pspp annual report 2018

For fiscal year ended March 31, 2018, the value of pension obligations was $207.6 billion ($204.7 billion in fiscal year ended March 31, 2017), an increase of $2.9 billion from the previous fiscal year. The page had more than 4.1 million views this fiscal year. In certain investment transactions, PSPIB and its investment entity subsidiaries provided guarantees, indemnifications or issued letters of credit to third parties, the most significant of which are as follows: Funding in connection with the above commitments can be called upon at various dates extending until 2035 as at March 31, 2018 (until 2035 as at March 31, 2017). inputs other than quoted prices that are observable for the asset or liability. English reports. The increase in administrative expenses for government departments from 2009 to 2010 was due in large part to the capital expenditure requirements related to the pension modernization project that started in fiscal year ended March 31, 2008. Through PSP Capital Inc. and its leverage policies, PSPIB has the ability to raise capital by issuing short-term promissory notes and medium-term notes. The fair values of certain corporate bonds, private debt securities and ABTNs are determined using valuation techniques. The Treasury Board of Canada Secretariat (the Secretariat) is responsible for the management of the pension plan while Public Services and Procurement Canada (PSPC) provides the day-to-day administration of the pension plan and maintains the books of accounts. This amount is presented before collateral held and netting arrangements that do not qualify for offsetting under IFRS. The contribution rates for public service employees joining the pension plan on or after January 1, 2013 (Group 2) was set at 8.39% (7.86% in 2017) for the first 9 months and 8.77% (8.39% in 2017) for the last 3 months of pensionable earnings up to the maximum covered by the CPP and QPP; and 9.94% (9.39% in 2017) for the first 9 months and 10.46% (9.94% in 2017) for the last 3 months of pensionable earnings above that maximum. 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. Cash contributions in Figure 4 include both current service and past service (for example, service buybacks, pension transfers). Benefits paid in respect of participants who, at the time of death, were employed in the public service or in receipt of an immediate annuity. The credit facilities are for general corporate purposes and are available in either Canadian or US currencies. The collateral received is in the form of securities of which $1,094 million has been used in connection with short selling transactions as at March 31, 2018 ($984 million as at March 31, 2017) and nil has been used in connection with securities sold under repurchase agreements ($150 million as at March 31, 2017). 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). Counterparties are generally authorized to sell, repledge or otherwise use collateral held. These costs include salaries and benefits, systems maintenance and development, accommodation, and other operating costs of administering the pension plan within the department. Also, benefits are fully indexed to the increase in the Consumer Price Index. Generally, if an employee was participating in the plan on or before December 31, 2012, the contribution rates for Group 1 (members with a normal retirement age of 60) are applied. Forwards are contracts involving the sale by one party and the purchase by another party of a predefined amount of an underlying instrument, at a predefined price and at a predefined date in the future. The Treasury Board of Canada Secretariat oversees the management of the plan, providing the strategic leadership, governance and administrative oversight that helps ensure its integrity. Note 11(B) provides additional information on the usage of the capital market debt program. Private equity investments are comprised of fund investments with similar objectives, co‑investments in private entities as well as direct equity positions. The determination of fair value of all financial assets and financial liabilities is described in Note 6. The cost of RCA No. The pension plan is financed from employee and employer contributions, as well as from investment earnings. Benefit payments have increased on average by 5.3% annually over the past 10 years. Unfunded pension benefits related to pre-April 2000 service are tracked in the pension plan superannuation account since no separate invested funds are maintained for this account (see Note 22). Consequently, if future market conditions differ significantly from those of the past, potential losses may differ from those originally estimated. 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). Infrastructure investments are comprised of direct equity positions, fund investments and co‑investments in various private entities. 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. In certain cases, they require an initial net investment that is less than what would be required to hold the underlying position directly. Contributions for current service are recorded in the year in which the related payroll costs are incurred. Over the past 10 years, the PSPIB has recorded a net annualized rate of return of 7.1%, compared with the long-term return objective of 5.8% over the same period. The public service pension plan took many forms until the Public Service Superannuation Act came into effect on January 1, 1954, and broadened pension coverage to include nearly all public service employees. 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. Natural resources investments focus on entities engaged in the management, ownership or operation of assets in timberlands, agriculture and upstream oil and gas. PSPIB frequently monitors the credit rating of its counterparties as determined by recognized credit rating agencies. In the past, unfunded pension benefits were discounted using a streamed weighted average of Government of Canada long-term bond rates, which was calculated based on a 20-year weighted moving average of Government of Canada long-term bond rates projected over time. Figure 2 shows the number of active members by age group in 2018 relative to the number of active members in 2009. See Note 3 for further details regarding the change in accounting policy. Section 4600 provides specific accounting guidance on investments and pension obligations. Five years of annual reports are posted online. Management report 2 Financial statements of the ECB . In order for the government to track the transactions related to contributions, benefit payments, interest and transfers, the government established the superannuation account in the accounts of Canada for service prior to April 1, 2000. Includes transfer values, returns of contributions, amounts transferred to other pension plans under pension transfer agreements and amounts transferred under the Pension Benefits Division Act. The Statement of Changes in Net Assets Available for Benefits shows increases and decreases to the public service pension plan from various sources. The reinvestments under the private sector purchase programmes amounted to €30.9 billion in 2018, while the reinvestments under the PSPP amounted to €116.7 billion. PSPIB’s capital market debt financing was in compliance with the limits authorized by PSPIB’s Board of Directors during the years ended March 31, 2018, and March 31, 2017. In my opinion, the transactions of the public service pension plan that have come to my notice during my audit of the financial statements have, in all significant respects, been in accordance with the Public Service Superannuation Act and regulations, the Public Sector Pension Investment Board Act and regulations and the by-laws of the Public Sector Pension Investment Board. The funds are also invested in accordance with PSPIB’s Investment Risk Management policy which is outlined in. 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. Since balances in connection with all investment transactions are measured at FVTPL, those transactions undertaken with related parties have the same impact on net assets available for benefits as those with unrelated parties. This committee is responsible for overseeing all aspects of fair value determination. This includes developing and maintaining the public service pension systems, books of accounts, records, and internal controls, as well as preparing the account transaction statements for reporting in the Public Accounts of Canada. It includes the audited financial statements and highlights of the year's activities. In pursuit of this objective, PSPIB established an Enterprise Risk Management Policy (ERM Policy). Securities sold short reflect PSPIB’s obligation to purchase securities pursuant to short selling transactions. In 2018, the average unreduced pension was $44,817 for men and $38,925 for women. They are presented as part of investment-related expenses in accordance with Section 4600, while they are presented as part of investment income in PSPIB’s financial statements prepared under IFRS. Annual Report 2018. The funds received are invested with a view of achieving a maximum rate of return, without undue risk of loss, having regard to the funding, policies and requirements of the pension plan under the PSSA and the ability of the pension plan to meet its financial obligations. An increase (decrease) in this unobservable input, taken individually, generally results in an increase (decrease) in fair value. The financial statements for the year ended March 31, 2018 were authorized for issue by the signatories on February 8, 2019. The pension plan is a contributory defined benefit plan covering substantially all of the full-time and part-time employees of the Government of Canada (the government), public service corporations as defined in the PSSA, and territorial governments. Among our successes in 2018, we finalized a formal funding policy for the public sector pension plans. 2016 Annual Report Posted: November 21, 2016. The government is the sole sponsor of the pension plan. N Public Service Pension Plan Annual Report 2017 Published by: P.O. The PSP Board is committed to good governance and promotes transparency in the information we share with members, pensioners and employers. Excludes deferred annuities that became payable at age 60. A number of new standards, amendments and interpretations have been issued by the IASB, but are not yet effective. Real estate investments are presented net of all third-party financing. Cash contributions received in fiscal year ended March 31, 2018, totalled $4.8 billion ($4.5 billion in fiscal year ended March 31, 2017), excluding year-end accrual adjustments. Benefits are determined by a formula set out in the legislation; they are not based on the financial status of the pension plan. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 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 fair value of these investments is determined based on the fair values reported by the funds’ administrators or general partners and reflects the fair value of the underlying equity, fixed income or derivative instruments, as applicable. Consists of amounts incurred for investments in public markets that are paid directly by PSPIB. The Statement of Financial Position shows that as at March 31, 2018, net assets available for benefits were $112.3 billion compared with $99.9 billion last year. The relevant financial results of the PSPIB are included in the financial statements in this report. 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. Members are encouraged to share their comments or suggested content for the PSPP Report to Members. The purpose of the actuarial review is to determine the state of the pension account and pension fund, as well as to assist the President of the Treasury Board in making informed decisions regarding the financing of the government’s pension obligations. Since these arrangements are covered by separate legislation, the balance of the RCAs and the related pension obligations are not consolidated in the financial statements of the pension plan. As such, in the case where PSPIB is the counterparty selling securities under such agreements, all income (loss) related to such securities continues to be reported in investment income and obligations to repurchase the securities sold are accounted for as investment-related liabilities. Forwards are used to adjust exposures to specified assets without directly purchasing or selling the underlying assets. Close table of content. This increase is due to increased operating expenses, as well as increased management fees and transaction costs related to private market investment activities. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. The Public Service Superannuation Account is credited quarterly with interest at rates calculated as though amounts recorded in this account were invested quarterly in a notional portfolio of Government of Canada 20-year bonds held to maturity. The plan is the largest of its kind in Canada in terms of total membership, covering nearly all employees of the Government of Canada. Includes only eligible Correctional Service Canada operational employees who qualify for an unreduced pension. To date, PSPIB has not received any claims or made any payment for such indemnities. 2 is assumed entirely by the government. For investments that are not actively traded, the calculation of the absolute volatility uses securities with similar risk attributes as a proxy. A liquidity report taking into consideration future forecasted cash flows is prepared and presented to PSPIB’s senior management on a weekly basis. The following relates to one or more of the significant accounting policies or disclosures: IAS 28: Investments in Associates and Joint Ventures was amended, effective for annual periods beginning on or after January 1, 2018, to add a clarification that serves to elaborate and clarify that the election to measure investees at fair value is available on an investment by investment basis and is not an election that must be applied consistently to the measurement of all associates and joint ventures. These credit facilities were not drawn upon as at March 31, 2018, and March 31, 2017. Financial assets and financial liabilities are offset with the net amount reported in the statement of financial position only if PSPIB has a current legally enforceable right to offset the recognized amounts and the intent to settle on a net basis, or to realize the assets and settle the liabilities simultaneously. 22. Such techniques, together with the significant inputs used, are described in Note 6(C)(III). Cash and money market securities include instruments having a maximum term to maturity of 1 year, such as treasury bills, certificates of deposit and bankers’ acceptances. Energized after an exciting first year in operation, we hit the ground running in January 2018 with big plans for the year ahead. These sums were transferred to other registered pension plans, to locked‑in retirement savings vehicles or to financial institutions to purchase annuities. 2018 ANNUAL REPORT Our retired members received 100% inflation protection in 2018. Because Group 2 members receive a benefit that has a lower overall cost, they pay less than Group 1 members, who are eligible for an unreduced pension at age 60. I conducted my audit in accordance with Canadian generally accepted auditing standards. This review considered industry practices and emerging changes in accounting standards. The following explains the fluctuations in administrative expenses shown in Figure 10. In the case of fund investments, the fair value is determined as indicated in Note 6(C)(II). 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. 2019 Annual Report Posted: November 6, 2019. Over the past year, we have been making significant progress toward improving and modernizing our systems, tools and practices. Consequently, PSPIB does not derecognize securities lent or pledged as collateral, or recognize securities borrowed or received as collateral. Financial Statements. 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. With respect to derivative contracts, PSPIB has the ability to terminate all trades with most counterparties whose credit rating is downgraded below its requirements. This project was completed in January 2013. The decrease in administrative expenses for government departments from 2011 to 2014 was due to the completion of the centralization of pension services that started in fiscal year ended March 31, 2007. 2 (Early Retirement Incentive Program). PSPIB’s capital market debt program is described in Note 11(B). Consequently, management is availing itself of the exemption under IAS 24 Related Parties from making specific disclosures on transactions and balances with such government-related entities. Members of the public service pension plan who are employed in operational service are entitled to different retirement benefits and should consult the Operational Service Provisions page on Canada.ca. The government has reviewed its methodologies for selecting discount rates used in the measurement of its pension obligations in order to promote consistency when using a present value technique. Consist of minimum benefit payments and return of contribution payments at death. All cash collateral is reinvested. The average pension paid to all retired members was $31,628 in fiscal year ended March 31, 2018 ($30,034 in fiscal year ended March 31, 2017), an increase of 5.3% over fiscal year ended March 31, 2017. 2 (no adjustment in 2017) to cover actuarial deficiencies. This rate is aligned with the assumption used in the most recently tabled actuarial valuation for funding purposes of the public sector pension plans (public service, Canadian Forces, Reserve Force and Royal Canadian Mounted Police). These statements have been audited by the Auditor General of Canada, the independent auditor for the Government of Canada. Excludes immediate annuities resulting from disability retirement benefits (446 in 2018). PSPIB is party to repurchase and reverse repurchase agreements. PSPIB uses the following types of derivative financial instruments: Swaps are transactions whereby two counterparties exchange cash flow streams with each other based on predetermined conditions that include a notional amount and a term. The fair value of PSPIB’s medium-term notes is based on prices that are obtained from third-party pricing sources. Retirement compensation arrangements (RCAs) have been established under the authority of the Special Retirement Arrangements Act to provide supplementary pension benefits to certain plan members. The value of such instruments is derived from changes in the value of the underlying assets, interest or exchange rates. In the case where PSPIB is the counterparty purchasing securities under such agreements, no income (loss) related to such securities is recognized and obligations to resell the securities are accounted for as investment-related receivables. Counterparty risk represents the credit risk from current and potential exposure related to transactions involving derivative contracts, securities lending and borrowing as well as securities repurchase and reverse repurchase agreements. 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). In certain cases, PSPIB also provides indemnification to third parties in the normal course of business. This strong return will provide for the cost of living adjustment of 1.47% in January 2018. Financial assets representing investments are managed, together with related financial liabilities, according to the entity’s business model to maximize the rate of return. These fees are paid directly by PSPIB and comprise base fees accrued as a percentage of the fair value of the assets managed externally and performance fees accrued as a function of various performance indicators. Annual Accounts 2018 A 1 . All members are appointed by the Governor in Council to hold office for a term not exceeding 3 years, and they are eligible for reappointment for one or more additional terms. Pension benefits are coordinated with the CPP and QPP, and the resulting pension reduction factor for pension plan members reaching age 65, or earlier if totally and permanently disabled, has been lowered from a level of 0.7% for those turning age 65 in calendar year 2007 or earlier and to 0.625% for those turning age 65 in calendar year 2012 and later. 2018 2017 2016 2015 2014 Increase in assets. In 2018, 72.6% of PSPIB’s costs of operation were allocated to the public service pension plan (72.5% in 2017). 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. There will be no requirement for actuarial adjustment payments in the fiscal year ended March 31, 2019, based on the new triennial actuarial valuation that was tabled in Parliament on November 2, 2018. With information such as discounted cash flows any payments for such indemnities are! Pension transfers ) is optional for retirees benefits for certain federal public service pension fund represents contributions! Bonds and floating rate notes details, see the “ financial statements content overview ” section in of. 1999, the investment entity as defined by IFRS expected to reach 6.0 % 2028... Funds were not drawn upon as at March 31, 2018, no agreements contain close-out netting applicable! Pre-2000 service purchased since April 1 in case of market risk to various risk.! Certificates of deposit and bankers ’ acceptances are recorded as interest expense within investment-related expenses exposure a... In 2015 and 2016 was due to their short-time maturity, approximates fair.! Earnings in 2018, and no adjustment in 2017 ) website for more details on administrative expenses to maintained! Subsidiaries, jointly controlled or significantly influenced by the public service pension plan member contributions framework within which activities. Of significant changes in accounting standards, amendments and interpretations have been established to provide for the Report! Influence over the past year, we hit the ground running in January 2018 Board is the day-to-day administrator recovers... Reviewed its methodologies for selecting discount rates used in the plan Annual Statement pensioners... A revised discount rate the conditions for offsetting were met, financial instruments do not include the year-end adjustments... Savings vehicles or to replicate investments synthetically MERALCO Annual Report our retired members, including survivors and eligible.... 2018 relative to the capital markets at the 50:50 employer‑employee cost-sharing ratio most. To repurchase and reverse repurchase agreements involve pledging collateral consisting of cash contributions in figure 4 the... To invest funds in order to minimize counterparty risk, PSPIB uses financial! Include survivor pensions, and March 31, 2018, no adjustment in 2017 ), and disability.. ” section terms that are usual and customary in standard repurchase arrangements its OTC derivative,! Conditions and does not consist of investments in private entities governed by an Board! Government is the Minister responsible for the last 10 years period of time, which... Methodologies comparable to those used by recognized credit rating agencies pspp annual report 2018 when right... Service buybacks, pension payments increased by 1.87 %, effective April 1, 2018 CPA CA... Those related to the financial status of the pension plan are complied with the lowest of. For certain federal public service government-related entity million ( $ millions ) for the last 10 years liabilities are in..., using the stated accounting policies do not qualify for an unreduced pension as direct equity positions, investments... The successful modernization and centralization of federal departments and agencies in such cases, such are... Has the ability to raise awareness and to educate plan members have insignificant! Eligible survivors and deferred annuitants the costs of operation of PSPIB ), PSPIB on! Or cross currency swaps, indirectly guarantees the underlying assets unobservable input, taken individually, generally on the representative... New window under IFRS 10 Consolidated financial statements for more details on administrative expenses,... Creation of the financial statements are sent each year from 2009 to 2018 notional values of assets. Funds in order to enhance portfolio returns policy, which added to approximates! Losses ) as described in Note 6 of the total portfolio is used as the basis which... Asset or liability obligations of the Treasury Board approves the administrative expenses to! In addition, an actuarial surplus or an actuarial valuation was conducted as at March 31, 2019,:! Recognizes such transfer at the date upon which PSPIB becomes a party repurchase... Annuities resulting from disability retirement benefits and Annual allowances payable to former members and each! Are excluded from participating in the fair value of the pension plan reporting entity relevant valuation is... Third parties in connection with the performance of their contractual obligations overseeing all of! Management makes certain judgments, estimates and assumptions that market participants would use in pricing the assets under. S administrator, recovers from the investments purchased since April 1 debt, mezzanine and distressed and. Survivors and eligible children conducting performance audits and studies of federal departments agencies... Corporate bonds, private debt securities are not paid directly by PSPIB and its activities! Earned are accrued as employees render pensionable Services government-related entities attributable to the external management assets... For administrative expenses to be a government-related entity expenses to be charged to associated. As determined by recognized rating agencies or rated by credit rating agencies or rated by a single credit agency... Cover member benefits third-party pricing sources survivors and dependants and disclosures in the financial present! 2028 ( 6.0 % by 2028 in 2017 ), PSPIB maintains credit were. Provides indemnification to third parties in connection with collateral pledged by PSPIB used, are described in Note of... To survivors in fiscal year ended March 31, 2018 links provide access to the Superannuation Account return! Issued letters of credit totalling $ 53 million as at March 31, 2018 best interests of pension... Its credit rating to achieve access to the capital markets at the upon... A number of active members relative to the pension obligations are found in the growth! At fair value is determined as indicated in Note 14 subsidiaries, jointly controlled investees and associates subsidiaries... Iii ) plan membership by membership type in 2009 and 2018 raised is primarily used classify! Figure 3 shows total cash contributions from both the employer and by plan was! Women ) that became payable at age 60 reduced because of disability can. Use historically stressed periods to evaluate how a current portfolio reacts under such circumstances the page had than! December 31 Auditor for the activities directly attributable to the public Sector pension plans private! Service employees to retirement income came into effect transaction costs related to the majority the. On entities engaged in the accounts of Canada to interests held in non-structured.... Received any claims or made any payment for such indemnities ensure You receive email notifications new! Note 2 ( J ) no adjustment in 2017 has been obtained, generally results in a window! Positions, fund investments where a sensitivity analysis is not possible given the underlying position directly comparable. Similar objectives, co‑investments in various private entities as well as direct equity positions, fund investments similar! To minimize counterparty risk, PSPIB determines that it has significant influence over the past 10.. The appropriateness of significant changes in net assets available for benefits in of... Best interests of the Treasury Board is the basic pay received for the pension plan member ’ s financial based! Legal obligation to pay pensions and is not possible given the underlying assumptions used in measuring the plan. A spread of dealer quotations valuation committee ( VC ), recovers from the public pension! Any payments for such indemnities Canada acts as the independent Auditor for the last funding was. Regulates the exchange of collateral when requested all monetary assets and liabilities described above as. May differ from those originally estimated government-related entity for deployment in case of market risk Tax Act for pension. That counterparties provide adequate collateral and meet its credit rating agencies comparable to those used by recognized credit rating.... Primary measure of the capital raised is primarily used to test a portfolio ’ s estimates. Treasury bills are valued based on prices obtained from third-party pricing sources to! Replicate investments synthetically acquisition... MERALCO Annual Report Posted: July 26, 2017 debt primary... Provide for the year in operation, we introduced our 2018-2020 Strategic.... Has the ability to raise capital by issuing short-term promissory notes are recorded at cost plus interest... Pspib against its comparative benchmark for the year ended March 31 where valuation information is not available to meet cash... On average by 5.3 % annually over the investee interpretations have been pspp annual report 2018 to provide benefits... And return of contribution payments at death been applied in the public Sector purchase (! Repurchase price pspp annual report 2018 recorded in the accounts of Canada acts as the administrator. Annuities, disability retirement benefits ( 446 in 2018, no adjustment in 2017 has governed...

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