2024 Risk Management Conference: Panel: Expanding access to DB pension plans best way to maintain sustainability

This five-year longevity increase is also coming at a time when DB plan sponsors are facing market volatility stemming from high inflation and geopolitical concerns that are expected to persist for some time, he noted.

Read: Canadian DB pension plans return -6.4% during heightened volatility in Q1: report

The OPB’s key risk management strategy began years ago when it helped launch the Investment Management Corp. of Ontario, which provides the pension fund with an increased ability to scale and access markets. “They have enhanced research and significant risk management capabilities so that . . . strategic partnership is a big piece in our investment strategy in terms of mitigation.”

In addition, Bozek noted the OPB’s Public Service Pension Plan has experienced membership growth, which is changing its demographics and providing it with economies of scale from a costing perspective.

Also speaking on the panel, Asif Haque, the chief investment officer of the Colleges of Applied Arts and Technology pension plan, said expanding membership is one of the best ways to manage longer-term risks to the sustainability of a DB plan.

Read: Worker demand for DB pension plans could increase as financial concerns continue: CAAT

Pension envy is a big concern for DB plan sponsors in terms of providing equitable retirement savings across the board for all Canadians. “Our solution . . . is to grow,” he said. “We can make something like this work for more Canadians, not just for a select group. . . . It’s risk mitigation for us [because] it grows and diversifies our membership base and hopefully, in a small way, provides a positive solution to retirement challenges in Canada.”

Indeed, Haque noted regulatory interference could jeopardize how these plans function. Natasha Trainor, assistant vice-president of pension investments at NAV Canada, agreed.

“This is the first plan I worked at that’s a federally regulated corporate pension plan and subject to solvency funding,” she said during the panel discussion. “I’d previously only worked on going-concern-focused plans and the struggle between the going-concern objectives and the solvency objectives is a real one, particularly with the market volatility we’ve had in the past few years and the quick ramp-up in interest rates that we experienced in 2022.”

Read: Super-priority pension bill may hasten DB plan closures: expert

It sometimes feels as though DB plan sponsors have to sacrifice their going-concern objectives for solvency objectives, she noted. “Trying to figure out how best to balance that [is] something we’ve given a lot of thought to over the past few years.”

Over the last few decades, the amount of corporate DB plans have decreased, while other models — such as defined contribution, registered retirement savings plans and others — have increased, which Haque believes has led to suboptimal outcomes for plan members in some cases.

Ten to 15 years ago, the knee-jerk reaction to plan sustainability issues was to do away with the DB model in the private sector, he said, noting if energy was focused on modernizing the DB model to meet the concerns of private sector employers, it would have likely enhanced retirement savings outcomes.

Read more coverage of the 2024 Risk Management Conference.