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CSS executes longevity risk insurance policy

​Joint agreement with Co-operators only the third of its kind in Canada

Longevity risk insurance policy

We are very pleased to report that, after undertaking a competitive bid process with major insurers in Canada, CSS recently entered into a longevity risk insurance policy with Co-operators Life Insurance Company (Co-operators) to transfer longevity risk in our Pensions Fund to Co-operators. Read on for more information on this innovative and exciting initiative.


For many members of defined contribution (DC) pension plans such as ours, in-plan retirement income options are very beneficial, yet they are not common in Canada. Many Canadian DC plans do not offer in-plan retirement income options which forces members to leave their plan at retirement and move their accumulated pension funds into the retail financial markets where management fees and expenses can be significantly higher than in the DC plan. 

In a recent survey, 81% of our members told us it was “very important” to them that our Plan offers retirement income options. CSS has been offering one or more retirement income options to our members for close to 50 years and the majority of CSS members starting a retirement income utilize our in-plan retirement income options. We currently offer two retirement income options: 

1) Monthly pension (fixed monthly income for life); and 

2) Variable Benefit payments1 (periodic withdrawals from your CSS investments).  

For more details on each of these options please visit the Retiring section of our website.

The survey result and the high proportion of members starting a retirement income who choose a CSS retirement income option confirms that CSS members highly value the opportunity to remain in our plan in retirement. It is therefore very important for CSS to ensure we can continue to offer these retirement income options that members want and need. In this article we will look at recent steps that CSS has undertaken to enhance our ability to offer the monthly pension option for many years to come.

CSS began offering monthly pensions in the early 1970s. Today, there are over to 6,600 retirees receiving a monthly pension2 from CSS. Some of the key features of the monthly pension are:

  •    Members know exactly how much they will receive in retirement income each month
  •    Members know that they will receive the monthly pension for as long as they live
  •    Members do not need to take responsibility for investing the funds used to generate their monthly pension
  •    The administrative fees at CSS are very low compared to other options available in the retail market


One of the key risks that members are able to avoid3 by taking a monthly pension is the risk of outliving their retirement funds. With a CSS monthly pension, the member is assured to receive their monthly “paycheque” from CSS for as long as they live (and for as long as their spouse lives if the member predeceases their spouse and a Joint and Last Survivor monthly pension was taken).

Just as members do not know how long they will live in retirement, CSS does not know how long each individual member will live in retirement either.  However, because we have almost a half century of experience with the monthly pension product and because we have a large pool of retirees receiving monthly pensions, the Plan’s actuary4 is able to accurately estimate an average lifespan for a typical CSS member who takes a monthly pension. The actuary is also able to access statistics on how lifespans of Canadians have changed (increased) over time to estimate how much we can expect CSS members’ lifespans to improve over time. The actuary is then able to use all of this information to determine an appropriate “price” for a CSS monthly pension that allows the Plan to pay the pension to all members taking this option no matter how long they live. This works very well so long as the average lifespan of monthly pension recipients doesn’t increase unexpectedly.

We noted above that members offload their individual longevity risk – the risk of outliving their retirement assets – by starting a CSS monthly pension.  We also noted that CSS manages this collective longevity risk through the pricing of our monthly pensions, which includes a provision for the various expected risks of managing our monthly pensions program. In other words, we maintain an appropriate Pensions Fund surplus to manage longevity risk - along with all other risks - associated with operating an annuity or monthly pensions fund. 

One thing that the Plan and its actuary cannot predict, though, is unexpected improvements or increases in pensioners’ lifespans. An example of an unexpected improvement would be a major breakthrough in cancer research tomorrow that led to a significant reduction in cancer-related deaths. While this type of breakthrough would be very welcome, it would mean that CSS would have to pay monthly pensions to many of our pensioners for longer than we expected when the pension was originally purchased.  If the lifespan improvement was significant, it could lead to the CSS Pensions Fund being unable to absorb the increased payments required.


Over the past number of years, the CSS Board of Directors and management have been analyzing the above issue and working with our actuary, the Plan’s regulator, and others to find an option that eliminates or significantly reduces the Plan’s exposure to the risk of having to make more monthly pension payments than anticipated due to an unexpected improvement or increase in pensioner lifespans.

As noted at the beginning of this article, it is very important to CSS and our members that we are able to offer an in-plan monthly pension for life. We therefore sought a solution that would protect our pensioners and protect CSS’ ability to offer monthly pensions to members for many years to come.  The solution we settled on is relatively new in Canada but has been used for many years globally and was deemed the best fit for the needs of CSS and its pensioners.

The longevity risk insurance policy entered into with Co-operators transfers the collective longevity risk held by CSS at April 1, 2019, to Co-operators.  CSS pays a quarterly premium for the insurance coverage from the surplus held in the Pensions Fund to Co-operators and, in return, should the covered population of monthly pension recipients see an unexpected improvement in their lifespans, Co-operators will provide payment of the resulting additional monthly pension payments.

This is a very important and innovative initiative undertaken by CSS to both continue to adequately protect our monthly pensions currently in pay, as well as to allow us to continue offering monthly pensions to our members who want and need them well into the future. 

We appreciate that some of the concepts covered in this article may seem complex (they are!).  Should you have any questions or require any clarification of topics covered in this article, please do not hesitate to contact our office.

1 Variable Benefit payments are available in the following jurisdictions only: AB, BC, MB, SK, NS and Federal

2 Another name for monthly pension is annuity.  CSS members can convert all or a portion of their CSS account into a monthly pension which provides a fixed monthly income to the member for life.  Options exist for the member’s spouse to continue to receive payments if the member pre-deceases their spouse and payment guarantee periods may be added at the time of establishing the monthly pension.  For more details, please consult our website or contact our office to speak with a Pension Plan Consultant.

3 This risk is called “longevity risk” and it is offloaded by the member to CSS to manage when the member starts a monthly pension.

4 Actuary: a professional trained to assess financial consequences of risks, amongst other things.  They utilize mathematics, statistics, and financial theory to determine the financial impact of uncertain future events and utilize that information to advise pension plans on how to eliminate or reduce negative financial outcomes from those uncertain future events.