: Province Embarks on Consultations to Enhance Pension Fund Investment Efficiencies

The 2012 Ontario Budget includes strong action to balance the budget and to maintain gains made in education and health care.  The Budget also presents a strong plan to move forward and transform public services – to change the way they are delivered to give Ontario families better value for money and better results.

Many of Ontario’s public-sector pension plans have a relatively small amount of assets and each one has its own investment management function.  For example, the 20 publicly funded universities in Ontario have more than 25 pension plans.  Not only does this duplicate costs and prevent economies of scale, but it also means that these plans cannot access higher-return investment opportunities that are available to other investment pools.  A recent study from the International Centre for Pension Management suggested that large plans outperform smaller plans by between 43 and 50 basis points per year. 

As announced in the Budget, the government intends to introduce a legislative framework in Fall 2012 that would facilitate the pooling of pension fund assets in the broader public sector (BPS).  Mr. Bill Morneau has been appointed as a special Pension Investment Advisor to lead the implementation process.  Mr. Morneau works extensively with organizations in the design and delivery of their employee benefits and compensation programs.  Mr. Morneau will be engaging individual plans and a range of other stakeholders as he develops recommendations for the government’s consideration. 

Other jurisdictions in Canada and internationally have identified benefits of pooling pension fund investments and have created new entities to manage these pooled assets.  In Ontario, this could be achieved either through a new investment management entity or by building on existing models.

To inform the recommendations of the Advisor, the views of individual plans, affected stakeholders and other individuals and groups are being sought.  We would appreciate hearing your thoughts on the following questions:

  • What is the appropriate mechanism(s) for pooling the investments of BPS pension plans?
  • Should participation in the model be voluntary or mandatory? 
  • What is the appropriate governance model to ensure effective leadership and representative decision-making?
  • How can the model meet plan-specific investment needs in a manner that is consistent with the fiduciary responsibilities of plan administrators?
  • How can the model be implemented?  What is the appropriate transition period for implementation?  How should transition costs be allocated?
  • What role should pension plan design, asset allocation models and the size of plan play in determining participation?
  • Are there any obstacles to the inclusion of defined contribution pension plans in the model?
  • Should the model include other BPS Investment Funds?

Please send your comments (in both WORD and PDF format) to pension.feedback@ontario.ca by June 30, 2012.  All submissions will be posted on this website at a future date unless you request otherwise.

Ontario Appoints Advisor To Lead Pension Investment Reforms

Bill Morneau: Special Advisor - BPS Pension Efficiencies