Level 3 inputs are unobservable inputs for the asset or liability that are used within model-based techniques. Although there was an increase in operating expenses, it was offset by a decrease in management fees and transactions costs for assets under management. The economic assumptions used in the annual actuarial valuation represent management’s best estimate. From: Treasury Board of Canada Secretariat, Report on the Public Service Pension Plan for the Fiscal Year Ended March 31, 2018 For each investment, the relevant valuation methodology is applied consistently over time as appropriate in the prevailing circumstances. The ratio was reached at the end of 2017. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or the liability, either directly or indirectly. *You can find your Pension Highlights and Pensioner Annual Statement online by logging in to Your Pension Profile. In certain cases, PSPIB also provides indemnification to third parties in the normal course of business. In November, the Board once again approved 100% inflation protection for implementation on April 1, 2019. Monetary assets and liabilities that are denominated in foreign currencies are translated at the functional currency rate of exchange prevailing at the end of the reporting period. Such techniques are used to test a portfolio’s sensitivity to various risk factors and key model assumptions. Derivative financial instruments do not, typically, require an initial net investment. In addition to the above, PSPIB holds wholly owned subsidiaries that solely provide it with services that relate to its investment activities. In pursuit of this objective, PSPIB established an Enterprise Risk Management Policy (ERM Policy). MEPP Inflows and Outflows (in millions) Nancy Chahwan Pension Highlights statements are sent each year after employers submit their year-end employee information.. Benefits paid to retired members in fiscal year ended March 31, 2018, totalled $6.7 billion ($6.4 billion in fiscal year ended March 31, 2017), including benefits paid to plan members who retired on grounds of disability, which represents 90% of pension payments paid in the year. A financial asset (or, where applicable, a part thereof) is derecognized when the following conditions are met: A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired. Balance Sheet as at 31 December 2018 22 Profit and Loss Account for the year ending 31 December 2018 24 Accounting policies 25 Notes on the Balance Sheet 33 Off-balance-sheet instruments 50 Notes on the Profit and Loss Account 53 Post-balance sheet events . If an employee began participating in the plan on or after January 1, 2013, the contribution rates for Group 2 (members with a normal retirement age of 65) are applied. Warrants are options to purchase an underlying asset which is in the form of a transferable security and which can be listed on an exchange or traded OTC. The minimum fair value of collateral required is equal to 100% of the fair value of the securities borrowed. Press Release : Push to Pass Phase 2. Inflation-linked bonds are fixed income securities that earn inflation‑adjusted returns. 2018 ANNUAL REPORT Our retired members received 100% inflation protection in 2018. This is a testament to the availability of useful information and a demonstration of interest in pension information by current and former federal employees and stakeholders. OTC instruments consist of those that are bilaterally negotiated and settled, and those that are cleared (OTC-cleared) by a central clearing party (CCP). As a result, PSPIB may be required to indemnify such third parties in connection with the performance of their contractual obligations. Benefit payments have increased on average by 5.3% annually over the past 10 years. During the year ended March 31, 2017, PSPIB entered into a revolving credit facility in the amount of $2 billion and a demand line of credit in the amount of $1 billion (together “the credit facilities”). Infrastructure investments are comprised of direct equity positions, fund investments and co‑investments in various private entities. Through its pay and pension services, Public Services and Procurement Canada ensures that federal government employees receive their pay and that retired pension plan members receive their pension benefits payments. Instead, transactions relating to the pension plan were recorded in the Public Service Superannuation Account (superannuation account) created by legislation in the accounts of Canada. The accompanying notes are an integral part of these financial statements. For the obligations pertaining to service since April 1, 2000, the objective of managing the capital position of the pension plan is to ensure that the investments held by PSPIB are sufficient to meet the related future pension obligations. Forwards are used to adjust exposures to specified assets without directly purchasing or selling the underlying assets. The pension plan is funded from plan member and employer contributions, and from investment earnings. Governor General of â¦ For tax purposes, financial transactions related to pension plan members’ pensionable earnings over $164,700 in calendar year 2018, are recorded separately. Obligations to repurchase or resell the securities sold or purchased under such agreements are recorded at cost plus accrued interest, which due to their short-term maturity, approximates fair value. The government is the sole sponsor of the pension plan. Significant assumptions used for each asset class are described in Note 6(C)(III). Until April 1, 2000, separate invested funds were not set aside to provide for payment of pension benefits. As illustrated in Table 2, Group 2 members, who are eligible to receive an unreduced pension benefit at age 65 (5 years later than Group 1 members), pay lower contribution rates than Group 1 members. 2018 Annual Results: Press Release. The pension obligation related to the RCA accounts is $3,597 million ($3,587 million as at March 31, 2017) compared to $3,797 million ($3,766 million as at March 31, 2017) under the old discount rate methodology. More on the features of Your Pension Profile. In 2018, the average retirement age was 61.31 for men and 60.42 for women. As part of securities lending and certain OTC derivative transactions, cash collateral is received and reinvested by PSPIB. Part of my work as Chief Human Resources Officer has been to strengthen the funding governance for the pension plan and the broader oversight role provided by the Treasury Board of Canada Secretariat. Management, through the activities of PSPIB, assesses control, joint control and significant influence with respect to the investees disclosed in Note 7 as follows: It is determined that PSPIB has control over an investee when it is exposed, or has rights, to variable returns from its investment in an entity and has the ability to affect those returns through its power over the investee. Cash collateral received is recognized as described in Note 6 (A)(IX). I would like to thank Canada’s federal employees for their ongoing and dedicated service, and for giving us a world-class public service of which we can all be proud. With respect to derivative contracts, PSPIB has the ability to terminate all trades with most counterparties whose credit rating is downgraded below its requirements. The Government of Canada recognizes that the public service pension plan is an integral part of the public service workforce recruitment, retention and renewal strategy, and it is committed to providing timely and accurate information about the plan to members. Funded pension benefits relate to post-March 2000 service that falls within the Income Tax Act limits, as an amount equal to contributions less benefit payments and other charges is invested by PSPIB. The maximum credit exposure excludes guarantees disclosed in Note 24 as well as investments in funds classified as alternative investments in Note 6 (A). The counterparties are authorized to sell, repledge or otherwise use collateral held. PSPIB provides indemnification to its directors, its officers, its vice-presidents and to certain PSPIB representatives who are asked to serve on boards of directors (or like bodies) or investment advisory boards (or like bodies) of entities in which PSPIB or its investment entity subsidiaries have made an investment or have a financial interest. The benefits that pension plan members are entitled to when they leave the public service depend on their age and the number of years of pensionable service to their credit (see Tables 3 and 4). Fixed income consists of cash and money market securities, government and corporate bonds, inflation-linked bonds, private debt securities and other fixed income securities. The balance consists of cash collateral received with respect to certain OTC derivative transactions, and is included in Note 6 (A) as part of collateral payable. PSPC, as the day-to-day administrator, recovers from the pension plan administrative expenses for the activities directly attributable to its administration. In general, investments in cash, money market securities, floating rate notes, bonds and public equities are expected to be highly liquid as they will be invested in securities that are actively traded. The year’s maximum pensionable earnings in 2018 was $55,900; in 2017, it was $55,300. With respect to the public service pension plan, the Office of the Auditor General of Canada acts as the independent auditor. Report on the Public Service Pension Plan for the Fiscal Year Ended March 31, 2018 (PDF, 2,551 KB) Her Excellency the Right Honourable Julie Payette, C.C., C.M.M., C.O.M., C.Q., C.D. The CAAT Planâs latest Annual Report, released April 23, 2019, details the Planâs strong 2019 investment performance and its focus on benefit security and sustainability. Foreign currency transactions during the period, including purchases and sales of securities, income and expenses, are translated at the rate of exchange prevailing on the date of the transaction. As at March 31, 2018, 103 investment entity subsidiaries were incorporated in North America, 23 in Europe, 11 in Oceania, 4 in Central and South America, 1 in Africa and 1 in Asia (103 in North America, 23 in Europe, 10 in Oceania, 4 in Central and South America, 1 in Africa and 1 in Asia as at March 31, 2017). Direct investments in Canadian and foreign equities are measured at fair value using quoted prices in active markets and are based on the most representative price within the bid-ask spread. PSPIB maintains its own records and systems of internal control to account for the funds managed on behalf of the pension plan in accordance with the Public Sector Pension Investment Board Act, regulations and by-laws. Fair values of government and most corporate bonds, inflation-linked bonds and mortgage-backed securities are based on prices obtained from third-party pricing sources. In its implementation of the public sector purchase programme (PSPP), the Eurosystem conducts purchases in a gradual and broad-based manner, aiming to achieve market neutrality in order to avoid interfering with the market price formation mechanism. Dividends are recognized when the right to receive them has been obtained, generally on the ex-dividend date. 2018 . To ensure you receive email notifications for new issues, please log in to mypensionplan.ca and sign up to "Go Green". See Note 3 for further details regarding the change in accounting policy. PSPIB is required to act in the best interests of the contributors and beneficiaries under the pension plan and for maximizing returns without undue risk of loss. Adjustments to fund deficiencies are based on triennial actuarial valuations. The ultimate discount rate is expected to reach 6.0% by 2028 (6.0% by 2028 in 2017). As at March 31, 2017, a private market investment was classified under Level 3 as its fair value was determined based on significant unobservable inputs. pspp .pensionsbc .ca 5 Annual Report 2019 Investments: Performance over time Five-year financial summary ($ millions) for the year ended March 31 2019 2018 2017 2016 2015 Increase in assets Investment income $ 1,993 $ 2,906 $ 3,381 $ 45 $ 3,438 Contributions Employers 401 376 353 338 328 PSPIB enters into investment transactions with such related parties in the normal course of its business, more specifically, as part of private markets and certain fixed income investments described under Note 6 (A) as well as guarantees, indemnities and commitments described under Notes 24 and 25, respectively. In April 2000, the government began transferring to the PSPIB amounts equal to pension contributions net of benefit payments and departmental administrative expenses for the plan. I conducted my audit in accordance with Canadian generally accepted auditing standards. Private debt securities also include third‑party loans such as junior and senior debts, construction loans, bridge loans, income‑participating loans, as well as other structured finance products in the real estate sector. The reinvestments under the private sector purchase programmes amounted to â¬30.9 billion in 2018, while the reinvestments under the PSPP amounted to â¬116.7 billion. In accordance with its mandate, the PSPIB’s statutory objectives are to manage the funds transferred to it in the best interests of the contributors and beneficiaries, and to invest its assets with a view to achieving a maximum rate of return without undue risk of loss, having regard to the funding, policies and requirements of the pension plan. Includes deferred annual allowances. Private markets consist of investments in real estate, private equity, infrastructure and natural resources. Benefits were paid to 276,284 retired members and survivors in fiscal year ended March 31, 2018 (276,796 in fiscal year ended March 31, 2017). An increase (decrease) in this unobservable input, taken individually, generally results in an increase (decrease) in fair value. 2, such as contributions, benefits and interest credits, are recorded in the Retirement Compensation Arrangements Account in the Public Accounts of Canada. The balance in the Retirement Compensation Arrangements Account is credited with interest at the same rate as that of the Public Service Superannuation Account. To ensure the Plan remains sustainable and affordable, we take a thoughtful, long-term approach to investment and a focused approach to managing operations and costs. The fair value measurement of fund investments included as part of private debt securities is described in Note 6(C)(II). For fiscal year ended March 31, 2018, the Public Sector Pension Investment Board (PSPIB) reported a net rate of return of 9.8% (12.8% in fiscal year ended March 31, 2017), compared with the benchmark rate of return of 8.7% (11.9% in fiscal year ended March 31, 2017). In certain cases, fair value is determined by third parties where valuation information is not available to PSPIB. In addition, an actuarial valuation was completed by the planâs actuary at January 1, 2017. 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