After OCRA’s June 2024 GM, CAAT Pension Plan senior staff answered a few questions posed by OCRA Board member Doug Greenwood. We are happy to share their responses:
One of the highlights when OCRA members meet at the General Meeting is the opportunity to interact with senior members of the CAAT Pension Plan. Evan Howard, Chief Pension Officer, and Mike Dawson, Chief Financial Officer, who attended our June 2024 meeting at Niagara College, presented an update on our pensions and spent a fair bit of time chatting with retirees. The OCRA Board is proud of the relationship that has been developed with senior staff at the CAAT Pension Plan over the years.
Board member Doug Greenwood is our resident pension guru and follows the activities of the CAAT Pension Plan closely. For those of you who are similarly inclined and are interested in the nuances, Doug’s follow up questions and Mike and Evan’s answers will be illuminating. Most of the questions relate to information shared in the CAAT Pension Plan Annual Report for 2023, which is very reassuringly entitled “The Comfort of Certainty”. If you would like to consult it while viewing this content, you can download the annual report PDF file from the CAAT Pension Plan website.
Question #1: There’s a significant increase in the returns from the CAAT investments in markets whose economies are in the developmental stage (sometimes called emerging markets). In fact, these returns are way above the normal averages i.e. CAAT returns are a healthy 19% whereas the average, or benchmark, returns are closer to 7%. Did we find a new country to invest in?
CAAT Pension Plan response: Our investments are managed actively, and the Plan had leaned into smaller stocks within emerging markets, and away from larger ones, particularly the very large companies in China. That positioning worked particularly well in 2023.
Question #2: The funding policy chart on page 32 of the report is always informative (the chart defines the level of financial health of the Pension Fund – 6 being the highest level), but I didn’t see that it identified what level we’re currently at or are hoping to achieve. I have seen a reference to this elsewhere i.e. that we’re heading for Level 6, which is great, but I wondered why the Annual Report didn’t identify this.
CAAT Pension Plan response: The Plan is currently in Funding Level 5. The primary objective with the Plan’s Funding Policy is long-term sustainability. As part of our Asset-Liability studies, we look at funding level outcomes based on a range of economic scenarios and while many of these scenarios indicate funding Level 6 as a possibility in the next 5 years, it remains uncertain and dependent on several external factors beyond the Plan’s control.
Question #3: The Ten-Year Review chart at the end of the report has a line item for administrative expenses which shows a dramatic increase over each of the last 3-4 years. At first, I wondered how much of this was related to the membership drive which has, of course, dramatically increased the number of employers and members in CAAT, but the statement on page 41 of the report indicates that only 18 million of the 107 total admin spend went towards membership expansion. Is this something you could comment on?
CAAT Pension Plan response: Administration expenses have largely gone up because of our membership growth, as additional resources are needed to service a larger, more complex membership base that spans across Canada. In addition, the Plan has made significant investments in our IT infrastructure, cyber security, and member/employer experience (such as web portals). The magnitude of these investments will reduce over time.
If you have other questions about the CAAT Pension Plan, please let us know. OCRA is happy to pose them to senior staff at the CAAT Pension Plan and share their responses.