named its new Chair and Vice-Chair for the next two years. Jordan Berger will take over as Chair, directly following his two year tenure as Vice-Chair. Jordan was first appointed to the OPTrust Board of Trustees by OPSEU in 2001, and is now also Chair of the Administration Committee. “OPTrust’s tradition of delivering superior service and benefits to its members is one I am proud of, and I am pleased to continue serving as a member of the Board of Trustees.”
Tony Ross takes on the role of Vice-Chair. A Government appointee to the Board, Tony retired as Vice-Chair of Merrill Lynch Canada in 1999, where he was responsible for debt and equity issues for Canadian governments and corporations. He has more than 30 years’ experience in the investment field. He is the Chair of the Investment Committee and was appointed to the Board in March 2000. “I look forward to my continued relationship with OPTrust. The governance of this Plan is of the utmost importance to its strength and stability, and I am honoured to be given this responsibility, which I hold in the highest regard.”
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Inflation Adjustments
In January of each year, pensions are adjusted for the increase in the cost of living. The cost of living is determined by the Consumer Price Index (CPI) as reported by Statistics Canada. In the Plan, indexation is referred to as “inflation adjustment.”
The maximum increase in any one year is 8%. Any increase above 8% is carried forward to be used in the next year(s) where the inflation adjustment is less than 8%. When a member terminates employment or retires partway through a year, the subsequent inflation adjustment will be pro-rated in the first year.
Inflation adjustments are also applied to deferred pensions. Plan members sometimes leave their job before they are eligible for an immediate pension. Inflation protection maintains the value of their pension during this deferred period.
Why have inflation adjustments?
The main reason for having inflation adjustments is to protect the value of your pension over time. For example, by applying inflation adjustments a $20,000 annual pension in 1996 would be worth $24,422 in 2006.
Why use CPI as the index for inflation adjustments?
CPI is generally regarded as the best option for measuring inflation adjustments. Using a Canadawide CPI index reflects the fact that our pensioners do not live only in Ontario and enables inflation adjustments to be fair for all pensioners in the Plan. By increasing pensions according to this index, pensioners’ benefits from the Plan maintain the same value they had when the benefits were put into pay.
The CPI directly or indirectly affects nearly all Canadians. It is used to determine increases in payments from the Canada Pension Plan and Old Age Security. The CPI also affects wage increases, labour contracts, rental agreements, spousal support agreements and real return bonds.
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Service Spotlight – Proactive Member Communications
Our Member and Pensioner Services department has always been focused on providing proactive member services and communications. Recently we have taken greater strides to move towards a more member focused environment. As well as analyzing and processing pensions, we have established a mandate to become pension communicators, helping to ensure excellence in service through timely responses to your questions, and a focus on resolving issues. We have pledged to provide our members and pensioners with one-onone targeted communications, such as:
- offering Online Services registration to all callers
- providing targeted communications to members with e-blasts, newsletters and fact sheets
- enrolling more unclassified, contract and non-permanent employees in the Plan
Achieving our project goals
E-mail from member
"Last Sunday I lost my wallet. On Monday August 14th I notified OPTrust in regards to my personal information that may have been compromised. Shortly thereafter I received a letter from OPTrust dated August 15th informing me that they had been alerted to the situation and would follow up. I just wanted to let you know how much your help was appreciated during a stressful period. Also, the people I dealt with over the phone were very helpful, understanding and polite. Thanks to OPTrust. Your employees are the greatest."
The goals of this project are to develop new and effective methods of contacting members to inform you of changes that affect your pension, to increase your awareness of the benefits of Plan membership, build relationships with new members and strengthen our existing relationships. On an operational basis we will also develop initiatives to increase the number of cases processed within the OPTrust service standards to meet with your expectations. We routinely monitor our outgoing communications to determine their effectiveness and obtain your feedback and suggestions on how to improve the communications process. Recently we conducted focus groups with our members and pensioners, and gained valuable feedback which we have incorporated into our publications.
The e-mail on the right is an example of the feedback we receive from you about our service provision. It was sent to a staffer in our Member and Pensioner Services department expressing appreciation for the swift work in addressing a pressing issue.
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Online Services – What’s Available to You
The following is a list of Online Services available to members. We encourage you to register online to access these services.
- apply for Leave of Absence Buybacks
- update costs and make lump sum payments on previously approved buybacks
- view Annual Pension Statements
- view Annual Buyback Statements
- view and update beneficiary information
- view and update contact information
- send and receive secure messages
- choose to receive correspondence electronically only
Remember that registering for Online Services enables you to view your Annual Pension Statement and Annual Buyback Statement weeks before they are mailed. It will be posted to the “Your Pension Statements” section of OPTrust’s secure Online Services, and will be available for viewing online in March, 2007.
Your Privacy Matters to Us
When you communicate with OPTrust online, over the phone or by mail – your personal information is always protected. We respect your privacy and want you to understand how we protect your personal information.
Why we collect your personal information
OPTrust uses your personal information to administer your pension, which is why we need your personal information to be accurate and current. We also collect your personal information to keep you informed of any changes to the Plan that may affect you.
Your personal information is protected
OPTrust has a comprehensive privacy policy with strict principles to protect your personal information. Our policy requires us to:
- advise you as to why we collect personal information and what we use it for
- outline the conditions under which your personal information is disclosed to third parties
- obtain your consent to collect personal information
- identify uses and potential disclosure of personal information
- ensure that your personal information is not used or disclosed for purposes other than administering your pension, without your consent.
OPTrust appointed a Privacy Coordinator and conducted a thorough review to determine how to enhance our privacy policies keeping our members and pensioners in mind. In fact, OPTrust along with other public sector pension plans already had strict standards in place about dealing with personal information.
Keeping you informed
Rest assured that the use, collection and disclosure of your personal information is a top priority for OPTrust. We will continue to assess the impact of any business changes and ensure that our business practices meet or exceed industry standards. We will also keep you informed about any measures we take to further protect your privacy.
If you have any questions or concerns regarding OPTrust’s privacy policy, please contact our Privacy Coordinator toll-free within Canada at 1-800-906-7738 or via e-mail.
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Question: How does the income trust tax imposed by the federal government affect the OPSEU Pension Plan?
Answer: OPTrust hires investment managers to invest the Fund’s Public Markets assets. The Fund has had and continues to have exposure to income trust investments as a by-product of investing in the Canadian market S&P/TSX Composite Index. However, the Fund was “underweight” in our holdings of income trust investments on October 31, 2006 when the tax change was announced, relative to the weight of income trusts in the Index. While the relative weight of income trusts in the TSX composite index was 11.18% on October 31st, the Fund held only 5.24% of this weighting in income trust investments in various portfolios. This reduced exposure to income trust investments meant your Fund did not suffer the same magnitude of losses as did investors who held the Index weight on that date may have had.
While our investment in income trusts did drop from $145 million on October 31, 2006 to $129 million on November 6th, it is worthy to note that partially offsetting this drop following the announcement on income trusts, many investors chose to move investments from income trusts into banks and other high dividend paying stocks. As a consequence, these types of stocks had substantial gains in the market. OPTrust benefited, as we had and continue to have substantial investments in bank stocks and other high dividend paying stocks and consequently prospered from this movement.
Question: Does the new income trust tax affect the pensions paid by the Plan to its retirees?
Answer: OPTrust’s pensions are safe and secure and payments are unaffected by tax changes to income trusts. Your OPTrust pension is not subject to market risks or the success of particular investments. Your OPTrust pension is a defined benefit which means you will receive a pension based on your salary and years of credit in the plan.
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A Special Welcome
OPTrust would like to welcome back The Central North Correctional Centre, which transferred membership out of the Plan on October 29, 2001 and rejoined the Plan on November 8, 2006.
On January 1, 2007 an estimated 700 federal jobs were transferred into the Ontario Public Service and OPSEU under a new deal between Ontario and the federal government. Under a Labour Market Development Agreement, some federal Employment Insurance (EI) programs have transferred to the Ontario Ministry of Training, Colleges and Universities (MTCU). The programs relate to apprenticeship, integration of recent immigrants, literacy and essential skills, skills upgrading, aboriginal peoples, and workers who face barriers to employment. These programs are already provided provincially in most of Canada.
IMPORTANT NOTICE
Under the employee transfer arrangement, former federal employees are entitled to pension termination options under the Public Service Superannuation Act. One of the available options is to transfer your pension assets from the federal plan to the OPSEU Pension Plan. Affected employees have up to one year to decide to transfer their pensions.
We understand that the value of the transfer of your pensions from the federal pension plan may increase if the transfer is made on or after January 1, 2008. This can mean a smaller “top-up” to obtain all your pension credits in the OPSEU Pension Plan. Please submit your “no obligation to transfer application” now. We will delay requesting the transfer of your pension assets until this information is confirmed.
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Posted on February 12, 2007
