Office of the Superintendent of Financial Institutions
Assia Billig, Chief Actuary
11 August 2021
Traditional defined benefit pension plans legislative framework
Update on the most recently filed statutory actuarial valuation
All economic assumptions are select and ultimateFootnote 2
Year’s Maximum Pensionable Earnings and Maximum Pensionable Earnings.
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Notional account established to track contributions and benefits for service prior to 1 April 2000
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Shortfall amounts with interest have been credited to the Superannuation Account on 31 March of the year following the filing of the report
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Deficits are amortized by the government with 15 equal annual payments or until a new valuation reveals surplus
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Bar graph showing the evolution of liabilities related to the Superannuation Account and to the Pension Fund over time. Y-axis represents the expected Superannuation Account and Pension Fund liabilities in billions. X-axis represents the year, starting at March 31 2020 and ending at 31 March 2054.
At 31 March 2020, the Superannuation Account liabilities were approximately $48 billion and the Pension Fund liabilities were approximately $31 billion. The Superannuation Account liabilities are expected to steadily decrease and the Pension Fund liabilities are expected to steadily increase over time. As a result, it is estimated that in 2026 the Pension Fund liabilities of $44 billion will exceed the Superannuation Account liabilities of $42 billion.
From 2026 to 2054, The Superannuation Account liabilities will continue to steadily decrease by an average of $1.2 billion per year resulting in liabilities of $7 billion in 2054. The Pension Fund liabilities will continue to steadily increase, by an average of $3.2 billion each year resulting in liabilities of $135 billion in 2054.
Bar graph showing the range of potential funding ratio of the best-estimate portfolio over time. Y-axis represents the funded ratio. X-axis shows the year, starting at 31 March 2019 and ending at 31 March 2040.
The Pension Fund was fully funded (funding ratio of 102%) at 31 March 2019. The median expected funding ratio is relatively flat (between 102% and 112%) over the projection period. The funding ratio is expected to be between 99% (5th percentile) and 115% (95th percentile) with a median of 104% at 31 March 2020, between 69% (5th percentile) and 177% (95th percentile) with a median of 109% at 31 March 2030 and between 67% (5th percentile) and 229% (95th percentile) with a median of 112% at 31 March in 2040.
Bar graph showing the evolution of cash flows under the Pension Fund over time. Y-axis represents the expected contributions, payments, special payments, and resulting net cash flows in millions. X-axis represents the plan year, starting in 2020 and ending in 2042.
In plan year 2020, contributions to the Pension Fund are expected to reach $1,497 million, whereas payments and special payments are expected to reach $1,042 million and $145 million, respectively, resulting in net cash flows of $600 million. Both contributions and payments are expected to increase over time, however payments are expected to increase at a higher rate than the contributions. It is expected that the contributions will be higher than the payments until plan year 2025. In 2026, the expected payments of $1,649 million will exceed the estimated contributions of $1,608 million resulting in net cash flows of negative $41 million. From 2026, the Pension Fund is expected to have negative net cash flows. In plan year 2042, contributions to the Pension Fund are expected to reach approximately $2,343 million, whereas payouts are expected to reach approximately $4,174 million resulting in net cash flows of negative $1,831 million.
The major difference in funding requirements between private and federal public sector pension plans is that solvency valuations are not required
The statutory and accounting actuarial valuations are used for different purposes and performed on different bases
There is currently a surplus in the CF Pension Plan Regular Force
The plan is maturing
Also include federal crown corporations and provincial public sectors pension plans
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Initial assumptions in select period reflect current market conditions transitioning to ultimate long-term assumptions.
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A deficit in the Canadian Forces Reserve Force pension plan will be amortized in equal annual special payments over a period of 15 years, as prescribed in the Reserve Force Pension Plan Regulations
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Except for the Canadian Forces Reserve Force pension plan where the non permitted surplus is set at 110% of liabilities
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