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Making investment decisions​


When it comes to choosing how to invest your pension funds, there is no right answer. Much depends on your age, your other assets, your planned retirement date and your comfort with risk.

We encourage you to review your personal circumstances with a CSS Pension Plan Consultant or a qualified financial advisor at your financial institution to make a decision that's right for you.​

Investment choices

You can choose how to invest your pension funds in the CSS Pension Plan, though you're not required to.

What are my choices?

The CSS Pension Plan offers four investment funds ​ – a Money Market Fund, Bond Fund, Balanced Fund and Equity Fund. Each fund – or combination of funds – has different levels of risk and expected returns. How you choose to invest your pension funds can impact your retirement plan.​

Do I have to choose?

No. Members who do not want to set and monitor their own asset mix are automatically invested into the Balanced Fund. The Balanced Fund is the Plan's original diversified investment option.

Can I change my mind?

Yes. We understand that life circumstances and retirement plans can change, so you are free to move as little or as much of your pension funds as you like to any of the four funds, at any time. See changing your investments​ for instructions on how to do so.

What should I consider?

To make an informed choice, you should consider the following questions:

1. ​When will I retire?

2. How much pension funds will I need?

3. What type of retirement income do I want?

Your answers to these questions will affect how your pension funds should be invested. For help answering these questions, you should consult a CSS Pension Plan Consultant or a qualified financial advisor at your credit union or bank.


Investment risk and return

Market timing risk

​"Market timing" is the strategy of moving pension funds among the Plan's investment options in response to short-term market conditions.

Although you are free to do so, here are some things to think about before you take action.

Investing in retirement

Some retirees are more comfortable with the uncertain returns earned by market-based investments. They are willing to continue to accept investment risk, even after they retire, to have the opportunity to enjoy a higher retirement income. They are not distressed by the thought of receiving a variable retirement income. 

If you are comfortable with a variable retirement income, you will probably continue to hold market-based investments, like stocks, bonds and mutual funds after you retire. The value of these investments will continue to move up and down with the markets. A short-term loss at retirement will therefore not become permanent. Moving all your pension funds to lower risk funds in stages as retirement nears, therefore, may not serve any useful purpose. 

However, you could still move some of your pension funds into the Bond Fund to reduce the risk of short-term losses, or into the Money Market Fund to create a spending reserve. Then if markets were down when you retired, although some of your pension funds would track down with the markets, you would have other funds to spend while you wait for markets to recover. For example, moving one to three years of retirement income into the Money Market Fund as your retirement approaches could protect you from having to sell investments at a loss to pay your living expenses. If you already have cash reserves outside the Plan, then you may not need to take this precautionary measure.

VB payments are different from monthly pension payments. A traditional monthly pension is a fixed, guaranteed payment for life. VB payments, as the name suggests, can change from year to year and may not continue for life. A summary of the differences appears below:
Monthly pension VB payments
​Monthly lifetime income ​Monthly or annual withdrawals from investments
​Cannot change the payment amount ​Can change payment amount (within limits)
​Pension funds are transferred to CSS Pension Plan and invested in long-term bonds ​Pension funds stay invested in the Money Market Fund, Bond Fund, Balanced Fund and/or Equity Fund as instructed by the member
​Payments continue for life ​Payments stop when pension funds are all spent
​Pension funds are “spent” to buy a fixed monthly payment ​Any unspent funds belong to the member and can be left to a spouse or beneficiaries
​Annual retirement income is fixed for life based on the long-term interest rate at retirement Annual retirement income may vary with the returns on the member’s pension funds
If you choose VB payments: 
​​
  • ​​You will maintain ownership and control of your pension funds after you retire. Depending on your tolerance for risk, therefore, you will have the opportunity to earn a higher retirement income than you might receive as a monthly pension. You will also have limited flexibility to vary your retirement income from year to year. However, you will face risks that do not apply to monthly pension payments. 

  • You will continue to face investment risk after you retire. Starting VB payments does not change how your pension funds are invested. Your pension funds will remain invested in the same fund(s) as before you retired, unless you change your investments. If your pension funds are invested mostly or only in the Balanced Fund or Equity Fund, you will have the opportunity to earn a higher income, but you will also have a higher risk of suffering short-term losses.

Inflation Risk: Whether you choose to receive a monthly pension or VB payments, you will face inflation risk in retirement. Prices generally increase each year. The investments supporting your VB payments may or may not produce adequate returns to keep up with inflation. By continuing to hold some of your pension funds in the Balanced Fund or Equity Fund, you could partially offset the impact of inflation during retirement.  

Mortality Risk: Once you retire and begin to spend your pension funds, you will face mortality risk. This is the risk that your funds will run out and your VB payments will stop during your lifetime. To reduce this risk, most Canadian provinces impose maximum withdrawal limits. However, your pension funds could still be impaired, or even exhausted, through investment losses. If you continue to withdraw the maximum amount, or even a specified amount, regardless of your investment returns, the entire amount of your pension funds might be spent much sooner than you think. Reducing your VB payments following a year when returns are low can help to reduce this risk.

The CSS Pension Plan offers four investment funds: A Balanced Fund, Equity Fund, Bond Fund and Money Market Fund.

Used in combination, the Bond Fund and Equity Fund can serve as an alternative to the Balanced Fund. By using them you can have the flexibility to adjust the percentage of stocks you hold over bonds, and vice versa.   

As you contemplate retirement, you may feel comfortable remaining fully invested in the Balanced Fund. You should remember, however, that the Balanced Fund will experience short-term losses that will impact your retirement income. If you are planning to choose VB payments, you should re-examine your fund mix. Retirees have shorter time horizons and different needs. Older investors typically move a larger portion of their portfolio to fixed-income investments like bonds. This reduces the frequency and severity of short-term losses but does not eliminate them.
Although using the Money Market Fund can help to stabilize your retirement income, moving your entire balance into the Money Market Fund might be too conservative – even for a retiree. The expected return of the Money Market Fund can be too low to offset inflation. It can also actually be lower than the rate at which you could convert your pension funds into a regular pension. By holding a significant portion of your pension funds in the Bond Fund, for example, you would have the opportunity to earn higher average returns than the Money Market Fund. 
Further, by continuing to hold some of your pension funds in the Balanced Fund or Equity Fund, you would usually tend to earn better returns than bonds during periods of rising inflation. A retiree receiving VB payments, therefore, might still want to have some pension funds in the Balanced Fund or Equity Fund for many years into retirement.
As you approach retirement, you should review with a qualified financial advisor or a CSS Pension Plan Consultant the proportion of pension funds held in each of the Plan’s four investment funds. If you wish to move some or all of your accumulated pension funds among the Funds, you must complete an Investment Instructions form.

If you elect to receive VB payments you will maintain ownership and control of your pension funds. You will also have some flexibility in terms of your payment amount. The downside of this control and flexibility, however, is that there is no guarantee of a lifetime retirement income. You will remain exposed to investment risk and will face mortality risk after you retire.
​Equities vs. bonds*​# Losing years**​Average loss​Worst loss​Expected return***​Volatility
​100% Equities
0% Bonds
​6​-14.4%​-28.7%​7.9%​16.4%
​​80% Equities
20% Bonds
​6​-10.1%​-20.2%​7.2%​13.0%
​​60% Equities
40% Bonds
​6​-6.4%​-11.8%​6.4%​9.8%
​40% Equities
60% Bonds
​6​-3.3%​-4.4%​5.5%​6.8%
​​20% Equities
80% Bonds
​4​-3.0%​-7.0%​4.5%​4.8%
​0% Equities
100% Bonds
​5​-5.5%​-10.5%​3.4%​5.1%
* Equities are split 1/3 S&P TSX, 2/3 MSCI Global Equity. Bond returns are based on returns on Canada long-term bonds. All returns are expressed in Canadian dollars. 
** Calendar years. 
*** Expected return is for illustrative purposes only. Your actual returns will differ. Source: Canadian Institute of Actuaries 

In most provinces, pension legislation tries to limit mortality risk – the risk of running out of funds – by setting a maximum annual withdrawal limit. But even in provinces where a maximum limit applies, there is a chance that weak investment returns could cause you to run out of money. Prudent payment choices can help to reduce the risk that you will outlive your VB payments.
Your investment returns are an important factor when setting the amount of your VB payments. You should therefore consider how your investment returns might change after retirement. Not sure where to start? Our Pension Plan Consultants are here to help. Please contact us.