1 Securing Your Retirement Algonquin College Jan. 2013

2 Overview 1.Pensions and politics 2.Why growth matters to you 3.Your role in promoting retirement security 4.Your benefits – a plan worth keeping

3 Key Messages - Our mandate The purpose of the CAAT Pension Plan is to improve the financial security of members in retirement with appropriate and secure benefits supported by stable and affordable contribution rates.

Measuring success Contribution rates Minimize probability of increases Appropriate for benefits earned Reduce volatility Secure promised benefits Avoid benefit reductions (funding level) Paying post-2007 conditional indexing 4 4

Key Message – Joint Governance adds value Jointly-sponsored, multi-employer Plan  Equal representation  Bicameral governance structure  29 employers and growing 5 5

Board of Trustees – joint representation  12 member Board  Responsible for  Administration  Investments 6

Sponsors’ Committee – joint representation  8 member Committee  Responsible for  Benefit design  Contribution rates 7

Key Message - Healthy demographic profile 8 Active members: 20,500 Retired members: 12,100 (including survivors) 8

9 Key Message - Well diversified asset mix

Key Message - Strong financials  Filed valuation with small surplus (01/01/2012) 10 * Preliminary results to September 30, 2012

11 Overview 1.Pensions and politics 2.Why growth matters to you 3.Your role in promoting retirement security 4.Your benefits – a plan worth keeping

Pension plans are facing headwinds  Historically low-interest rates  Increasing longevity  Hangover from the economic crisis of 2008  Onerous and changing pension legislation  Pension Envy 12

13 Pensions, politics and the emerging reality  Federal gov’t announces OAS to start at 67  Drummond Report – calls for amalgamation of plans for better administrative efficiency  Budget 2012 – 50/50 cost sharing, JSPP  William Morneau report - pooling of pension funds under $40 Billion  Pensions are on the political agenda in 2013 and will likely remain there

JSPP framework  Investment pooling  Annual valuations  Choose: benefit reductions over contribution increases  One size fits all  Pension expense 14 Hon. Dwight Duncan, Minister of Finance

Specifics of recent agreement  Exempt from special legislation  No forced participation in pooled investment fund  Granted longer valuation cycle for flexibility and stability  Governance decisions remain in the Plan  Benefit restoration at 100% funded  Funding Policy temporarily changed  CAAT recognized as a model 15

16 Forced pooling of pension assets? No Thanks  Misaligned investments results in more volatility  Risk of too many eggs in one basket  Diseconomies of scale in certain assets  Governance structures across unrelated sectors will create costly growing pains  Untested

17 Retaining control of investments means  We continue with our diversified, sophisticated investment program  We manage investment risk to our tolerance  We are focused on Plan needs  With a single focus our asset size is not a limitation

Why retaining control matters  Joint governance structure remains independent  Benefits and contributions decisions geared to needs of college sector 18

Change to Plan Funding Policy – to 2018  If funding deficit arises  Future benefits would be temporarily reduced  Restoration at 100% funding  Benefits earned remain protected 19

20 CAAT is recognized as the model  Jointly sponsored plan with good governance  cost and risk sharing  Top quartile investment performance  Sustainable:  Liabilities recognize longevity and lower expected investment returns  Conditional indexing  Funding policy

Should you be worried? No, and here’s why  Pension benefits earned to date are protected  Plan governors are focused on keeping pensions stable, secure  Reductions will be minimized, temporary  CAAT is a model pension plan – tweaks 21

More reasons for reassurance  Changes already made put the Plan on a sound financial footing  Recognizing longer life span in assumptions  Realistic assumptions about investment returns  More diversified investments, aligned with liabilities 22

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24 Overview 1.Pensions and politics 2.Why growth matters to you 3.Your role in promoting retirement security 4.Your benefits – a plan worth keeping

Inviting interested universities to join CAAT  We propose university members join on a future service basis  Past debt remains the responsibility of the university unless plan to fully fund  Governance structure to be adjusted as appropriate, but CAAT retains 50% of representation 25

Why the CAAT Plan is pursuing growth  Growth in Plan membership improves stability of pension funding  Accelerates contribution rate reductions  Similar demographic profile makes for lower risk and better alignment 26

How university members benefit  Strong voice in a well-governed, transparent pension plan  More of contributions go to benefits than to expenses – economies of scale, no PBGF  Secure, well-funded, sustainable plan offering good value  Ready-made long-term solution 27

How universities benefit  Avoids solvency funding requirements  Substantially lowers cost and risks associated with pension administration, investments, governance and compliance  Stabilizes contribution rates 28

How Ontario benefits  An efficient postsecondary sector pension plan achieved without legislation  The proposal offers an immediate solution  High interest in its success 29

Advantages of postsecondary pension plan  More predictable contribution and secure benefits  True joint governance  Lower costs and risks  Dedicated pension, investment expertise 30  Aligned with gov’t objectives  Postsecondary sector alignment  Permanent solvency exemption  Proven solution 30

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32 Overview 1.Pensions and politics 2.Why growth matters to you 3.Your role in promoting retirement security 4.Your benefits – a plan worth keeping

Importance of adequate retirement income 60% of Canadians do not have a work- place pension and most will have inadequate personal savings at retirement. 33

DB are complex and ripe for oversimplification The critics see pension plans as too generous, unsustainable and unfair to Canadian taxpayers. 34

“Canada’s pension system is a disaster waiting to happen. Public sector pension plans at all levels of government are massively underfunded which will demand higher taxes and strain Canada’s economy.” Public Sector Pensions: A Runaway Train Canadian Federation of Independent Business 35

“We need to have a retirement scheme that isn’t going to bankrupt the country. The money is not there to cover these obligations.” Gregory Thomas, National Director Canadian Taxpayers Federation (As quoted the Toronto Sun, August 29, 2012 referencing CD Howe Institute’s estimate of the federal public service unfunded liability of billions of dollars) 36

Towers Watson study – results of pressures  Many closing or freezing DB plans  DC members behaviors will lead to insufficient retirement income  late entry, leaving money on the table  deferring retirement  not adequately prepared  buy high, sell low 37

Solution isn’t viable in the long term  Conversion to DC plans – people will pay more and receive less  DC plans are less efficient – will need to over save to guard against individual risk  In DB, risks are pooled 38

Five truths about DB pensions worth sharing 1.Adequately funded 2.Shared risk 3.Plans are efficient, low cost operations 4.Provides long-term capital 5.Helps combat poverty among the elderly 39

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41 Overview 1.Pensions and politics 2.Why growth matters to you 3.Your role in promoting retirement security 4.Your benefits – a plan worth keeping

CAAT benefits comparable to other public plans  Lifetime and bridge benefits  Pensions based on best-5 years (60 consecutive months  Flexible retirement options  60% Survivor benefits  Conditional inflation protection 42

Lifetime and bridge benefits Before 65  2% x service After 65  1.3% to YMPE  2% over YMPE 43

Flexible retirement options  Retire  as early as 50 with 20 years or (55 and 2)  as late as 71  Permanent early retirement provisions  Unreduced dates (earliest)  85 factor (age plus service)  60 years of age and 20 years of service  Reduction of only 3% per year from earliest 44

Joint and survivor pension options  60% survivor pension - included  If you marry after retirement, your new spouse automatically receives a survivor pension – included 45

Conditional inflation protection  Inflation protection at 75% of the CPI conditional on the funding status – subject to the results of the Plan’s most recent filed actuarial valuation.  Highest priority  First dollar of surplus  First priority for reserves  Perfect record 46

47 Value Member retires at 60 Lifetime pension: $21,967 Bridge paid to 65: $7,036

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50 Questions welcome