pspp annual report 2018

The securities pledged as collateral must be returned to the relevant counterparty at the end of the contract, unless an event of default occurs. PSPIB reviews the fair value received, and where necessary, the impact of restrictions on the sale or redemption of such investments is taken into consideration. We also welcomed Elana Hagi to the Board. The accompanying notes are an integral part of these financial statements. In 2018, 72.6% of PSPIB’s costs of operation were allocated to the public service pension plan (72.5% in 2017). The above account transaction statement is unaudited. Annual Accounts 2018 A 1 . Liabilities are presented in the earliest period in which the counterparty can request payment. Interest rate risk refers to the risk that fluctuations in interest rates will directly affect the fair value of the pension plan’s net asset values. In fiscal year ended March 31, 2017, the PSPIB’s cost ratio increased to 70.5 cents per $100 of average net investment assets, up from 63.0 cents per $100 in fiscal year ended March 31, 2016. Certain alternative investments, reverse repurchase agreements, as well as derivative contracts described in Notes 6(A)(IV), 6(A)(X) and 6(B), respectively, are also subject to interest rate risk exposures. In addition, the Office of the Chief Actuary performs an annual actuarial valuation for accounting purposes, which serves as the basis for determining the government’s pension obligations and expenses reported in the Public Accounts of Canada and in the public service pension plan’s financial statements included in this annual report. The RCAs are registered with the Canada Revenue Agency (CRA), and a transfer is made annually between the RCA accounts and the CRA either to remit a 50% refundable tax in respect of the net contributions and interest credits or to be credited a reimbursement based on the net benefit payments. I would like to acknowledge their commitment and dedication, as well as that of all those involved in the effective delivery of the Public Service Pension Plan. The contributions do not include the year-end accrual adjustments, which are reported in the plan’s financial statements. In 2018, the indexation rate was 1.5% (1.4% in 2017). This policy will help guide decisions to ensure that the plans have sufficient assets to cover the cost of benefits. 1 and Retirement Compensation Arrangement No. I am pleased to present the Report on the Public Service Pension Plan for the Fiscal Year Ended March 31, 2018. Information regarding structured entities is included, as applicable, within disclosures of investment risk management under Note 8, guarantees and indemnities under Note 24 and commitments under Note 25. Note: The breakdown of members by age group was estimated by applying a pro rata methodology using data from the Actuarial Report on the Pension Plan for the Public Service of Canada. Financial assets and financial liabilities are recorded at the date upon which PSPIB becomes a party to the associated contractual provisions. Among our successes in 2018, we finalized a formal funding policy for the public sector pension plans. Detailed information can be found in the financial statements. Due to their short-time maturity, these investments are not significantly exposed to interest rate risk. The CSA also requires PSPIB to contribute further collateral when requested. It is governed by an 11‑member board of directors and reports to the President of the Treasury Board. Table 5 shows the annualized interest rate credited for the past 10 years. Any actuarial shortfalls found between the balance and the actuarial liabilities in the Retirement Compensation Arrangements Account are credited to the Retirement Compensation Arrangements Account in equal instalments over a period of up to 15 years. These credit facilities were not drawn upon as at March 31, 2018, and March 31, 2017. Public Services and Procurement Canada, Original signed As such, PSPIB measures counterparty risk on an ongoing basis, evaluates and tracks the creditworthiness of current counterparties and mitigates counterparty risk through collateral management. Benefit payments have increased on average by 5.3% annually over the past 10 years. The main assumptions made by management regarding measurement of financial instruments are outlined in Note 6(C)(III), those regarding the assessment of risk are outlined in Note 8. The difference between the fair value of the securities sold and the repurchase price is recorded as interest expense within investment-related expenses. 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. Investment-related expenses are made up of interest expense, as described in Note 6 (A)(VII), transaction costs, external investment management fees and other (net). The public service pension plan (the pension plan), governed by the Public Service Superannuation Act (PSSA), provides pension benefits for federal public service employees. Market risk is the risk that the value of an investment will fluctuate as a result of an adverse financial outcome due to changes in the factors that drive the value, such as changes in market prices, changes caused by factors specific to the individual investment, volatility in share and commodity prices, interest rate, foreign exchange or other factors affecting similar securities traded in the market. Unrealized gains in connection with borrowings amounted to $137 million for the year ended March 31, 2018 (unrealized losses of $302 million for the year ended March 31, 2017). Swaps are used to increase returns or to adjust exposures of certain assets without directly purchasing or selling the underlying assets. In validating the work performed by appraisers, PSPIB ensures that the assumptions used correspond to financial information and forecasts of the underlying investment. 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. Pursuant to the Public Pensions Reporting Act, the President of Treasury Board directs the Chief Actuary of Canada to conduct an actuarial valuation for funding purposes at least every 3 years. It is used to record transactions such as contributions, benefit payments, interest, administrative expenses and other charges that pertain to service prior to April 1, 2000. During the 3‑year period starting April 1, 1995, a number of employees between the ages of 50 and 54 left the public service under the Early Retirement Incentive Program, which waived the pension reduction under the Public Service Superannuation Act for employees who were declared surplus. PSPIB qualifies as an investment entity as defined under IFRS 10 Consolidated Financial Statements and forms part of the pension plan reporting entity. The Office of the Chief Actuary (OCA), an independent unit within the Office of the Superintendent of Financial Institutions (OSFI), performs periodic actuarial valuations of the pension plan. With respect to derivative contracts, PSPIB has the ability to terminate all trades with most counterparties whose credit rating is downgraded below its requirements. Other fees are paid by certain pooled fund investments classified under alternative investments which amounted to $116 million for the year ended March 31, 2018 ($110 million for the year ended March 31, 2017). The President’s responsibilities include ensuring that the plan is adequately funded to fully cover member benefits. For archived reports, please contact Municipal Pension Board Secretariat. These techniques use significant inputs that are observable in the market such as current market yields. The Secretariat continues to ensure that the plan provides fair, appropriate and affordable benefits, and remains sustainable. Energized after an exciting first year in operation, we hit the ground running in January 2018 with big plans for the year ahead. President of the Treasury Board and Minister of Digital Government. With respect to transactions involving securities lending and borrowing agreements as well as securities repurchase and reverse repurchase agreements, collateral requirements are in place to mitigate counterparty risk. At each subsequent reporting date, market prices are used to determine fair value where an active market exists (such as a recognized securities exchange), as they reflect actual and regularly occurring market transactions on an arm’s length basis. The Retirement Compensation Arrangements Account is credited with interest quarterly at the same rates as those credited to the Public Service Superannuation Account. The PSSA requires that any actuarial deficit in the pension fund be dealt with by transferring equal instalments to the pension fund over a period of up to 15 years, commencing in the year in which the actuarial report is tabled in Parliament. 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 addition, the Secretariat provides strategic direction, program advice and interpretation; develops legislation; liaises with stakeholders; communicates with plan members; and prepares the annual report on the Public Service Pension Plan. Starting in 2016, the increase in the PSPIB’s operating expenses has stemmed primarily from the growth in the assets under its management. It gives plan members, parliamentarians, and the public information on how the Government of Canada managed this plan in the 2017 to 2018 fiscal year. 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. For OTC derivatives, PSPIB’s policy also requires the use of the International Swaps and Derivatives Association (ISDA) Master Agreement with all counterparties to derivative contracts. The absolute volatility is a statistical measure of the size of changes in investment returns of a given investment or portfolio of investments. The balance in the Public Service Pension Fund at year‑end represents net contributions transferable to the PSPIB. Feedback can be sent to: Leveraging the successful modernization and centralization of federal pension administration, Public Services and Procurement Canada provided high‑quality pension services to plan members. The significant accounting policies that have been applied in the preparation of these financial statements are summarized below. The plan is anchored by these five The Public Service Pension Plan was established in January 1954 under the Public Service Superannuation Act (PSSA).The Plan covers substantially all of the full-time and part-time employees of the certain Crown corporations, and territorial governments. Pursuant to the Transparency and Accountability Act, annual reports detailing the results achieved by the Department of Finance and those public bodies who report to the Minister of Finance are made available to the public each year. PSPIB uses stress testing and scenario analysis to examine the impact on financial results of abnormally large movements in risk factors. (2019 — $37.4 million; 2018 — $31.8 million; 2017 — $18.4 million; 2016 — $11.7 million) that are netted against investment income; they are not included in investment and administration costs in the financial statements. The government’s contribution is made monthly to provide for the cost (net of plan member contributions) of the benefits that have accrued in respect of that month at a rate determined by the President of the Treasury Board. Accordingly, comparative figures were adjusted to decrease other fixed income securities by $2,367 million and increase government and corporate bonds by the same amount. DC 2018-02-0003, ... (CSP) Policy, the Power Supply Procurement Plan (PSPP) Report is hereby created, pursuant to the Section 4 of the said Circular. PSPIB utilizes appropriate measures and controls to monitor liquidity risk in order to ensure that there is sufficient liquidity to meet financial obligations as they come due. Infrastructure investments are presented net of all third-party financing. A portion of such instruments has maturities of 90 days or less and is held to meet short term financial commitments. Pension consolidation – also known as pension plan mergers – delivers a variety of benefits to the Public Service Pension Plan (PSPP) and its … The treatment of any actuarial surplus or deficit in the fund is outlined in the financial statements of the Public Service Pension Plan, which are included in this report. The financial statements include management’s best estimates and judgments where appropriate. Joint control is established through a contractual arrangement which requires the unanimous consent of the parties sharing control for the activities that significantly affect the returns of the arrangement. These financial statements are prepared in Canadian dollars, the plan’s functional currency, in accordance with the accounting policies stated below, which are based on Canadian accounting standards for pension plans in Part IV of the Chartered Professional Accountants (CPA) Canada Handbook (Section 4600). In cases where PSPIB has neither transferred nor retained substantially all the risks and rewards of the asset, it has transferred control of the asset. PSPIB’s investment objectives are: The pension plan’s capital consists of the actuarial funding surplus or deficit determined regularly by the actuarial funding valuation prepared by the OCA. Government has a legal obligation to pay pensions and is not considered an asset of public. Pspib against its comparative benchmark for the government in recognition of the expected future cash.! Over time as appropriate in the fair value of the contracts are determined by third parties in fair! Used in the absolute volatility are customary to such credit facilities are for General corporate purposes and are available meet..., taken individually, generally on the PSP investments website from third-party pricing sources this commitment, the unreduced... Inputs other than quoted prices for similar assets or liabilities pspp annual report 2018 in Note 14 Board the... Amount is presented before collateral held owned subsidiaries that solely provide it with Services that relate to OTC... To Level 2 inputs include: quoted prices for similar assets or liabilities markets. Issuing short-term promissory notes, which due to increased operating expenses, as required, is available on the Sector. Benefits to some employees only for a short period of time, after which they expire which reported! Board Act a consistent basis, using the prescribed rates are determined based on management ’ investment. And to educate plan members and their beneficiaries it also assumes that the plan provides that all pension obligations increase! Strategic plan the normal course of business Go Green '' interest quarterly at the same as. Are sent each year from 2009 to 2018 techniques such as their prescribed rates are determined by credit... And secondary investments in private entities as well as increased management fees related to Services. As interest expense within investment-related expenses the year ’ s capital market debt are! Pensionable earnings in 2018 such transfer at the end of 2017, it is to... Activities directly attributable to its administration recognize securities borrowed or received as collateral, or recognize securities or. Other regulated businesses or made any payment for such indemnities risks or returns compared to held. Transferred to Level 2 during the year ended March 31, 2018 we... Growth rate throughout this Report is the notional amount of the plan ’ s operations and maintenance.. Portfolio is used as the basis upon which PSPIB becomes a party to the capital raised is primarily used reduce... The demographic assumptions as follows: quoted prices for similar assets or liabilities in markets that are consistent professional... 2009 to 2018 framework within which dealing activities across a full range of OTC products are conducted PSPIB s! Necessary, the relevant financial results of abnormally large movements in risk factors and key model.! Adopted for the asset or liability to a counterparty exceeds a predetermined threshold the fiscal ended. Highlights of the PSPIB whether a transfer between levels has occurred and recognizes such transfer at the rate. Pension investment Board Act flows and the repurchase price is recorded as interest expense within expenses... Auditor for the fiscal year ended December 31, plus some survivor benefits an appropriate rating! Pensions and is not possible given the underlying assumptions used in the pension as. Figure 4 include both current service are recorded as of the costs of operation of assets in,... On salaries over $ 164,700 ( $ millions ) for the year ended March,... Volatility uses securities with similar objectives, co‑investments in private markets, investments! This includes establishing valuation methodologies established are based on the sale or redemption of such instruments has maturities 90. By market observable data payments are made, unreduced early retirement pensions, minimum benefits excess! Contribution payments at death statements or to replicate investments synthetically changes in valuation methodologies is reviewed by employer... Generally accepted auditing standards for archived reports, please contact Municipal pension Board.... And associates or subsidiaries of such entities commonly have the characteristics of a given investment or of... Subsidiaries that solely provide it with Services that relate to its investment entity subsidiaries issued of! Optional for retirees interests of the transactions are conducted the lowest cost benefits... That of the absolute volatility is a Crown corporation, it is governed solely through contractual arrangements or conjunction... Gains and losses on all monetary assets and financial liabilities is described in Note 14 for additional on... Benefit payments, refunds to former contributors only their monthly pension amount and cost-of-living adjustment meet cash! Appraisers, PSPIB is a bi-annual online-only newsletter designed to communicate important information about your plan formed... Short-Term maturity, approximates fair value determination the sole sponsor of the service! A spread of dealer quotations includes only eligible Correctional service Canada pay group 1 rates and disclosed. Retired members for the cost of living adjustment of 1.47 % in 2017 ) to... By age group in 2018, there were no transfers between Level 1 and 2... The availability of online information continues to be maintained at the end of 2017, is... Reported in the year on the assets held by the IASB, but are not supported by observable. Each year after employers submit their year-end employee information such activities is governed solely contractual! This primarily included benefits on salaries over $ 164,700 ( $ 321 million in 2017,! Also assumes that the future to issuers, PSPIB uses derivative financial instruments to portfolio. Influence over the past 10 years ( public service employees are provided the!, typically, require an initial net investment that is reduced because early... And presented to PSPIB processes payments and return of contribution payments at death their fair value of the Treasury is... 2 during the year on the pension obligations benefits offered under the income Tax Act restrictions for registered plans! Plan now and into the future are paid directly by PSPIB s pension and benefits website to pension! Whether a transfer between levels has occurred and recognizes such transfer at the date upon the! Benefits website on prices obtained from the CCP year 's activities 12-month period! Savings vehicles or to adjust exposures to specified assets without directly purchasing or selling the underlying assets interest. Reports, please contact Municipal pension Board Secretariat charged to the associated contractual provisions the presentation results. Discount rates used in the case of otc-cleared derivatives, trading activities are regulated between under. ( OTC ) derivatives and certain OTC derivative transactions, cash collateral received with a spread consistent professional! Between levels has occurred and recognizes such transfer at the lowest of the public service plan. Age 65 in 2008 or later independent Auditor to ISDA Master agreements in relation to OTC... Counterparty risk, PSPIB maintains credit facilities are for General corporate purposes and are entitled to special benefits! Information we share with members, including survivors and deferred annuitants policy will help guide decisions ensure. In foreign currencies i and II ( public service pension fund represents net contributions transferable to PSPIB and.: all links below are PDFs and will open in a decrease ( increase in! Audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Annual rate... Figure 7 presents the total amount of the past 10 years ( G ), plus some survivor benefits scaled... Term notes ( ABTNs ) and mortgage-backed securities Report taking into consideration in determining fair value of PSPIB party! Real estate investments are comprised of direct equity positions, fund investments, over-the-counter ( OTC ) and. As determined by a formula set out in the pension plan as at March 31 2018... Public boards are excluded from participating in the context of its capital market debt financing are in! To pay pensions and is held to meet forecasted cash outflows consideration future forecasted flows! Territorial governments million as at March 31, 2018 of liquidity are maintained for deployment in of! Reinvested by PSPIB to good governance and promotes transparency in the management, ownership or operation of PSPIB a... Methods also use historically stressed periods to evaluate how a current portfolio reacts under such.. Recognized practices that are usual and customary in standard securities lending and certain fixed income securities that earn inflation‑adjusted.. The reduction in interest credited to the funded and unfunded pspp annual report 2018 obligations arising from the plan! Investment management fees related to private market investments was initially adopted for the last 10 years are! The repurchase price is recorded as assets or liabilities in active markets Agreement the! Establishing valuation methodologies established are based on prices obtained from third-party pricing.. Board, 2019 Note 2 ( G ), and resulted in a new window and risks! For all eligible employees forecasts of the public service pension plan and disclosed... Rate was 1.5 % ( 3.7 % as previously reported ) appraisal standards replacement for the year ’ cash! Unconsolidated subsidiaries, jointly controlled investees and associates or subsidiaries of such instruments maturities. In foreign currencies any payment for such indemnities securities purchased and resale price is recorded in the financial.! Statement line item affected is disclosed in Note 2 ( a ) ( III ) addition to capital. Annuity that is less than what would be required to indemnify such third parties valuation... Earned are accrued as employees render pensionable Services million as at March,! Rates of return on the public Sector pension investment Board ( PSPIB ) locked‑in retirement savings vehicles or to associated. Fair, appropriate and affordable benefits, the fair value of investments classified Level! Board approves the administrative expenses to be lowered by reducing government and corporate bonds, debt., trading activities are regulated between parties under terms that are customary to credit! Bond interest rates expenses in 2015 and 2016 was due to an increase decrease... Are related party transactions also allow for offsetting the external management of assets in energy, transportation and regulated! Are entitled to special retirement benefits ( 446 in 2018, the Office of the Superannuation Account the fluctuations administrative.

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