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The accumulated benefits of retirees who choose to start a fixed monthly pension
are transferred into the Pensions Fund - a segregate bond portfolio that secures
the Plan's pension liability. Monthly pension payments are paid from this Fund.
The Plan offers single and joint life pensions. Pensions provided by the Plan may
receive periodic, ad hoc increases, subject to the solvency of the Pensions Fund
and the policies adopted by the Plan's Board of Directors.
An actuarial valuation of the assets held in the Pensions Fund and of the Plan's
pension liability is required every three years by law. The most recently completed
valuation was conducted December 31, 2012. At that date, the Plan's actuary reported
that the market value of the assets held in the Pensions Fund exceeded the Plan's
pension liability.
Around the 20th of each month, the Plan sets the conversion rate for new pensions
that will start in the following month. This conversion rate is used to calculate
the payments for these new pensions.
The Pensions Fund is mainly invested in Government of Canada, Provincial and Corporate
Bonds.
To set the conversion rate, the Pensions Fund manager first determines the current
market yield available on Government of Canada Bonds with similar interest rate
sensitivity, or duration, to the cash flows or total payments produced by the new
pensions. This is subject to change every month based on movements in market interest
rates and other economic and financial factors.
The manager next adds an increment to reflect the additional yield then available
on Provincial and Corporate Bonds similar to those held in the Pensions Fund. Provincial
and Corporate Bonds typically produce a higher yield than Government of Canada Bonds.
This increment is also subject to change every month.
Finally, a margin of 0.4% is deducted by the Plan to pay for pension administration
and to support the Pension Fund’s security reserve. This margin is set by Plan policy
and does not change frequently.
Here is a table of historical conversion rates for new pensions:
Annuity Rates
| -- |
3.52 |
4.38 |
4.68 |
5.27 |
5.03 |
4.69 |
4.52 |
4.61 |
5.27 |
5.64 |
| January |
3.3 |
3.6 |
4.6 |
5.0 |
5.5 |
4.7 |
4.4 |
4.3 |
5.0 |
5.3 |
5.8 |
| February |
3.4 |
3.7 |
4.8 |
4.9 |
5.5 |
4.8 |
4.5 |
4.4 |
4.8 |
5.2 |
5.7 |
| March |
3.5 |
3.7 |
4.8 |
4.9 |
5.4 |
5.0 |
4.5 |
4.5 |
4.8 |
5.2 |
5.9 |
| April |
3.4 |
3.8 |
4.7 |
4.8 |
5.6 |
5.0 |
4.5 |
4.5 |
4.9 |
5.1 |
5.9 |
| May |
3.2 |
3.6 |
4.7 |
4.9 |
5.5 |
5.0 |
4.5 |
4.6 |
4.8 |
5.3 |
6.0 |
| June |
3.3 |
3.5 |
4.5 |
4.6 |
5.4 |
4.8 |
4.6 |
4.5 |
4.6 |
5.4 |
5.7 |
| July |
-- |
3.4 |
4.3 |
4.7 |
5.4 |
4.9 |
4.8 |
4.7 |
4.4 |
5.5 |
5.4 |
| August |
-- |
3.3 |
4.3 |
4.5 |
5.3 |
4.9 |
4.9 |
4.9 |
4.4 |
5.3 |
5.4 |
| September |
-- |
3.5 |
3.9 |
4.5 |
4.9 |
4.9 |
4.9 |
4.7 |
4.4 |
5.2 |
5.5 |
| October |
-- |
3.4 |
4.0 |
4.5 |
5.0 |
5.5 |
5.1 |
4.4 |
4.3 |
5.4 |
5.4 |
| November |
-- |
3.4 |
4.1 |
4.4 |
4.8 |
5.3 |
4.9 |
4.5 |
4.4 |
5.2 |
5.5 |
| December |
-- |
3.4 |
3.8 |
4.4 |
4.9 |
5.5 |
4.7 |
4.2 |
4.5 |
5.1 |
5.5 |
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