vancouver webcast financial and operational review accountable to you 4th annual general meeting...

Vancouver Vancouver WebcastWebcast

Financial and Operational Financial and Operational ReviewReview

Accountable To Accountable To YouYou

4th Annual General 4th Annual General MeetingMeeting

October 15, 2005October 15, 2005

2

AgendaAgenda

Plan profilePlan profile

Financial structureFinancial structure

Annual financial statementsAnnual financial statements

Actuarial valuationActuarial valuation

Service highlightsService highlights

3

PLAN PROFILEPLAN PROFILE

4

2004 Membership Profile2004 Membership Profile

Active Active membership membership 1% 1%

Number of retired Number of retired members members 8% 8% (about 3,900 new (about 3,900 new pensions granted)pensions granted)

* Members no longer employed with a * Members no longer employed with a Municipal Pension Plan employer, Municipal Pension Plan employer, but with contributions on deposit in but with contributions on deposit in the planthe plan

Retired 44,915Retired 44,91523%23%

Active 130,043Active 130,04366%66%

InactiveInactive** 21,217 21,21711%11%

5

Retired Members as a Percentage of Active Retired Members as a Percentage of Active MembersMembers

Year ended December 31Year ended December 31

Pen

sio

n B

en

efi

ts a

s a

%

Pen

sio

n B

en

efi

ts a

s a

%

of

Reg

ula

r C

on

trib

uti

on

sof

Reg

ula

r C

on

trib

uti

on

s

25%25%

35%35%37%37%

40%40%

ActualActual ForecastForecast

00

55101015152020

252530303535

40404545

19951995 20042004 20052005 20062006YearYear

Number of Number of retired retired members will members will continue to continue to grow as a grow as a result of aging result of aging membershipmembership

6

2004 Age Profile of Active 2004 Age Profile of Active MembersMembers

<40 yrs27%

>60 yrs4%55-59 yrs

13%

50-54 yrs 19%

40-49 yrs37%

7

2004 Active Members by 2004 Active Members by GroupGroup

91,173 Females91,173 Females(other than Police/Fire)(other than Police/Fire)

70%70%5,853 Police/Fire5,853 Police/Fire

5%5%

33,006 Males33,006 Males(other than (other than Police/Fire)Police/Fire)

25%25%

There are 130,043 active membersThere are 130,043 active members

11 females from a special closed group (0.01%) not shown on graph11 females from a special closed group (0.01%) not shown on graph

8

2004 Employer Profile2004 Employer ProfileTotal regular contributions by employer sectorTotal regular contributions by employer sector

There are 599 Municipal Pension Plan employersThere are 599 Municipal Pension Plan employers

Health Health SectorSector

53%53%Municipal and Municipal and

Regional Regional DistrictsDistricts

30%30%

School School DistrictsDistricts

11%11%

CollegesColleges

3%3% OtherOther

3%3%

9

Pensions Granted by AgePensions Granted by Age

Normal Retirement Age 65Normal Retirement Age 65 Normal retirement Age 60Normal retirement Age 60

Per

cen

tP

er

cen

t

Per

cen

tP

er

cen

t

3434

4343

99

1414

00

1010

2020

3030

4040

5050

6060

5555 56-5956-59 60-6460-64 6565

1515

1010

3030

4545

00

1010

2020

3030

4040

5050

6060

5050 51-5451-54 55-5955-59 6060

10

FINANCIAL STRUCTUREFINANCIAL STRUCTURE

11

Plan Financial Structure Plan Financial Structure

Member $Member $Employer $Employer $

The Retirement Annuity Account accumulates special The Retirement Annuity Account accumulates special agreement contributions used to fund retirement agreement contributions used to fund retirement annuities ($0.3 billion).annuities ($0.3 billion).

Inflation Adjustment Inflation Adjustment AccountAccount

$3.3 billion$3.3 billion

Funds Future Funds Future IndexingIndexing

Basic AccountBasic Account


Funds Basic Funds Basic PensionsPensions

Supplemental Supplemental Benefits AccountBenefits Account

Funds Group Funds Group BenefitsBenefits

Employer $Employer $

12












13












14

Inflation Adjustment AccountInflation Adjustment Account

IAA Balance History

$ B

illion

s$

Billion

s

Increase to pensions in Increase to pensions in January is based on year January is based on year over year increase in over year increase in the Canadian Consumer the Canadian Consumer Price IndexPrice Index

Full indexing granted in Full indexing granted in Jan. 2004 was 2.2%Jan. 2004 was 2.2%

Historically, the plan Historically, the plan has paid full indexinghas paid full indexing

YearYear

0.00.0

0.50.5

1.01.0

1.51.5

2.02.0

2.52.5

3.03.0

3.53.5

9090 9191 9292 9393 9494 9595 9696 9797 9898 9999 0000 0101 0202 0303 0404

15












16

ANNUAL FINANCIAL ANNUAL FINANCIAL STATEMENTSSTATEMENTS

17

Annual Financial StatementsAnnual Financial Statements

Prepared by Pension Corporation, board’s Prepared by Pension Corporation, board’s administrative agentadministrative agent

Audited by KPMG LLP, board-appointed Audited by KPMG LLP, board-appointed independent auditorindependent auditor ““Clean” audit reportClean” audit report

Board reviews and approves statementsBoard reviews and approves statements

Financial statements include:Financial statements include: Net assets available for benefitsNet assets available for benefits Changes in net assets available for benefitsChanges in net assets available for benefits Notes that include actuarial valuation informationNotes that include actuarial valuation information

18

Net Assets Available for Net Assets Available for BenefitsBenefitsas at December 2004as at December 2004

Net assets Net assets $1.7 billion (about 10%) from Dec. 2003 $1.7 billion (about 10%) from Dec. 2003

$ Thousands$ Thousands

Investments & cashInvestments & cash $18,163,988$18,163,988Contributions receivableContributions receivable 30,329 30,329 Accrued investment income Accrued investment income 2,3802,380Prepaid expensesPrepaid expenses 4,2674,267Net investment settlementsNet investment settlements 34,46834,468Other accounts payableOther accounts payable (20,305)(20,305)

Total (Basic, IAA, RAA)Total (Basic, IAA, RAA) $18,215,127$18,215,127

19

Changes in Net Assets Available for Changes in Net Assets Available for Benefits Benefits ($ Thousands)($ Thousands)

Net assets as at December 31, 2003Net assets as at December 31, 2003$16,493,296$16,493,296

Investment incomeInvestment income

$1,686,391$1,686,391ContributionsContributions 774,710 774,710 Net transfer with other plansNet transfer with other plans 608608Pension benefitsPension benefits (593,731)(593,731)Retired member group benefitsRetired member group benefits (41,391)(41,391)Termination & Refund Benefits Termination & Refund Benefits (61,648)(61,648)Investment & Administration CostsInvestment & Administration Costs (43,108)(43,108)

Total IncreaseTotal Increase $1,721,831$1,721,831

Net assets as at December 31, 2004Net assets as at December 31, 2004 $18,215,127 $18,215,127

20

Net Assets Available for Net Assets Available for BenefitsBenefits

$ B

illion

s$

Billion

s

10%10%

15.215.2 15.115.1 14.614.6

16.516.518.218.2

12.0 11.613.2

14.7

3.1 3.0

3.3

3.5

12.0

3.2

0

5

10

15

20

2000 2001 2002 2003 2004

Net assets available for inflation protection

Net assets available for basic pension benefits

21

Pension ContributionsPension Contributions

Contributions Contributions 2% 2% over 2003over 2003

$775 million versus $775 million versus $759 million$759 million

Salary base Salary base 2% 2%

Active members Active members 1% 1%

Purchases Purchases 1%1%

YearYear

$ M

illion

s$ M

illion

s

775775

617617 653653711711

759759

00

100100

200200

300300

400400

20002000 20012001 20022002 20032003 20042004

MemberMember EmployerEmployer

22

Pension BenefitsPension Benefits

Pension benefit Pension benefit payments payments 13% 13% over 2003over 2003

$594 million $594 million versus $525 versus $525 millionmillion

Number of retired Number of retired members members 8% 8%

Full CPI indexing Full CPI indexing of 2.2% at of 2.2% at January 2004 January 2004 (2003: 2.3%)(2003: 2.3%)

$ M

illion

s$

Million

s

325.1325.1 356.2356.2 391.5391.5436.0436.0

497.8497.8

68.368.375.875.8

83.583.589.089.0

96.296.2

0

100

200

300

400

500

600

700

20002000 20012001 20022002 20032003 20042004

Inflation adjustmentInflation adjustmentBasic pensions

393393432432

475475525525

594594

YearYear

23

Pensions Benefits as a Percentage of Pensions Benefits as a Percentage of Regular ContributionsRegular Contributions

Pen

sio

n B

en

efi

ts a

s a

% o

f P

en

sio

n B

en

efi

ts a

s a

% o

f R

eg

ula

r C

on

trib

uti

on

sR

eg

ula

r C

on

trib

uti

on

s

Year ended December 31Year ended December 31

56%56%

81%81% 85%85% 90%90%

00101020203030404050506060707080809090

100100

19951995 20042004 20052005 20062006

Year


Number of Number of retired retired members will members will continue to continue to grow as a grow as a result of aging result of aging membershipmembership

24

Retired Member Group Benefit Retired Member Group Benefit CostsCosts Extended Health, Dental and MSPExtended Health, Dental and MSP

Costs Costs 21% due to: 21% due to:

Spousal and dependent Spousal and dependent premiums introduced in premiums introduced in Jan. 2004 for extended Jan. 2004 for extended health and dentalhealth and dental

Partially offset by Partially offset by increase in retired increase in retired members and rising members and rising extended health and extended health and dental costs dental costs

Costs Costs increased 18% increased 18% from 2000 to 2004from 2000 to 2004

Number of retired Number of retired members members 32% over 32% over same periodsame period

$ M

illion

s$

Million

s

YearYear

34.939.6

51.0 52.6

41.4

00

1010

2020

3030

4040

5050

6060

20002000 20012001 20022002 20032003 20042004

25

Retired Member Group Retired Member Group BenefitsBenefitsGroup Benefit Costs as a Percentage of Employer IAA Group Benefit Costs as a Percentage of Employer IAA ContributionsContributions

The plan rules require The plan rules require that retired member that retired member group benefit costs group benefit costs not exceed 100% of not exceed 100% of employer IAA employer IAA contributionscontributions

This rule is applied on This rule is applied on a fiscal year basisa fiscal year basis%

of

Em

plo

yer

IAA

%

of

Em

plo

yer

IAA

C

on

trib

uti

on

s U

sed

Con

trib

uti

on

s U

sed


00

2020

4040

6060

8080

100100

120120

20032003 20042004 20072007 2008200820052005

94%94%

YearYear

Funding Policy Maximum Funding Policy Maximum (100%)(100%)

77%77%

52%52%64%64%

111%111%

26

ACTUARIAL VALUATIONACTUARIAL VALUATION

27

Basic Account Actuarial Basic Account Actuarial ValuationValuationDefined Benefit PortionDefined Benefit Portion

Assumptions include:

Investment return

Salary escalation rate

Mortality and termination rates

Retirement age

Assets Assets -- Liabilities Liabilities == Surplus or (Unfunded Surplus or (Unfunded Liability)Liability)

Investment Investment fundfund

Future member Future member contributionscontributions

Future Future employer employer contributionscontributions

Pensions being Pensions being paid paid

Value of pensions Value of pensions for current active & for current active & inactive membersinactive members

Other future Other future expensesexpenses

Actuarial Actuarial value of value of

basic basic account account assetsassets

Actuarial Actuarial liability of liability of

basic basic accountaccount

28


Independent actuary appointed by boardIndependent actuary appointed by board

Results of valuation and key assumptions Results of valuation and key assumptions reviewed by the boardreviewed by the board

Most important indicator of the financial Most important indicator of the financial health of the basic accounthealth of the basic account

Most recent valuation done as at Dec. 31, Most recent valuation done as at Dec. 31, 20032003

29


Primary purpose of the valuation is to Primary purpose of the valuation is to determine appropriate member and determine appropriate member and employer contribution rates required to employer contribution rates required to properly finance the basic accountproperly finance the basic account

Change in actuarial position from Change in actuarial position from surplus of $436 million as at Dec. 31, surplus of $436 million as at Dec. 31, 2000, to an unfunded liability of $789 2000, to an unfunded liability of $789 million as at December 31, 2003million as at December 31, 2003

30

Total Basic Benefit Liability Total Basic Benefit Liability FundingFunding

YearYear

$ B

illion

s$

Billion

s

0.550.55

0.440.44

0.790.79

12.6512.65

16.6116.61

20.5220.52

00

55

1010

1515

2020

2525

19971997 20002000 20032003

Funded PortionFunded Portion

Unfunded LiabilityUnfunded Liability

SurplusSurplus

Funded portion of the Funded portion of the basic benefit liability is basic benefit liability is $20.52 billion, meaning $20.52 billion, meaning the basic benefit the basic benefit obligation is 96% fundedobligation is 96% funded

Liability indicates Liability indicates additional contributions additional contributions required to properly required to properly finance basic benefitsfinance basic benefits

31

Reason for Change in Actuarial Reason for Change in Actuarial PositionPosition

Change in actuarial position from surplus of Change in actuarial position from surplus of $436 million as at Dec. 31, 2000, to an $436 million as at Dec. 31, 2000, to an unfunded liability of $789 million as at Dec. unfunded liability of $789 million as at Dec. 31, 200331, 2003

There were two primary reasons for the There were two primary reasons for the change in the actuarial position:change in the actuarial position: Lower rates of investment performanceLower rates of investment performance Revised assumptions about future rates of Revised assumptions about future rates of

investment performanceinvestment performance

32

Increase in Contribution RatesIncrease in Contribution Rates

The The Joint Trust AgreementJoint Trust Agreement requires that: requires that: Contribution rates must be increased in order to Contribution rates must be increased in order to

properly finance the pension plan;properly finance the pension plan; That those rate increases must be shared equally That those rate increases must be shared equally

between plan members and employersbetween plan members and employers

Trustees decided that effective July 1, 2005, Trustees decided that effective July 1, 2005, member and employer contribution rates member and employer contribution rates each increased by 0.99% of salaries, as each increased by 0.99% of salaries, as recommended by the actuaryrecommended by the actuary

33

SERVICE HIGHLIGHTSSERVICE HIGHLIGHTS

34

3-Year Continuous 3-Year Continuous ImprovementImprovementClient Satisfaction – Recent RetireesClient Satisfaction – Recent Retirees

02/0302/03 03/0403/04 04/0504/05

TargetTargetActuaActuall

94%94%84%84%

00

2020

4040

6060

8080

100100P

er

cen

tP

er

cen

t90%90%

YearYear

94%94%

35

3-Year Continuous 3-Year Continuous ImprovementImprovementFirst Pension Payment on TimeFirst Pension Payment on Time

02/0302/03 03/0403/04 04/0504/0500

2020

4040

6060

8080

100100P

er

cen

tP

er

cen

t

TargetsTargetsActuaActuall

99%99%97%97%95%95%

98%98% 98%98% 98%98%

YearYear

36

3-Year Continuous 3-Year Continuous ImprovementImprovementFinal Pension Options on TimeFinal Pension Options on Time

02/0302/03 03/0403/04 04/0504/0500

2020

4040

6060

8080

100100

Per

cen

tP

er

cen

t

TargetsTargetsActualActual

Annual ForecastAnnual ForecastActual for 12 MonthsActual for 12 Months

93%93%85%85%73%73%

Service RequestsService Requests(demand 8% higher (demand 8% higher

than forecast)than forecast)

7,5677,5677,0007,000

75% 75% within within 30 days30 days



YearYear

37

3-Year Continuous 3-Year Continuous ImprovementImprovementPurchase Quotes on TimePurchase Quotes on Time

02/0302/03 03/0403/04 04/0504/0500

2020

4040

6060

8080

100100

Per

cen

tP

er

cen

t


88%88%77%77%

75%75%


70% 70% within within

30 days30 days


YearYear

38

3-Year Continuous 3-Year Continuous ImprovementImprovementTermination Options on TimeTermination Options on Time

02/0302/03 03/0403/04 04/0504/0500

2020

4040

6060

8080

100100

Per

cen

tP

er

cen

t


92%92%88%88%

78%78%




YearYear

39

Continuous ImprovementContinuous ImprovementResponse to Written EnquiriesResponse to Written Enquiries

03/0403/04 04/0504/0500

2020

4040

6060

8080

100100P

er

cen

tP

er

cen

t


93%93%86%86%



YearYear

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