Office of the Superintendent of Financial Institutions
10 May 2013
The Honourable Tony Clement, P.C., M.P.
President of the Treasury Board
Pursuant to section 6 of the Public Pensions Reporting Act, I am pleased to submit the report on the actuarial review as at 31 March 2012 of the Royal Canadian Mounted Police pension plan.
This actuarial review is in respect of pension benefits and contributions which are defined by
Parts I, III, and IV of the Royal Canadian Mounted Police Superannuation Act, the Special Retirement Arrangements Act and the Pension Benefits Division Act.
Jean-Claude Ménard, F.S.A., F.C.I.A.
Office of the Chief Actuary
This actuarial report on the pension plan for the Royal Canadian Mounted Police (RCMP)was made pursuant to the Public Pensions Reporting Act (PPRA).
This actuarial valuation is as at 31 March 2012 and is in respect of pension benefits and contributions defined by Parts I, III, and IV of the Royal Canadian Mounted Police
Superannuation Act (RCMPSA), the Special Retirement Arrangements Act (SRAA), which covers the Retirement Compensation Arrangement (RCA) and by the Pension Benefits Division Act (PBDA).
The previous actuarial report was made as at 31 March 2011. The date of the next periodic
review is scheduled to occur no later than 31 March 2015.
The purpose of this actuarial valuation is to determine the state of the RCMP
Superannuation Account, Pension Fund and Retirement Compensation Arrangements (RCA) Account, as well as to assist the President of the Treasury Board in making informed decisions regarding the financing of the government’s pension benefit obligation.
Changes were made to the plan provisions that improve portability options effective 1 September 2012. These amendments to the RCMPSA Regulations have no material impact on this valuation. Adopted increased member contribution rates for 2013, 2014 and 2015 are taken into account in this report. There were no other changes to the plan provisions since the last valuation. This report is based on pension benefit provisions
enacted by legislation, summarized in Appendices 1 and 2.
The financial data on which this valuation is based are composed of invested assets
(Pension Fund) which the government has earmarked for the payment of benefits for service since 1 April 2000 and accounts available for benefits established to track government’s pension benefit obligations such as the Superannuation Account, for service prior to 1 April 2000, and the RCA Account for benefits in excess of those that can be provided under the Income Tax Act limits for registered pension plans. These pension assets and accounts available for benefits are summarized in Appendix 3. The membership data is summarized in Appendix 4.
The valuation was prepared using accepted actuarial practices in Canada, methods and assumptions which are summarized in Appendices 5 to 8.
All actuarial assumptions used in this report are best-estimate assumptions. They are
individually reasonable for the purposes of the valuation at the date of this report.
Actuarial assumptions used in the previous report were revised based on economic trends and demographic experience. A complete description of the assumptions is shown in Appendices 6 to 8. The following table presents a summary of the ultimate economic assumptions used in this report and a comparison with those used in the previous report.
The proposed amounts to be credited to (or debited from) the Accounts and the Pension
Fund are shown on a calendar year basis in this section beginning with calendar year
2014 which is the first calendar year that follows the expected tabling of this report.
Valuation results on a plan yearFootnote 1 basis are shown in Section II.
As at 31 March 2012, the total of the amounts available for benefits under the
Account is $13,024 million and the actuarial liability for service priorFootnote 2 to 1 April 2000 is $13,141 million. The total of the amounts available for benefits is less then the corresponding actuarial liability; it is 99.1% of the actuarial liability. The actuarial liability exceeds the total of the amounts available for benefits by
Beginning on 31 March 2014, 15 equal annual installments of $12 million could be
credited to the Superannuation Account to better track the actuarial liability. The
time, manner and amount are to be determined by the President of the Treasury
The RCMPSA total current service cost, borne jointly by the contributors and the
government, is $452 million for calendar year 2014. The estimated members’ contributions are $168 million and the estimated government contributions are $284 million for calendar year 2014. Administrative expenses are estimated at $3 million (included in the total current service cost) for calendar year 2014. The following table shows the projected current service cost expressed as a percentage of the expected pensionable payroll Footnote 4 for the three calendar years following the expected laying date of this report. The ratio of government current service cost to contributor current service cost is also shown.
Projected current service costs shown in this table are based on the member
contribution rates shown in Section II-C-2.
As at 31 March 2012, the smoothed actuarial value of assets is $4,526 million and
the actuarial liability is $5,307 million, resulting in an actuarial deficit of
In accordance with the RCMPSA, the deficit of $722Footnote 5 million could be amortized in 15 equal annual special payments of $71 million beginning on 31 March 2014, taking into account a special payment of $57 million to be made on 31 March 2013 in accordance with the previous special payments schedule. The time, manner, and amount are to be determined by the President of the Treasury Board.
If there exists in the opinion of the President of the Treasury Board a non-permitted surplusFootnote 6 in the Pension Fund, any future contributions to the Fund may be reduced in a manner determined by the President or the non-permitted surplus may be paid out of the Fund and into the Consolidated Revenue Fund. Based on the results of this valuation, a non-permitted surplus does not exist as at 31 March 2012.
As at 31 March 2012, the total of the amounts available for benefits under the RCA
is $61 million and the actuarial liability is $43 million resulting in an actuarial excess
of $18 million.
The SRAA does not allow for an adjustment to be made to the RCA Account to track the actuarial liability when there is an actuarial excess.
The RCA total current service cost, borne jointly by the contributors and the government, is $1 million per year for calendar years 2014, 2015 and 2016. The estimated members’ contributions are $160,000 per year and the estimated government costs are 5 times the members ‘contributions, i.e. $800,000 per year for the next three years.
This report is based on pension benefit provisions enacted by legislation, summarized in Appendices 1 and 2, and the financial and membership data, summarized in Appendices 3 and 4. The valuation was prepared using accepted actuarial practices in Canada, methods and assumptions summarized in Appendices 5 to 8. Emerging experience, differing from the corresponding assumptions, will result in gains or losses to be revealed in subsequent
Projections of the Superannuation Account and Pension Fund and their financial components are shown in Appendices 9 and 10, respectively.
Beginning on 1 April 2000, government costs and employee contributions under the RCMP pension plan are no longer credited to the RCMP Superannuation Account. Rather, they are credited to the RCMP Pension Fund, and an amount equal to
contributions net of the benefits paid and the administration expenses is transferred to the Public Sector Pension investment Board (PSPIB) and invested in the financial markets. The valuation results of this section show the financial position for both
RCMPSA financing arrangements as at 31 March 2012. The results of the previous valuation are also shown for comparison purposes.
Beginning on 31 March 2014, 15 equal annual installments of $12 million could be credited to the Superannuation Account to better track the actuarial liability. The time, manner and amount are to be determined by the President of the Treasury Board.
The actuarial smoothing adjustment to the market value of assets is not taken into
account to calculate the special payment to amortize the actuarial deficit. Therefore, the
actuarial deficit of $722 million could be amortized in 15 equal annual payments of
$71 million beginning on 31 March 2014 such that the projected value of assets would
be equal to the projected value of liabilities in 15 years. The annual special payment
was calculated taking into account that a special payment of $57 million, determined by
the President of the Treasury Board following the laying of the 2011 actuarial valuation,
will be made as at 31 March 2013.
The actuarial smoothing adjustment of $59 million will disappear over the next five
years as the unrecognized investment gains will be gradually recognized.
This section reconciles the changes in the financial position in respect of the
Superannuation Account and the Pension Fund shown in this valuation using the main elements responsible for the changes. The items shown are explained afterward.
An actuarial asset valuation method that minimizes the impact of short-term
fluctuations in the market value of assets is used, causing the actuarial value of the Pension Fund assets to be $70 million less than their market value in the previous valuation report.
The expected interest to 31 March 2012 on the Account actuarial excess of $282 million as at 31 March 2011 amounted to $17 million. The expected interest to 31 March 2012 on the resulting Pension Fund actuarial deficit of $493 million, after considering the recognized investment gains items, as at 31 March 2011 amounted to $27 million. These amounts of interest were based on the Account and Fund yields projected in the previous report for the one-year intervaluation period.
The correction of data, in particular corrections to the member’s credited years of
service, upon which the 2011 report was based, resulted in an increase of $78 million to the Superannuation Account actuarial liability and an increase of $25 million to the Pension Fund actuarial liability as at 31 March 2012.
The Senior Constable provisional allowance will increase from 4% to 5% effective
1 January 2014. These improvements have increased the Account actuarial liability by $7 million and the Fund actuarial liability by $12 million.
The Service Pay Allowance is granted on every fifth service anniversary (1.5% for
every five years of service, up to and including 35 years of service). Effective 1 April 2013, the Service Pay Allowance will be granted after 4 years of service (with additional 1.5% increases unchanged at durations 10, 15, 20, 25, 30 and 35);
this improvement has no material impact on the results of this valuation.
An asset valuation method that minimizes the impact of short-term fluctuations is
used to determine the value of the Pension Fund assets. Appreciation of investment gains or losses is recognized at the rate of 20% per year. The smoothing adjustment as at 31 March 2012 decreases the surplus by $59 million.
Since the previous valuation, experience gains and losses have decreased the
Superannuation Account actuarial excess by $7 million and have increased the Pension Fund actuarial deficit by $121 million. The main items are described in the following table.
Actuarial assumptions were revised based on economic trends and demographic
experience as described in Appendices 6 and 7. This revision has increased the Superannuation Account actuarial liability by $324 million and increased the Pension Fund actuarial liability by $40 million. The impact of these revisions is shown in the following table and the most important items are discussed thereafter.
The details of the current service cost for plan year 2013 and reconciliation with the
2012 current service cost are shown below.
The RCMPSA current service cost is the weighted average of the separate current
service costs for Regular Members and Civilian Members. For plan year 2013, the current service cost of 22.65% of pensionable payroll is composed of 22.99% for Regular Members and 20.63% for Civilian Members. The difference in current
service costs is mainly attributable to the more advantageous early retirement provisions available to Regular Members.
The current service cost is borne jointly by the members and the government. The
member contribution rates have been changed since the last valuation, they are as
The following RCMPSA current service costs in dollar amount are also expressed as
a percentage of the projected pensionable payroll in each given plan year. Current service costs are shown below on a plan year basis; member contributions and the government current service costs are also shown on a calendar year basis in the Executive Summary.
Based upon the assumptions described in section B of Appendix 7, the Fund administrative expenses are included in the total current service costs. As for the previous report, the expected administration expenses exclude the PSPIB operating
expenses as these are recognized implicitly through a decrease in the real rate of return. The Fund administrative expenses are estimated to be $2.5 million for plan year 2013, increasing to $2.7 and $2.9 million for plan years 2014 and 2015,
respectively. The Account administrative expenses have been capitalized and increase the liability
for service prior to 1 April 2000.
Contributions and Costs for prior service elections are based upon the valuation data
and the assumptions described in section B of Appendix 7, they were estimated as follows:
The information required by statute, which is presented in the main report, has been
derived using best-estimate assumptions regarding future demographic and economic trends. The key best-estimate assumptions, i.e. those for which changes within a reasonable range have the most significant impact on the long-term financial results, are described in Appendices 6 and 7. Given the length of the projection period and the
number of assumptions required, it is unlikely that the actual experience will develop precisely in accordance with best-estimate assumptions that underlie the actuarial estimates. Individual sensitivity tests have been performed that consist of projections of the pension plan’s liabilities and current service cost using alternative assumptions.
The following table measures the effect on the plan year 2013 current service cost, the
liabilities for service prior to 1 April 2000 and for service since that date, if key economic assumptions are varied by one percentage point per annum from plan year 2013 onward.
The differences between the results above and those shown in the valuation can also
serve as a basis for approximating the effect of other numerical variations in one of the key assumptions to the extent that such effects are linear.
The valuation result of this section show the financial position of the RCA financing
arrangements as at 31 March 2012. The results of the previous valuation are also shown
for comparison purposes.
The sum of the recorded balance of the RCA Account and the tax credit (CRA refundable tax) is $61 million; it exceeds the actuarial liability of $43 million by 42% as at 31 March 2012 (53% as at 31 March 2011). The SRAA does not allow for an
adjustment to be made to the RCA Account to track the actuarial liability when there is an actuarial excess.
The projected current service cost, borne jointly by the contributors and the
government, of 0.06% for plan year 2013 calculated in the previous valuation has decreased by 0.01% to 0.05% of pensionable payroll in this valuation.
The RCA current service cost is estimated to remain constant at 0.05% of
pensionable payroll for the next three plan years, with the members contributing $160,000 every year and the government cost being 5 times this amount for a total amount of $800,000 per year.
The following table summarizes the estimated total government costs on a plan year basis.
In our opinion, considering that this report was prepared pursuant to the Public Pensions
In particular, this report was prepared in accordance with the Standards of Practice (General
Standards and Practice – Specific Standards for Pension Plans) published by the Canadian
Institute of Actuaries.
To the best of our knowledge, after inquiring with the Royal Canadian Mounted Police,
there were no subsequent events between the valuation date and the date of this report that
would have a material impact on the results of this valuation.
The payment of accrued pension benefits being the responsibility of the government, the
likelihood of the plan being wound-up and its obligation not being fulfilled is practically
nonexistent; also the Act does not define the benefits payable upon wind-up. Therefore, a
hypothetical wind-up valuation has not been performed.
Jean-Claude Ménard, F.S.A., F.C.I.A.
Mario Mercier, F.S.A., F.C.I.A.
Michel Rapin, F.S.A., F.C.I.A.
10 May 2013
Pensions for members of the Royal Canadian Mounted Police (“the Force”) were provided under
the Royal Canadian Mounted Police Act until the Royal Canadian Mounted Police Pension
Continuation Act and the Royal Canadian Mounted Police Superannuation Act (RCMPSA) were enacted in 1959. Benefits are also provided to members of the Force under the Special
Retirement Arrangements Act. Benefits may be modified in accordance with the Pension
Benefits Division Act if there is a breakdown of a spousal union.
The previous valuation report was based on the pension benefit provisions as they stood as at
31 March 2011. Changes were made to the plan provisions that improve portability options
effective 1 September 2012. These amendments to the Regulations have no material impact on this valuation as updated portability options will be calculated on an actuarially equivalent basis.
Increased member contribution rates adopted in December 2012 are taken into account in this
report. There were no other changes to the plan provisions since the last valuation.
Summary of Pension Benefit Provisions
Summarized in this Appendix are the pension benefits provided under the RCMPSA registered
provisions which are in compliance with the Income Tax Act. The portion of the benefits in
excess of the Income Tax Act limits for registered pension plans is provided under the retirement compensation arrangements described in Appendix 2.
The legislation shall prevail if there is a discrepancy between it and this summary.
Membership in the plan is compulsory for all members of the Force regardless of length of
service. Continued membership in the plan became optional for members of the Force who transferred to the Canadian Security Intelligence Service when it was established in 1984.
During the first 35 years of pensionable service, members contribute according to the rates shown in the following table.
(1) Approved by Treasury Board
The rates beyond 2012 have been changed from the previous report and are consistent
with the government objective of moving to a 50:50 current service cost sharing ratio under the Public Service pension plan. Rates beyond 2017 are assumed to remain constant.
After 35 years of pensionable service, members contribute 1% of pensionable earnings.
The government determines its on-going monthly cost as that amount, which when
combined with the required contributions by members in respect of current service, is sufficient to cover the cost, as estimated by the President of the Treasury Board, of all future benefits that have accrued in respect of pensionable service during that month and the Fund administrative expenses incurred during that month.
The government matches member contributions made under the Superannuation
Account for prior service elections. Government credits to the Pension Fund in respect of elected prior service are as described for current service.
Bill C-78, which received Royal Assent on 14 September 1999, gives the
government the authority to:
If an actuarial shortfall/deficit is identified through a statutory actuarial report, the Superannuation Account and/or the Pension Fund are to be adjusted with such annual amounts that in the opinion of the President of the Treasury Board will fully
amortize the actuarial shortfall/deficit at the end of a period not exceeding 15 years.
The objective of the RCMP pension plan is to provide an employment earnings-related
lifetime retirement pension to eligible members. Benefits to members in case of disability
and to the spouse and children in case of death are also provided.
Subject to coordination with the pensions paid by the Canada Pension Plan (CPP), the initial rate of retirement pension is equal to 2% of the highest average annual pensionable earnings
over any period of five consecutive years, multiplied by the number of years of pensionable
service not exceeding 35. Once in pay, the pension is indexed annually with the Consumer Price Index. Such indexation also applies to deferred pensions during the deferral period. Entitlement to benefits depends on either service in the Force or pensionable service, as defined in Notes 3 and 4 of section D below.
Detailed notes on the following overview are provided in section D.
Pensionable earnings means the annual employment earnings (excluding overtime but including pensionable allowances such as bilingual bonuses) of a contributor.
Pensionable payroll means the aggregate pensionable earnings of all contributors with less than 35 years of pensionable service.
All immediate and deferred annuities (pensions and allowances) are adjusted every January to the extent warranted by the increase, as at 30 September of the previous
year, in the 12-month average Consumer Price Index relative to the corresponding figure one year earlier. If the indicated adjustment is negative, annuities are not decreased for that year; however, it is carried-forward and the next positive
adjustment is diminished accordingly.
Indexation adjustments accrue from the end of the month in which employment terminates. The first annual adjustment following termination of employment is prorated accordingly.
The indexation portion of a retirement, disability or survivor pension normally starts being paid when the pension is put into pay. However, regarding a Regular Member
retirement pension, indexation payments start only when the pensioner is either
Service in the Force normally includes any period during which a person made required contributions under the RCMPSA, regardless of whether such contributions were subsequently withdrawn. As well, it includes any period of service as a member of any other police force subsequently taken over by the Force.
Pensionable service includes any period of service in the Force in respect of which a contributor either (1) had to make contributions that remain in the plan or (2) elected to contribute. It also includes any period of prior service with another employer in respect of which a contributor has elected to contribute in accordance with the provisions of the RCMPSA.
Retirement because of age means ceasing to be a Regular Member on or after reaching
age 60, for a reason other than disability or misconduct. Regular Members who joined
the Force before July 1988 may elect to retain the prescribed retirement ages (56 for ranks up to corporal, 57 for sergeants, and 58 for staff sergeants and majors) in effect at that time.
Return of contributions means the payment of an amount equal to the accumulated current and prior service contributions paid or transferred by the contributor into the plan. Interest is credited quarterly on returned contributions in accordance with the investment return on the RCMP Pension Fund or in accordance with the interest credited on the Superannuation Account, depending on where contributions were credited.
Cash termination allowance means an amount equal to one month’s salary, as at the date of termination, multiplied by the number of years of pensionable service, minus the total reduction in previous contributions by virtue of its coordination with the CPP.
Immediate annuity means an unreduced pension that becomes payable immediately
upon a pensionable retirement or pensionable disability. The annual amount is equal to 2% of the highest average annual pensionable earnings of the contributor over any period of five Footnote 8 consecutive years, multiplied by the number of years of pensionable service not exceeding 35. For contributors with periods of part-time pensionable
service, earnings used in the five-year average are based on a full 37.5-hour workweek but the resulting average is multiplied by the proportion of a full workweek averaged by the contributor over the entire period of pensionable service.
When a pensioner attains age 65 or becomes entitled to a disability pension from the
CPP, the annual pension amount is reduced by a percentage of the indexed CPP annual pensionable earnings Footnote 9 (or, if lesser, the indexed five-year1 pensionable earnings average on which the immediate annuity is based), multiplied by the years of CPP pensionable service Footnote 10. The applicable percentage is 0.625%.
Annuities are payable at the end of month until the month in which the pensioner dies or until the disabled pensioner recovers from disability (the last payment would then be
pro-rated). Upon the death of the pensioner, either a survivor allowance (Note 18) or a residual death benefit (Note 17) may be payable.
Deferred annuity means an annuity that normally becomes payable to a former
contributor who reaches age 60. The annual payment is determined as for an immediate annuity (Note 8) but is also adjusted to reflect the indexation (Note 2) from the date of termination to the commencement of benefit payments.
The deferred annuity becomes an immediate annuity during any period of disability
beginning before age 60. If the disability ceases before age 60, the immediate annuity reverts to the original deferred annuity unless the pensioner elects an annual allowance (Notes 13 and 19) that is the prescribed actuarial equivalent to the deferred annuity.
Regular Members and Civilian Members who, at their date of termination of pensionable service, are under age 60 and 50, respectively, and who are eligible for a deferred annuity may elect to transfer the commuted value of their benefits, determined in accordance with the regulations, to
Reduced immediate annuity means an immediate annuity for which the annual amount
of annuity determined as described in Note 8 is reduced until age 65 by 5% for each full
year, not exceeding six, by which the period of service in the Force is less than 20 years.
This type of annuity may be chosen by a Regular Member who has completed between 10 and 20 years of service in the Force upon being compulsorily retired
Upon compulsory retirement because of misconduct, a contributor is entitled to
Annual allowance means, for a Regular Member, an immediate annuity reduced by 5%
for each full year by which
whichever is the lesser.
Eligible surviving spouse means the surviving spouse (includes a common-law or same-sex partner recognized under the plan) of a contributor or pensioner except if:
Eligible surviving children include all children of the contributor or pensioner who are under age 18, and any child of the contributor or pensioner who is age 18 or over but under 25, in full-time attendance at a school or university, having been in such attendance substantially without interruption since he or she reached age 18 or the contributor or pensioner died, whichever occurred later.
If a contributor or a pensioner dies leaving no eligible survivor, the lump sum normally paid is the excess of five times the annual amount of the immediate annuity to which the
contributor would have been entitled, or the pensioner was entitled, at the time of death,
less any pension payments already received. Indexation adjustments are excluded from these calculations.
The same formula described in Note 16 is used to determine the residual death benefit,
which is the lump sum payable upon the death of an eligible survivor but also subtracting all amounts (excluding indexation adjustments) already paid to the survivor.
Annual allowance means, for the eligible surviving spouse and children of a contributor or pensioner, an annuity that becomes payable immediately upon the death of that
individual. The amount of the allowance is determined with reference to a basic allowance equal to 1% of the highest average annual pensionable earnings of the contributor over five consecutive years, multiplied by the number of years of pensionable service not exceeding 35.
The annual allowance for a spouse is equal to the basic allowance unless the spouse
became eligible as a result of an optional survivor benefit election, in which case it is equal to the percentage of the basic allowance specified by the pensioner making the election. The annual allowance for an eligible surviving child is equal to 20% of the basic allowance, subject to a reduction if there are more than four eligible surviving children in the same family. The annuity otherwise payable to an eligible surviving
child is doubled if the child is an orphan.
Survivor annual allowances are not coordinated with the CPP and are payable in equal
monthly instalments at the end of month until the month in which the survivor dies or otherwise loses eligibility. If applicable, a residual benefit (Note 17) is payable to the estate upon the death of the last survivor.
Annual allowance means, for a Civilian Member, an annuity payable immediately on
retirement or upon attaining age 50, whichever occurs later. The amount of the allowance is equal to the amount of the deferred annuity to which the Civilian Member would otherwise be entitled, reduced by 5% for each year between age 60 and the age when the allowance becomes payable. However, if the Civilian Member is at least 50 years old, and has at least 25 years of pensionable service, then the difference is reduced to the greater of
The Treasury Board can waive all or part of the reduction for Civilian Members who are
involuntarily retired at ages 55 and over with at least ten years of service in the Force.
If a former Civilian Member entitled to an annual allowance commencing at age 50
becomes disabled before then, the entitlement changes to an immediate annuity (Note 8). If disability ceases before age 60, then the entitlement changes to a deferred annuity (Note 9) unless the pensioner elects an annual allowance that is the prescribed actuarial equivalent to the deferred annuity.
In accordance with the Pension Benefits Division Act, upon the breakdown of a spousal union (including common-law), a lump sum can be debited by court order or by mutual
consent from, if applicable, the accounts and the Fund to the credit of the former spouse
of a contributor or pensioner. The maximum transferable amount is half the value,
calculated as at the transfer date, of the retirement pension accrued by the contributor or
pensioner during the period of cohabitation. If the member’s benefits are not vested, the
maximum transferable amount corresponds to half the member’s contributions made during the period subject to division, accumulated with interest at the rate applicable on a refund of contributions. The benefits of the contributor or pensioner are then reduced accordingly.
Retirement compensation arrangements (RCAs) are prefunded arrangements not subject to the
benefit limitations of registered pension plans and therefore are less tax-advantaged as the fund
must transfer a 50% refundable tax to the Canada Revenue Agency (CRA) immediately. Transactions in the RCA Account are made as if the RCMP RCA was a prefunded arrangement. Under the RCMP RCA, a debit is made from the RCA Account such that in total roughly half the recorded balances in the Account are held as a tax credit (CRA refundable tax). This Appendix describes the RCMP pension benefits provided under the SRAA that have a material impact on this valuation rather than those under the registered RCMPSA provisions.
If the annual allowance for eligible survivors described in Note 18 of section D of
Appendix 1 exceeds the tax-related limits described hereafter for registered plans, then the
excess in respect of service from 1 January 1992 onwards is debited from the RCA Account.
The total of all preretirement survivor pensions payable in respect of a deceased member may not exceed the member’s projected lifetime retirement benefit and the amount of
spouse allowance may not exceed two-thirds of the projected lifetime retirement benefit.
The member’s projected lifetime retirement benefit is the greater of:
The amount of the spouse allowance provided is limited in any year to a maximum of two-thirds the retirement benefit that would have been payable to the member in that
From 23 February 1995 onward, the highest average of pensionable earnings under the
RCMPSA is subject to a prescribed yearly maximum. Because the RCMPSA is coordinated with the pensions paid by the Canada Pension Plan, the prescribed maximum is derived from both the maximum annual pension benefit ($2,696.67 for calendar year 2013) payable from a registered defined benefit pension plan for each year of pensionable service and the
YMPE. The maximum is $150,900 for calendar year 2013. To the extent that a member’s average earnings at retirement exceed the prescribed yearly maximum, the corresponding excess pension is debited from the RCA Account.
The government has a statutory obligation to fulfill the pension promise enacted by
legislation to RCMP members. Since 1 April 2000, the government has earmarked invested assets (Pension Fund) to meet the cost of pension benefits.
With respect to the unfunded portion of the RCMP pension plan, accounts available for
benefits were established to track government’s pension benefit obligations such as the
Superannuation Account, for service prior to 1 April 2000, and the RCA Account for benefits in excess of those that can be provided under the Income Tax Act limits for registered pension plans.
RCMPSA member contributions, government costs, and benefits earned up to
31 March 2000 are tracked entirely through the RCMP Superannuation Account, which forms part of the Public Accounts of Canada.
The Account was credited with all RCMPSA member contributions and government
costs prior to 1 April 2000, as well as with prior service contributions/costs for elections
made prior to 1 April 2000 and leave without pay contributions/costs for periods before 1 April 2000 but credited after that date. It is charged with both the benefit payments made in respect of service earned under the Account and the allocated portion of the plan administrative expenses.
The Account is credited with interest as though net cash flows were invested quarterly in 20-year Government of Canada bonds issued at prescribed interest rates and held to
maturity. No formal debt instrument is issued to the Account by the government in recognition of the amounts therein. Interest is credited every three months on the basis of the average yield for the same period on the combined Superannuation Accounts of the Public Service, Canadian Forces and RCMP pension plans.
Since the last valuation, the Account balance has grown by $169 million (a 1.3%
increase) to reach $13,016 million as at 31 March 2012.
Since 1 April 2000 RCMPSA contributions (except for prior service elections made prior to 1 April 2000) have been credited to the RCMP Pension Fund. The Fund is invested in the financial markets with a view to achieving maximum rates of return without undue risk.
The Fund has been credited with all RCMPSA contributions since 1 April 2000, as well
as with prior service contributions in respect of elections made since that date and leave
without pay contributions for periods after that date. The Fund is also credited with the
net investment returns generated by the capital assets managed by PSPIB. It is charged with both the benefit payments made in respect of service earned and prior service elections made since 1 April 2000 and the allocated portion of the plan administrative expenses.
Since the last valuation, the Fund balance has increased by $456 million (an 11%
increase) to reach $4,570 million as at 31 March 2012.
The amount in the RCA account available for benefits is composed of the recorded
balance in the Retirement Compensation Arrangements Account, which forms part of the Public Accounts of Canada, and a tax credit (CRA refundable tax). Each calendar year, a debit is made from the RCA Account such that in total roughly half the recorded balances in the Account are held as a tax credit (CRA refundable tax).
No formal debt instrument is issued to the Account by the government in recognition of
the amounts therein. Interest is credited every three months on the basis of the average
yield for the same period on the combined Superannuation Accounts of the Public Service, Canadian Forces and RCMP pension plans.
Since the last valuation, the RCA Account balance has increased by 5% to reach
$31 million as at 31 March 2012 and the tax credit (CRA refundable tax) has increased by 5% to reach $30 million as at 31 March 2012.
The rate of interest in respect of the Superannuation Account is calculated using the
foregoing entries. The result was computed using the dollar-weighted approach and assumes that cash flows occur in the middle of the plan year (except for actuarial liability adjustments, if any, which occur on 31 March). The Fund rate of return is from the Public Sector Pension Investment Board (PSPIB) 2012 Annual Report.
The Royal Canadian Mounted Police Superannuation Account, RCA Account and Royal
Canadian Mounted Police Pension Fund entries shown in Section A above were taken from the Public Accounts of Canada and the financial statements of the Public Sector Pension Investment Board.
The individual data in respect of contributors, pensioners, and eligible survivors were provided as at 31 March 2012. The data includes benefits debited from the RCA Account.
The firm Morneau Shepell which is responsible for the administration of the plan provided
relevant valuation input data on contributors, pensioners and eligible survivors.
Certain tests of consistency with the data used in the previous valuation, with respect to
membership reconciliation, basic information (date of birth, date of hire, date of termination, sex, etc.), pensionable service, salary levels and pensions to retirees and survivors. Based on the omissions and discrepancies identified by these and other tests, appropriate adjustments were made to the basic data after consulting with the data provider.
A summary of the valuation data as at 31 March 2012 and the reconciliation of contributors,
pensioners, and survivors during the period from April 2011 to March 2012 inclusive are shown in this section. Average pensions shown in the following table include benefits debited from the RCA Account. Relevant detailed statistics on contributors, pensioners and survivors are shown in Appendix 12.
- Average Pensionable Earnings
- Average Age
- Average Service
- Average Pension
- Average Age
Eligible Surviving Spouses
Eligible Surviving Children
- Average Pension
Amounts available for benefits in the RCMP Superannuation Account consist essentially
of the recorded balance of the RCMP Superannuation Account in the Public Accounts of Canada. The underlying notional bond portfolio described in Appendix 3 is shown at the book value.
The only other Account-related amount available for benefits consists of the discounted value of future member contributions and government costs in respect of prior service
elections. The discounted value of future member contributions was calculated using the projected Account yields; the government cost is assumed to be equal to these future contributions.
For valuation purposes, an adjusted market value method is used to determine the
actuarial value of assets in respect of the Pension Fund. The method is unchanged from
the previous valuation.
Under the adjusted market value method, the difference between the observed investment returns during a given plan year and the expected investment returns for that year based
on the previous report assumptions is spread over five years, subject to a 10% corridor.
As a result, the actuarial value of assets is a five-year smoothed market value where the
appreciation of investment gains or losses is recognized at the rate of 20% per year. The
value produced by this method is related to the market value of the assets but is more
stable than the market value.
The only other Fund-related asset consists of the discounted value of future member and government contributions in respect of prior service elections. The discounted value of
future member contributions was calculated using the assumed rates of return on the Pension Fund; the government is assumed to contribute in the same proportion as for the RCMPSA current service cost.
The actuarial value of the assets, determined as at 31 March 2012, under the adjusted
market value method is $4,526 million and was determined as follows:
As benefits earned in respect of current service will not be payable for many years, the
purpose of an actuarial cost method is to assign costs over the working lifetime of the
As in the previous valuations, the projected accrued benefit actuarial cost method (also known as the projected unit credit method) was used to determine the current service cost
and actuarial liability. Consistent with this cost method; pensionable earnings are projected
up to retirement using the assumed annual increases in average pensionable earnings (including seniority and promotional increases). The yearly maximum salary cap and other benefit limits under the Income Tax Act described in Appendix 2 were taken into account to determine the benefits payable under the RCMPSA and those payable under the RCA.
Under the projected accrued benefit actuarial cost method, the current service cost, also called normal cost, computed in respect of a given year is the sum of the value,
discounted in accordance with the actuarial assumptions for the Pension Fund, of all future payable benefits considered to accrue in respect of that year’s service.
Under this method, the current service cost for an individual member will increase each year as the member approaches retirement. However, all other things being equal, the
current service cost for the total population, expressed as a percentage of total pensionable payroll, can be expected to remain stable as long as the average age and service of the total population remain constant. The Pension Fund administrative expenses are included in the total current service cost.
For a given year, the government current service cost is the total current service cost reduced by the members’ contributions during the year.
The actuarial liability with respect to contributors corresponds to the value, discounted in accordance with the actuarial assumptions, of all future payable benefits accrued as at the valuation date in respect of all previous service. For pensioners and survivors, the
actuarial liability corresponds to the value, discounted in accordance with the actuarial
assumptions, of future payable benefits.
It is unlikely that the actual experience will conform to the assumptions that underlie the actuarial estimates. Thus a balancing item must be calculated under this cost method to
estimate the necessary adjustments. Adjustments may also be necessary if the terms of the pension benefits enacted by legislation are modified or if assumptions need to be updated.
The actuarial surplus or deficit is the difference between the total value of assets and the actuarial liability. An actuarial deficit may be amortized over a period not exceeding 15 years through special payments and the disposition of any actuarial surplus is defined in
The state of the RCMP Superannuation Account is determined by comparing amounts available for benefits with the actuarial liability for service prior to 1 April 2000. The
resulting actuarial excess/shortfall is dealt with in accordance with the RCMPSA.
The recommended government contribution corresponds to the sum of:
The projected yields (shown in Appendix 6) used to calculate future interest credits to the
Superannuation Account are the projected annual yields on the combined book value of the
Superannuation Accounts of the Public Service, Canadian Forces, and RCMP pension
The projected Account yields were determined by an iterative process involving the
taking into account that the quarterly interest credited to an Account is calculated as if the principal at the beginning of a quarter remains unchanged during the quarter.
The present value of the benefits accrued or accruing with respect to the Pension Fund was calculated using the expected future investment returns to be added to the Pension Fund on the basis of a diversified portfolio of assets held by the PSPIB. The projected rates of return
are shown in Appendix 6.
For valuation purposes, individual data on each member were used.
The member data shown in Appendices 4 and 12 were provided as at 31 March 2012. This
valuation is based on the member data as at the valuation date.
The payment of accrued pension benefits is the responsibility of the government, therefore the
likelihood of the plan being wound-up and its obligation not being fulfilled is practically
nonexistent, consequently all of the assumptions used in this report are best-estimate
assumptions, i.e. they reflect our best judgement of the future long-term experience of the plan
and do not include margins.
Price increases, as measured by changes in the Consumer Price Index (CPI), tend to
fluctuate from year to year. In 2011, the Bank of Canada and the Government renewed their commitment to keep inflation between 1% and 3% until the end of 2016. Therefore, a price increase rate of 2.0% is assumed for plan years 2013 to 2019. For plan years 2020 and 2021, the CPI is assumed to increase from 2.0% to 2.2% and to remain at 2.2%
thereafter. The ultimate rate of 2.2% is 0.1% lower than the assumed rate in the previous
The year’s pension indexing factor is required in the valuation process by virtue of its role in maintaining the purchasing power of pensions. It was derived by applying the
indexation formula described in Appendix 1, which relates to the assumed Consumer Price Index increases over successive 12-month periods ending on 30 September.
The YMPE is required in the valuation process because the plan is coordinated with the Canada Pension Plan. The assumed increase in the YMPE for a given calendar year is
derived, in accordance with the Canada Pension Plan, to correspond to the increase in the average weekly earnings (AWE), as calculated by Statistics Canada, over successive 12-month periods ending on 30 June. The AWE, and thus the YMPE, is deemed to
include a component for seniority and promotional increases. The YMPE is equal to $51,100 for calendar year 2013. Future increases in the YMPE correspond to the assumed realFootnote 12 increase in the AWE plus assumed increases in the CPI.
The real-wage differential is developed taking into account historical trends, a possible
labour shortage, and an assumed moderate economic growth for Canada. Considering the relatively high unemployment rate in 2013, a real-wage differential of 0.7% is assumed for 2014. The real-wage differential is assumed to gradually increase to the ultimate assumption of 1.2% by 2019 (1.3% in the previous valuation). The ultimate real-wage
differential assumption combined with the ultimate price increase assumption results in an assumed annual increase in nominal wages of 3.4% in 2021 and thereafter. Thus, the ultimate rate of increase for the YMPE is 3.4%, resulting from a 1.2% increase in the real AWE and a 2.2% increase in the CPI.
Average pensionable earnings are applicable to RCMP pension plan members only,
whereas the YMPE applies to the general working population in Canada. In addition, increases in average pensionable earnings are exclusive of seniority and promotional increases, which are considered under a separate demographic assumption. Thus, the annual increase in average pensionable earnings is assumed to be 0.2% lower than the
corresponding increase in the YMPE. The ultimate increase in average pensionable earnings is 3.2%.
Since the plan is coordinated with the Canada Pension Plan, the tax-related maximum pensionable earnings were derived from both the maximum annual pension accrual under
a registered defined benefit plan and the YMPE. The maximum annual pension accrual of $2,646.67 for 2012 will increase to $2,696.67 for 2013, in accordance with Income Tax Regulations. Thereafter, the maximum annual pension accrual increases in
accordance with the increase in the YMPE, which is the same as the assumed increase in the AWE.
Beginning with calendar year 2012, the coordination factor is 0.625%. The MPE is
$150,900 for calendar year 2013.
The new money rate is the nominal yield on long-term Government of Canada bonds and
is set for each year in the projection period. The real yield on long-term federal bonds is equal to the new money rate less the assumed rate of inflation.
Recognizing recent experience, the annual real yield on long-term federal bonds is
assumed to be 0.6% at the beginning of plan year 2013, and is assumed to increase gradually to its ultimate level of 2.8% first attained at the end of plan year 2018. This increase is consistent with the average of private sector forecasts. The ultimate real yield is 0.1% greater than assumed in the previous valuation, which was 2.7%. The ultimate real yield on long-term bonds is based on historical yields.
These yields are required for the computation of present values of benefits to determine the liability for service prior to 1 April 2000. The methodology used to determine the
projected yields on the Account is described in Appendix 5-C. The methodology is unchanged from previous valuations.
The expected annual nominal rates of return on the Fund are required for the computation of present values of benefits to determine the liability for service since 1 April 2000 and the current service cost. The following sections describe how the rates of return on the
Fund are determined.
Since 1 April 2000, invested assets resulting from transferred amount equal to the government and employee contributions, net of benefit payments and administrative
expenses, are invested in capital markets through the Public Sector Pension Investment Board (PSPIB). PSPIB invests funds to maximize returns without undue risk of loss according to the investment policy set and approved by its Board of
Directors that take into account the needs of contributors and beneficiaries, as well as
financial market constraints. For the purpose of this report, the investments have been
grouped into three broad categories: equities, fixed income securities and real return
assets. Equities consist of Canadian, foreign developed market and emerging market equities. Fixed income securities consist of bonds which are usually a mix of federal, provincial, corporate and real return bonds. Real return assets include such categories as real estate and infrastructure.
As at 31 March 2012, PSPIB assets consisted of 61% equity, 22% fixed income
securities (including world inflation-linked bonds) and 17% real return assets (including asset classes such as real estate, infrastructure and renewable resources). PSPIB has developed a long-term target Policy Portfolio (approved by its Board of Directors on 29 March 2012 and subject to an annual review), which consists of 54%
equity, 18% fixed income securities and 28% real return assets. The Policy Portfolio asset mix weights represent long-term targets. Therefore, the initial asset mix is derived using the actual investments reported by PSPIB as at 31 March 2012.
As PSPIB Policy Portfolio reflects long-term expectations, it is assumed that the asset mix will converge slowly toward the Policy Portfolio. The ultimate asset mix is
reached in plan year 2018 and consists of 55% equity, 20% fixed income securities
(including 2% cash) and 25% real return assets. Net cash flows (contributions less expenditures) are expected to become negative during plan year 2032 and a portion of investment income will therefore be required to pay benefits. Changes to the assumed
asset mix may be required in the future to reduce funding risks and to take into account the maturity of the plan.
Table 24 shows the assumed asset mix for each plan year throughout the projection period.
Real rates of return are required in order to discount benefits payable in the future for the determination of the actuarial liability and current service cost. They are assumed
for each year of the projection period and for each of the main asset categories in which Pension Fund assets are invested. All of the real rates of return described in this section include an allowance for rebalancing and diversification and are shown prior to the reduction for investment expenses. Subsection c) describes how the returns are adjusted for investment expenses.
The real rates of return were developed by looking at historical returns (expressed in
Canadian dollars) and adjusting the returns upward or downward to reflect expectations that differ from the past. It is assumed that currency variations will impact the real rates of return over the projection period, creating gains and losses. However, as the projection period is long, these gains and losses are expected to offset
each other over time. Hence, it is assumed that currency variations will not have an impact on the long-term real rates of return.
With the exception of fixed income securities and cash, real rates of return for all asset classes are assumed to be constant for the entire projection period. The current
context of extremely low yields and the general expectations that yield will increase over the coming years are reflected in the expected fixed income securities’ short-term real rates of return. A constant real rate of return is assumed for more volatile asset classes, reflecting the difficulty to predict yearly market returns.
Fixed Income Securities
PSPIB currently has 22% of its portfolio invested in fixed income securities, including
Canadian fixed income, world government bonds, world inflation-linked bonds and cash. PSPIB Policy Portfolio assumes a long-term target weight for fixed income securities of 18% (including world inflation-linked bonds). Thus, it is assumed that
the proportion invested in fixed income securities will slightly decrease in order to follow the Policy Portfolio. It is assumed that by plan year 2018, 20% of Pension Fund assets will be invested in fixed income securities.
It is assumed that, excluding cash, fixed income securities consist of 45% federal
bonds, 15% provincial bonds, 15% corporate bonds and 25% inflation-linked bonds.
The assumed real yield on long-term federal bonds is expected to increase from 0.6%
at the beginning of plan year 2013 to an ultimate of 2.8% at the end of plan year 2018. This increase in real yield is consistent with the average private sector forecasts. The initial spreads over the long-term federal bond real yield are assumed to be 95 basis points for long-term provincial bonds and 160 basis points for corporate bonds. These spreads are higher than in the last report and reflect the current economic environment.
The ultimate spreads for provincial and corporate bonds are assumed to be 50 basis points and 90 basis points, respectively, and are reached at the end of plan year 2017. Corporate bond spreads are net of the expected default rate. Real return bonds, on the other hand, have a lower real yield than long-term federal bonds, since the real return
is guaranteed and will not vary with inflation. Thus, the spread on inflation-linked bonds is assumed to be -20 basis points initially and will reach its ultimate value of - 40 basis points at the end of plan year 2016.
In the previous report, it was assumed that fixed income securities would consist of
long-term bonds only. However, since the current PSPIB policy portfolio is not only composed of long-term bonds, but of bonds of all duration (universe), it is assumed that fixed income securities are initially composed of universe bonds, with the exception of real return bonds, and will transition to long-term bonds by plan year
2019 once the ultimate yield is reached. Since bonds with shorter duration are less affected by an increase in yield, this result in slightly higher fixed income rates of return over the first five years than it would have been assuming long-term bonds for the entire projection period.
Due to their shorter duration, the yield on universe bonds is lower than the yield on
long-term bonds. The initial spread between the long-term federal bonds and the universe of federal bonds is assumed to decrease from 85 basis points at the beginning of plan year 2013 to 50 basis points at the beginning of plan year 2016. Spreads
between universe federal bonds and universe provincial, or universe corporate bonds are assumed to be similar to spreads between long-term bonds.
The expected real rates of return for individual bonds take into account the coupons
and market value fluctuations due to the expected movement of their respective yield rates. As the economy continues to strengthen (following the 2008-2009 economic downturn), the long-term federal bond yield is assumed to increase between plan years 2013 and 2018 and only stabilize at the end of plan year 2018. Therefore, bond returns are quite low for the first six years of the projection. The assumed ultimate real rate of return for long-term federal bonds is 2.8% starting in plan year 2019. An ultimate fixed income real rate of return of 3.1% is assumed for 2019 and thereafter.
Currently, the assets of the pension fund are mostly invested in equity, specifically in
developed world equity and emerging markets equity. In the derivation of the real rates of return for these equity investments, consideration was given to the long-term equity risk premiums for these equity classes. The rates of return also include
dividends from the equities and market value fluctuations. No distinction is made between realized and unrealized capital gains.
Consistent with the assumption that risk taking must be rewarded, equity returns are
developed by adding an equity risk premium to the long-term federal bond real rate of
return. The historical equity risk premium over bonds for 19 countries, representing
almost 90% of global stock market value, for the 112-year and 50-year periods ending
in 2011 were 3.5% and 0.4% respectively (3.4% and 0.8% for Canada)Footnote 13. Historical equity risk premiums over the 112-year period were higher than expected due to several non-repeatable factors (mainly diversification and globalization). As a result, the long-term expected equity risk premium is assumed to be lower than what was realized in the past 112 years. However, the equity risk premium is assumed to be
higher in the first six years of the projection (averaging 7.1%), reflecting assumed low
bond returns over the same period, before reaching its ultimate rate of 2.2% for Canadian and foreign developed markets. The equity risk premium for emerging market equities is expected to be 1.0% higher than for Canadian and foreign developed market equities, reflecting the additional risk inherent with investments in emerging countries. As described in the previous section, the long-term federal bond real yield is set at 2.8% for plan years 2019 and thereafter, resulting in a long-term
federal bond real rate of return of 2.8% for plan years 2019 and thereafter.
Real rates of return for developed market equity investments are projected at 5.0%
(6.0% for emerging markets) throughout the projection period.
Real Return Assets
Real return assets such as real estate and infrastructure are considered to be a hybrid of
fixed income and equity. If these assets are considered to behave 60% like fixed
income and 40% like developed market equities, then the assumed return should be composed of 60% of the return on fixed income and 40% of the return on developed market equities. Considering the inherent difficulties in modelling short-term returns for volatile assets, real return assets are projected at 3.8% throughout the projection
Table 25 summarizes the assumed real rates of return by asset type throughout the
projection period, prior to reduction for investment expenses.
Over the last three plan years, PSPIB’s operating and asset management expenses
have decreased from 0.74% to 0.61% of average net assets. It is assumed that going forward PSPIB investment expenses will average 0.60% of average net assets. The majority of those investment expenses were incurred through active management
The active management objective is to generate returns in excess of those from the
policy portfolio, after reduction for additional expenses. Thus, the additional returns from a successful active management program should equal at least the cost incurred to pursue active management. In seven of the past nine years, PSPIB’s additional returns from active management exceeded related expenses. For the purpose of this
valuation, it is assumed that additional returns due to active management will equal additional expenses related to active management. Those expenses are assumed to be the difference between total investment expenses of 0.6% and the assumed
expenses of 0.2% that would be incurred for passive management of the portfolio considering that part of the portfolio is invested in real estate and infrastructure.
The next section shows the overall rate of return on the fund net of investment
The best-estimate rate of return on total assets is derived from the weighted average
assumed rate of return on all types of assets, using the assumed asset mix proportions as weights. The best-estimate rate of return is further increased to reflect additional returns due to active management and reduced to reflect all
investment expenses. The ultimate real rate of return is developed as follow:
The resulting nominal and real rates of return for each projection year are shown in
It is assumed that the ultimate real rate of return on investments will be 4.1%, net of
all investment expenses. The ultimate real rate of return is unchanged from the previous valuation. The real rates of return over the first six years of the projection are on average 0.5% lower than assumed in the previous valuation. The real rate of
return on assets takes into account the assumed asset mix as well as the assumed real rate of return for all categories of assets. The nominal returns projected for the Pension Fund are simply the sum of the assumed level of inflation and the real return.
Commuted values are calculated in accordance with the Standards of Practice published
by the Canadian Institute of Actuaries. In particular, the real interest rates to be used for
the computation of commuted values as at a particular date are as follows:
First 10 years: r7 + 0.90%
After 10 years: rL + 0.5 x (rL-r7) + 0.90%
Where r7 = rL x (i7/iL)
rL is the long-term real-return Government of Canada bond yield, annualized
iL is the long-term Government of Canada benchmark bond yield, annualized and
i7 is the 7-year Government of Canada benchmark bond yieldFootnote 14, annualized
The obtained rates of interest are rounded to the next multiple of 0.10%.
For example, for plan year 2013, the assumed real rates of interest are 1.4% for the first 10 years and 1.5% thereafter. These rates were derived from the assumed 2013 CPI increase and the assumed 2013 long-term Government of Canada benchmark bond yield which corresponds to the new money rate in this valuation.
The economic assumptions used in this report are summarized in the following table.
As a reference, for periods ending December 2011, the following table was prepared based on the Canadian Institute of Actuaries Report on Canadian Economic Statistics 1924-2011.
Given the size of the population subject to the RCMPSA and the somewhat unique characteristics of the pension benefit provisions, the plan’s own experience, except where otherwise noted, was deemed to be the best model to determine the demographic assumptions. Assumptions from the previous valuation were updated to reflect past
experience to the extent it was deemed credible.
The determination of some demographic assumptions also takes into account general or
specific information provided by the RCMP.
Seniority means length of service and promotion means moving to a higher rank.
Minor adjustments were made to the seniority and promotional salary increase
assumption for Regular Members. The assumption fully recognizes the Service Pay Allowance granted on every fifth service anniversary (1.5% for every five years of service, up to and including 35 years of service) and the 4% Senior Constable
Provisional Allowance granted after seven completed years of service. Improvements to these allowances, adopted on 30 March 2012, are also recognized in this valuation. Effective 1 April 2013, the first Service Pay Allowance will be granted one year earlier at duration 4 instead of 5 with additional 1.5% increases unchanged at durations 10, 15, 20, 25 and 35. The Senior Constable Provisional Allowance will increase from 4% to 5% effective 1 January 2014.
The assumption for Civilian Members was changed from the previous valuation. It was
decreased at most durations; the decrement is on average 0.15% by duration.
The new contributor assumption was changed from the previous valuation. The
projected number of Regular Members was split between males and females to recognize that the proportion of female Regular Members is increasing.
For each subgroup, the age distribution of new contributors is based on the distribution of actual new contributors during the intervaluation period. As demographic
characteristics at entry and qualifications are constantly evolving, short-term experience
was deemed a better model to determine the demographics of new entrants.
The initial salary of new Civilian Members in a given age-sex cell in plan year 2013 is assumed to be the same as the corresponding experience in plan year 2012 increased by
1.5% (assumed salary increase for plan year 2013). The initial salary for Regular Members is $48,946. Initial salary is assumed to increase in future plan years in accordance with the assumption for average earnings increases.
As in the previous valuations, assumed rates of pensionable retirement for Regular
Members were again updated for this valuation. Experience analysis shows that Regular Members have been delaying retirement. The average service in the force at retirement has increased by 2.3 years in the last 10 years (the average age at retirement has increased by 3.8 years). The average service in the force for Regular Members who retired in the intervaluation period is 32.0 years (with an average age of 55.3); it was 31.8 in the previous valuation (with an average age at retirement of 55.0). Pensionable retirement rates for Regular Members were decreased in this valuation to reflect this trend and are, on average, 5% lower than previous valuation retirement rates.
Based on the intervaluation experience, assumed rates of pensionable retirement for Civilian Members were also changed for this valuation. They are on average 40% lower
at durations 14 to 28 for ages 54 to 58.
Disability retirement rates for Regular Members were increased significantly beginning with the 1999 valuation when the experience showed many more disabilities than
expected. This finding was investigated with the RCMP and a change of policy was confirmed. Based on the intervaluation experience, it appears appropriate to again increase disability rates for this valuation. Assumed rates for Regular Members are on average 30% higher.
Disability retirement rates for Civilian Members were also changed for this valuation; they are on average 30 % higher after age 49.
As in the previous valuation, it is assumed that 25% of future new disability pensioners will receive a CPP disability pension.
Withdrawal means ceasing to be employed for reasons other than death or retirement with an immediate annuity or an annual allowance.
Rates for Regular Members are, on average, 35% lower at service durations 3 to 9 years of service and rates for Civilian Members are, on average, 20% lower than those used in
the previous valuation at early service durations (0 to 6 years of service).
In previous valuations, vested Regular Members (with at least two years of service) under age 60 and vested Civilian Members under age 50 were assumed to choose to transfer the
commuted value of the deferred annuity. In this valuation, 50% of all members who withdraw with at least five years of service are assumed to choose the deferred annuity option.
Mortality rates for male and female Regular Members are as projected in the previous
Mortality rates for Civilian Members, surviving spouses and disabled pensioners were changed. They are the same as those from the most recent actuarial report (31 March 2011) on the pension plan for the Public Service of Canada projected to plan year 2013. Given the size of the population of the pension plan for the Public Service of Canada, it was deemed to be a more appropriate model to determine the mortality
assumptions for these groups.
Mortality rates for both male and female Civilian Members are on average 7% lower
than those projected in the previous valuation. Mortality rates for widows are on average 9% lower and mortality rates for widowers are on average 7% lower than those projected in the previous valuation. Mortality rates for male disabled members are on average 3% lower; mortality rates for female disabled pensioners are on average 2%
lower than those projected in the previous valuation.
As shown in the 25th Actuarial Report on the Canada Pension Plan, life expectancy in Canada has been increasing constantly over the years. This trend is also observed with
the Royal Canadian Mounted Police membership as supported by analysis of past mortality experience. Mortality rates are reduced in the future in accordance with the same longevityFootnote 20 improvement assumption used in the 25th Actuarial Report on the Canada Pension Plan. For both males and females, the longevity improvement factors are higher than those used in the previous valuation except at advanced ages. Factors shown in the 25th Actuarial Report of the Canada Pension Plan are based on calendar years. These factors have been interpolated to obtained plan year longevity
The ultimate longevity improvement factors for plan years 2031 and thereafter were
established by analysing the trend by age and sex of the Canadian experience over the period 1921 to 2006. Improvement factors for plan year 2012 are assumed to be those experienced on average over the 15-year period 1991 to 2006. After plan year 2012, the factors are assumed to reduce gradually to their ultimate level by plan year 2031.
A sample of assumed longevity improvement factors is shown in the following table.
Assumptions for the proportion of members leaving, upon death, a spouse eligible for a survivor pension is unchanged from the previous valuation. The age assumption for new
survivors is also unchanged.
All assumptions regarding eligible children are not changed from the previous valuation. As in the previous valuation, to determine the value of pensions payable to eligible
children, the rates of pension termination were assumed to be zero prior to age 17 and
15% per annum thereafter until expiry of the benefit on the 25th birthday.
The division of pension benefits has almost no effect on the valuation results because the liability is reduced, on average, by approximately the amount paid to the credit of the
former spouse. Consequently, no future pension benefits divisions were assumed in estimating the current service cost and liability. However, past pension benefits divisions were fully reflected in the liability. Two other provisions, namely the optional survivor benefit and the suspension of membership while on leave without pay, were also treated like pension benefits divisions for the same reason.
This valuation does not take into account the minimum death benefit described in
Note 16 of section D of Appendix 1, with respect to deaths occurring after retirement. The resulting understatement of the accrued liability and current service cost is not material since the majority of the relatively few pensioners who die in the early years of retirement leave an eligible survivor.
In the previous report, PSPIB operating expenses were implicitly recognized through a reduction in the real return on the Fund. In this report, the operating expenses of the
PSPIB are still recognized implicitly.
As in the previous valuation, it is estimated that administrative expenses will be 0.40% of pensionable payroll. As in the previous valuation, in plan year 2013 the Account is
assumed to be charged with 68% of the total expenses reducing by 2% each year thereafter. The future expenses expected to be charged to the Account have been capitalized and are shown as a liability, whereas the expenses to the Fund have been added to the normal cost as they occur.
A specific project is underway to bring the administration of the RCMP pension plan at Public Works Government Services Canada. In the previous report, it was expected that the project would be completed by March 2014. The expected completion date has been changed to March 2016 in this report. The project’s cost continues to be charged to the Superannuation Account and the Pension Fund. This valuation recognizes the present
value of the expected remaining administration expenses associated with the realization
of this project. The total of these remaining administration expenses have been estimated
to $87 million.
In accordance with the current prior service financing policy, the government credits to the Account in respect of prior service elections are assumed to be 100% of the resulting
contributions made by the contributors; the corresponding figure for the Fund is
determined in accordance with the allocation of current service cost where the government is assumed to contribute in the same proportions.
Payments owing to former contributors as at 31 March 2012 are ignored in this valuation. The consequent understatement of liability is negligible because there were very few
such cases and the average amount owing was modest.
Both deferred pensioners and pensioners receiving an annual allowance while under age 60 are assumed to have a 0% disability rate. The resulting understatement of liability and
current service cost is negligible.
No recoveries are assumed for disability pensioners. The resulting overstatement of liability and current service cost is negligible.
Each eligible surviving spouse is assumed to be of the opposite sex of the member.
The amounts available for benefits in respect of the RCA comprise the recorded balance in
the Retirement Compensation Arrangements Account, which forms part of the Public Accounts of Canada, as well as a tax credit (CRA refundable tax).
Interest is credited every three months in accordance with the actual average yield on a book
value basis for the same period on the combined Superannuation Accounts of the Public Service, Canadian Forces – Regular Force and Royal Canadian Mounted Police pension plans. The actuarial asset value is equal to the book value.
Described in this appendix are the liability valuation methodologies used and any
differences in economic assumptions from those used in the RCMPSA valuation.
The limit on the amount of spousal annual allowance that can be provided under the
RCMPSA decreases at the same time the member's pension is reduced due to the CPP coordination offset, which usually occurs at age 65.
This benefit was valued conservatively by assuming the plan limit is always reduced by the CPP coordination offset. The liability overstatement is minor because the
probability of the former contributor dying prior to age 65 is small. This overstatement
tends to be offset by the understatement of accrued liability caused by terminally funding the preretirement survivor benefit. The projected accrued benefit cost method was used to estimate the liability and current service cost for this RCA benefit.
The projected accrued benefit cost method (described in detail in Appendix 5B) was
used to estimate the liability and current service cost for retirement benefits in excess of
the Maximum Pensionable Earnings.
To compute the liability and current service cost, no provision was made regarding the
expenses incurred for the administration of the RCA since these expenses are not debited from the RCA Account.
The valuation economic assumptions are those described in Appendix 6 and shown in Table 27, except that the interest discount rate used to determine the liability and current service cost in respect of the RCA is one-half of the yield projected on the combined Superannuation Accounts.
The demographic assumptions for the RCA valuation are the same as those used for the
RCMPSA valuation as described in Appendix 7.
Pension benefits in payment to be debited from the RCA were provided as at 31 March 2012. Details on the RCA valuation data for current pensioners are shown in Table 57 of Appendix 12.
Prior to 1 April 2000, the RCMP Superannuation Account tracked all government pension
benefit obligations related to the RCMPSA. The Account is now debited only with benefit
payments made in respect of service earned before that date and administrative expenses; and it
is credited with prior service contributions and costs related to elections made prior to
1 April 2000 and interest.
The results of the following projection were computed using the amounts available for benefits
described in Appendix 3, the data described in Appendices 4 and 12, the methodology described
in Appendix 5 and the assumptions described in Appendices 6 and 7.
The projection shows the expected cash flows and balances of the Superannuation Account if all
assumptions are realized. Emerging experience, differing from the corresponding assumptions,
will result in gains or losses to be revealed in subsequent valuation reports. Based on the
assumptions of this report, the Superannuation Account is expected to start decreasing by plan
Starting 1 April 2000, the RCMPSA is financed through the RCMP Pension Fund. Government
and employee contributions, investment earnings and prior service contributions for elections
since 1 April 2000 are added to the Fund. Benefit payments made in respect of service earned
since that date and administrative expenses are subtracted from the Fund.
The results of the following projection were computed using the data described in Appendices 4
and 12, the methodology described in Appendix 5 and the assumptions described in Appendices 6 and 7.
The projection shows the expected growth of the Pension Fund if all assumptions are realized.
According to the projection, cash flows are expected to be positive until plan year 2032.
Emerging experience, differing from the corresponding assumptions, will result in gains or
losses to be revealed in subsequent valuation reports.
The financial status of the Pension Fund depends on many demographic and economic
factors, including new contributors, average earnings, inflation, level of interest rates and
investment returns. The projected long-term financial status of the Pension Fund is based
on best-estimate assumptions; the objective of this section is to present alternative scenarios. The alternatives presented illustrate the sensitivity of the long-term projected financial position of the Pension Fund to changes in the future economic outlook. In this appendix, any references, in sections B and C, to assets, liabilities, surplus/(deficit), annual special payments and service cost relate to the Pension Fund.
Section B examines the sensitivity of the Pension Fund to different asset allocations. Five
alternative investment portfolios are described, along with the volatility of each portfolio
and the resulting impact on the Pension Fund’s funding ratio and current service cost. The
impact of financial market volatility on the financial status of the Pension Fund is explored
in section C, where severe one-time financial shocks are applied to three investment
portfolios with the purpose of quantifying the impact on the funding ratio over the short
term. Lastly, the impacts of prolonged low bond yields on the Superannuation Account and
on the Pension Fund due to slower than expected economic growth are analyzed in section D.
A major risk all pension plans face is funding risk – the risk that pension assets are
insufficient to meet benefit obligations. If funding deficiencies or surpluses continue for an
extended period of time, risk is transferred from one generation to another and may ultimately take the form of an increase or a decrease in the contribution rate.
The RCMPSA represents a long-term obligation to pay pension benefits. Thus, a long-term
approach must be taken to fund these obligations. Long-term Government of Canada bonds are considered risk-free and their yields are considered low. The real yield on long-term federal bonds was around 0.6% in March 2012. This is significantly below the required real return on assets of 4.1% that is needed to sustain the plan at the current contribution rates.
By investing solely in risk-free long-term federal bonds, all funding risk could be eliminated
with an excessive cost and then at the detriment of current and future contributors who will
have to contribute more unless benefits were decreased. If PSPIB were to switch from the
current portfolio of fixed and variable income securities to a portfolio that consists of only
long-term Government of Canada bonds, the current service cost of the plan would have to increase substantially in order to maintain the current funding status or benefits would have to be reduced. Neither of these is a desirable option.
The Government created the PSPIB to invest amounts equal to contributions in excess of
benefits and administrative expenses with respect to service since 1 April 2000 with the purpose of maximizing investment returns without undue risk of loss. The current service cost is less than it would have been if the investment policy had been restricted to long-term government bonds. Diversifying the portfolio into a mix of fixed and variable income securities accomplishes this.
The current service cost is reduced by investing in securities that offer a higher rate of
return than risk-free long-term federal bonds, but that also have a higher degree of risk or
volatility. That is, funds can be invested in a mix of investments, such as equities and bonds, with the expected rate of return equal to the yield required to meet the plan’s funding requirements. By investing in riskier assets, investors hope to realize the equity risk premium as their reward for taking on additional risk. An equity risk premium is the difference between the expected return on the risky asset (equity) and the expected return on
a risk-free asset, such as the Government of Canada long-term bond mentioned above.
Of course, these higher returns are expected but not guaranteed, creating the very real
possibility that the market will not perform as expected and liabilities will grow at a faster
rate than assets for an extended period of time. This is known as market risk. Since investing solely in risk-free long-term federal bonds will not produce a return sufficient to maintain the plan at status quo, it is necessary to take some risk in order to increase the probability of earning a sufficient return. Even if investment returns materialize as expected, other assumptions may not, causing liabilities to grow at a faster rate than assets. For example, salaries or inflation may increase at a higher rate than expected. The amount of risk assumed by the plan sponsor depends on many factors, including the current funding status and economic outlook, among other things. Thus, the investment policy must balance the plan sponsor’s desire for a high real rate of return with its tolerance or capacity for
The following table shows the impact that various asset mixes would have on the funding
ratio and the long-term service cost, as well as their relative volatility.
Portfolio #1 is invested in long-term federal bonds. This portfolio does not result in a
feasible scenario due to its prohibitive cost; however, its volatility is low when compared to
some of the other portfolios considered.
Portfolio #2 is invested in a fixed income portfolio consisting of federal, provincial,
corporate and real return bonds. This diversification increases the real rate of return and reduces the volatility compared to the first portfolio since the four bond asset categories are not perfectly correlated. Although this portfolio produces a higher real rate of return compared to Portfolio #1, it is still not sufficient to ensure the plan remains fully funded while maintaining a lower current service cost. This is also a low risk, low return portfolio. Thus, a portfolio with greater diversification in variable income assets is required in order to keep funding cost to a lower level.
The following portfolios are diversified portfolios that combine equity and real return
assets, such as real estate and infrastructure, to fixed income securities. Portfolio #3 and
portfolio #4 are more diversified than the first two portfolios and are invested 15% and
35%, respectively, in equity. This diversification increases the real rate of return earned on
these portfolios and keeps their volatility comparable to the first two portfolios since the
three broad asset categories are not perfectly correlated. However, despite an increased real
return and similar risk, these portfolios are still not sufficient to maintain the current funded
ratio. Thus, an increase in the plan’s current service cost would be required with both
Portfolio #5 is considered riskier because it is entirely invested in equity which has much
more volatile returns than bonds. This portfolio is likely to result in higher than necessary
returns, resulting in either an improvement to the plan’s funding ratio or a decrease to the
current service cost. However, the volatility of this portfolio is quite high. By investing in
a less risky portfolio, a reasonable current service cost can still be achieved along with
lower volatility, and therefore, a lower probability of significant losses and large unforeseen additional contributions.
The best-estimate portfolio is invested 20% in fixed income securities, 55% in equity and
25% in real return assets in the long-term, which is very close to PSPIB’s current long term
asset-mix objective. Such a portfolio produces an ultimate annual real return of 4.1% net of
all investment expenses (assumed to total 0.20% of assets) with a standard deviation of 12.0%. By observing the volatility of each of the portfolios in Table 40, it can be concluded that a certain degree of risk must be undertaken in order to earn a sufficient return. Thus, an asset allocation such as the best-estimate portfolio shows that an average real return of 4.1% can be achieved with some degree of risk.
This section focuses on the volatility present in the best-estimate portfolio and the extreme outcomes that could result. During plan year 2009, the nominal return on PSPIB assets was
(22.7%) due to the economic slowdown. Such an event could be characterized as low probability (also referred to as a “tail event”). However, when these events do occur, the impact on the funding ratio is significant. This section analyzes the impacts that tail events returns would have on the Pension Fund’s funding ratio. To illustrate this, returns other than the best-estimate are assumed to occur in plan year 2015. Two alternative portfolios
were selected from section B to show the potential variation in tail returns of a less risky
(Portfolio 4: 35% equity, 15% real estate and infrastructure, 50% fixed income) and a more
risky (Portfolio 5: 100% equity) portfolio in relation to the best-estimate portfolio.
It is assumed that the returns of the three portfolios follow a normal distribution. The longterm mean and annual standard deviation for each portfolio is given in Table 40. Two
probability levels were selected to analyze: 1/10 and 1/50. These levels can be thought of as the probabilities of earning a given return once every 10 and 50 years, respectively. Since the normal distribution has two tails, a left tail and a right tail, both were examined. The left tail event is the occurrence of a nominal return such that the probability of earning that return or less is equal to 1/10 (or 1/50). The right tail event is the occurrence of a nominal return such that the probability of earning that return or more is equal to 1/10 (or 1/50).
For each portfolio a nominal return is calculated at the two probability levels. The nominal returns are given in the following table.
Table 42 shows the impact on the projected Surplus/(Deficit) as at 31 March 2015 (the
expected date of the next actuarial review) if the nominal return for plan year 2015 happens
to be equal to the returns presented in Table 41 for the best-estimate scenario. Following
the various portfolio returns in plan year 2015, it is assumed that the return revert back to its
best-estimate value for plan year 2016.
This section explores the consequences of slower than expected economic growth through a
reduction in expected bond yields and variable income securities over the next 10 years.
Current bond yields are much lower than their historical averages and, without stronger
economic growth, might well remain low over the next few years. Over the last 10 and 50-year periods ending 31 December 2011, the average real yield of long-term Government of Canada bonds was respectively 2.2% and 3.3%. This is much higher than the 0.6% real yield on long-term federal bonds as at March 2012. This section looks at the impact of prolonging the current period of low bond yields until the beginning of plan year 2017.
The best-estimate scenario assumes that the long-term federal bond real yield reaches its
ultimate value of 2.8% at the beginning of plan year 2019. This scenario assumes that
economic growth will remain weak over the next 4 years and moderate thereafter. Consequently, the long-term federal bond real yield will remain at its current level for the next four years, before increasing to reach its ultimate value of 2.8% in plan year 2023. As a result, the new money rate will also be affected and will reach its ultimate value later. In addition, returns for equities and real estate and infrastructure would also be lower for the first 4 years. Thus, returns would be lower over the next 5 and 10 years than under the best
Table 43 shows the impact that such scenario would have on the expected short-term investment returns and new money rate, as well as the impact on accrued liabilities and annual special credits/payments required to fund the Superannuation Account shortfall and the pension fund deficit.
Low Bond Yields
Prolonging low bond yields, for an additional four years, results in higher actuarial liability and higher special credits/payments for both, the Superannuation Account and the Pension
Average age: 40.7 years
Average service in the force: 13.4 years
Average pensionable service: 13.8 years
Annualized pensionable payrollFootnote 28: $1,322.6 million
Average age: 38.6 years
Average service in the force: 11.8 years
Average pensionable service: 12.0 years
Annualized pensionable payrollFootnote 28: $335.9 million
Completed Years of Pensionable Service
Average age: 43.1 years
Average pensionable service: 11.9 years
Annualized pensionable payrollFootnote 28: $149.9 million
Average age: 41.9 years
Average pensionable service: 11.3 years
Annualized pensionable payrollFootnote 28: $135.8 million
Average ageFootnote 30 at 31 March 2012: 65.5 years
Average ageFootnote 30 at retirement: 51.1 years
Average age at 31 March 2012: 59.2 years
Average age at retirement: 49.1 years
Average ageFootnote 30 at 31 March 2012: 55.7 years
Average ageFootnote 30 at retirement: 49.3 years
Average age at 31 March 2012: 52.1 years
Average age at retirement: 44.9 years
Average ageFootnote 30 at 31 March 2012: 69.4 years
Average ageFootnote 30 at retirement: 58.0 years
Average age at 31 March 2012: 63.1 years
Average ageFootnote 30 at retirement: 51.8 years
Average ageFootnote 30 at 31 March 2012: 67.0 years
Average ageFootnote 30 at retirement: 57.7 years
Average age at 31 March 2012: 57.8 years
Average age at retirement: 48.0 years
Average age at 31 March 2012: 70.1 years
Average age at death of contributor: 58.1 years
Average age of widowers at 31 March 2012: 65.1 years
Average age of widowers at death of contributor: 54.2 years
Former Regular Members
For members who elect to buy back prior service, the following mortality rates are used to
calculate the monthly instalments required. These mortality rates are combined mortality rates
shown in this report for Regular and Civilian Members and were projected to plan year 2017.
They are deemed to be the mortality rates applicable for plan years 2013 to 2017 inclusively.
After 2017, they are projected in accordance with the assumed longevity improvement factors
shown in this report (Table 36).
Morneau Shepell provided relevant valuation input data on contributors, pensioners and
survivors. The co-operation and able assistance received deserve to be acknowledged.
The following individuals assisted in the preparation of this report:
Mathieu Désy, F.S.A., F.C.I.A.
Li Ya Ding, A.S.A.
Michel Millette, F.S.A., F.C.I.A.
Any reference to a given plan year in this report should be taken as the 12-month period ending 31 March of the given year.
Return to footnote 1 referrer
The actuarial liability for service prior to 1 April 2000 refers to the actuarial liability for service accrued prior to that date
except for service elections since 1 April 2000 that are deemed to be service accrued since that date.
Return to footnote 2 referrer
Also called normal cost.
Return to footnote 3 referrer
Pensionable payroll means the aggregate of pensionable earnings of all contributors with less than 35 years of service.
Return to footnote 4 referrer
The actuarial smoothing adjustment of $59 million is ignored to calculate the amortization payments. More information is
provided on page 11.
Return to footnote 5 referrer
A non-permitted surplus exists when the amount by which the value of assets exceeds liabilities for service since
1 April 2000 is greater than the lesser of (a) and (b), where:
Return to footnote 6 referrer
As determined by the President of Treasury Board following the laying of the 2011 valuation report.
Return to footnote 7 referrer
If the number of years of pensionable service is less than five, then the averaging is over the entire period of pensionable
Return to footnote 8 referrer
Indexed CPP annual pensionable earnings means the average of the YMPE, as defined in the CPP, over the five calendar
years leading up to and including the one in which pensionable service terminated, increased by indexation proportionate to
that accrued in respect of the immediate annuity.
Return to footnote 9 referrer
Years of CPP pensionable service mean the number of years of RCMPSA pensionable service after 1965 or after attaining
age 18, whichever is later, but not exceeding 35.
Return to footnote 10 referrer
The valuation data with respect to eligible surviving children were not detailed enough to allow the reconciliation of the
change in the population.
Return to footnote 11 referrer
Note that all of the real rates presented in this report are actually differentials, i.e. the difference between the effective
annual rate and the rate of increase in prices. This differs from the technical definition of a real rate of return, which, for
example in the case of the ultimate Fund assumption would be 4.0% (derived from 1.063/1.022) rather than 4.1%.
Return to footnote 12 referrer
Source: Elroy Dimson, Paul Marsh and Mike Staunton, Credit Suisse Global Investment Returns Yearbook 2012.
Return to footnote 13 referrer
It was deemed to be equal to 90% of the long-term Government of Canada benchmark bond yield.
Return to footnote 14 referrer
Bold figures denote actual experience.
Return to footnote 15 referrer
Assumed to be effective as at 1 January.
Return to footnote 16 referrer
Assumed to be effective as at 1 January. Exclusive of seniority and promotional increases.
Return to footnote 17 referrer
Calendar year 2013 Maximum Pensionable Earnings is $150,900.
Return to footnote 18 referrer
Rates do not apply if the sum of the age (minimum 55 years) and the years of pensionable service is at least 85. Rates are
halved for the plan year in which this criterion is first met or ceased to be met.
Return to footnote 19 referrer
In this report ‘longevity improvement assumption’ is equivalent to the ‘mortality improvement assumption’ discussed in the
25th Actuarial Report on the Canada Pension Plan.
Return to footnote 20 referrer
The mortality rate reduction applicable during any plan year within the 19-year select period is found by linear interpolation
between the figures for plan years 2013 and 2031.
Return to footnote 21 referrer
Does not apply if the deceased member was a contributor with less than two years of pensionable service.
Return to footnote 22 referrer
Payable unless the deceased member was a contributor with less than two years of pensionable service.
Return to footnote 23 referrer
Benefit payments plus administrative and modernization expenses minus prior service contributions/costs.
Return to footnote 24 referrer
The probability of earning the positive returns in the table corresponds to the probability that the annual return is greater
than or equal to the indicated return. Similarly, the probability of earning the negative returns in the table corresponds to
the probability that the annual return is less than or equal to the indicated return.
Return to footnote 25 referrer
Equal annual special payments required to amortize the deficit over the next 15 years starting 31 March 2017.
Return to footnote 26 referrer
As defined in Note 1 in Section D of Appendix 1.
Return to footnote 27 referrer
The aggregate pensionable earnings of all contributors with less than 35 years of pensionable service.
Return to footnote 28 referrer
Equals initial amounts of all pensions in pay plus all accrued indexation up to and including 1 January 2012, reduced by any
CPP coordination and PBDA offsets in effect as at 31 March 2012. All accrued indexation is in pay except that in respect
of retirement pensioners who have not yet satisfied at least one of the relevant criteria for receiving indexation payments.
There were also 87 male former Regular Members who are entitled to an average deferred pension of $11,200 payable at
age 60, there average age is 40.
Return to footnote 29 referrer
Deferred annuitants are excluded for calculation of the average age.
Return to footnote 30 referrer
Equals initial amounts of all pensions in pay plus all accrued indexation up to and including 1 January 2012, reduced by any
CPP coordination and PBDA offsets in effect as at 31 March 2012. All accrued indexation is in pay except that in respect
of retirement pensioners who have not yet satisfied at least one of the relevant criteria for receiving indexation payments.
There were also 38 female former Regular Members who are entitled to an average deferred pension of $14,700 payable at
age 60, there average age is 41.
Return to footnote 31 referrer
Equals initial amounts of all pensions in pay plus all accrued indexation up to and including 1 January 2012, reduced by any
CPP coordination and PBDA offsets in effect as at 31 March 2012. There were also 30 male former Civilian Members who
are entitled to an average deferred pension of $17,600 payable at age 60, there average age is 44.
Return to footnote 32 referrer
Equals initial amounts of all pensions in pay plus all accrued indexation up to and including 1 January 2012, reduced by any
CPP coordination and PBDA offsets in effect as at 31 March 2012. There were also 77 female former Civilian Members
who are entitled to an average deferred pension of $14,300 payable at age 60, there average age is 46.
Return to footnote 33 referrer
Equals initial amounts of annual allowance plus all indexation up to and including 1 January 2012.
Return to footnote 34 referrer
All pensioners are male except 6 members. They are all non-disabled pensioners except three members. All pensions are in
pay except one that is deferred to age 60.
Return to footnote 35 referrer
Equals initial amounts of pension plus all accrued indexation up to and including 1 January 2012.
Return to footnote 36 referrer