Canada Pension Research Articles

Pension Fund Efficiency: An International Comparison of Australian Performance

Using a sample of 256 pension funds from Australia, Canada, the United States and Europe for the period 2004 to 2012, we use data envelopment, cluster and multivariate analysis to compare performance. We find high efficiency scores for many smaller corporate funds and lower efficiency scores for larger Australian industry and retail funds. Among US, Canadian and European pension funds passive investment management outperforms active. Defined contribution and public offer fund types perform least well. We attribute the generally lower efficiency scores for Australian funds to the higher degree of separation between managers and beneficiaries which exists in Australia, where delegation of responsibility is widespread.

Is Gamma Frailty a Good Model? Evidence from Canadian Pension Funds

In this paper, we bootstrap data on Canadian pensioners' mortality (spanning 1999-2008) that was recently published by the CIA (2014) in order to study the characteristics of its implied heterogeneity. We find strong support for the gamma frailty model. It is remarkable that our results are obtained without making any distributional assumption.

Canadian pension fund investors in transport infrastructure: A case study

Policy makers and scholars have increasingly identified pension funds as an important source of private capital to finance the next generation of critical investment in infrastructure. However, to date pension funds globally have not been significant direct investors in infrastructure. This paper examines the opportunities and barriers to pension funds taking on a more significant role in the financing, delivery and operation of transportation infrastructure. This assessment is based on a case study of seven large Canadian pension funds, which have been at the forefront of a new wave of institutional investing in infrastructure. Drawing on key informant interviews with fund managers as well as an examination of annual reports, industry studies and media coverage, I illustrate how pension funds have specific characteristics that direct the types and locations of projects that they will invest in, as well as the models of deal structuring that are appealing. The results show that Canadian pension funds have focused primarily on investing in operational projects in established marketplaces, where they have demonstrated a willingness to assume traffic volume risk on projects that have demonstrated suitable demand in early operations.

AN ACTUARIAL BALANCE SHEET MODEL FOR DEFINED BENEFIT PAY-AS-YOU-GO PENSION SYSTEMS WITH DISABILITY AND RETIREMENT CONTINGENCIES

AbstractIn this paper, we develop a theoretical basis for drawing up a “Swedish” type actuarial balance sheet for a defined benefit pay-as-you-go (DB PAYG) scheme with retirement and disability benefits. Our model enables us to obtain the system's expected average turnover duration, measure the scheme's solvency and explore the phenomenon identified as “pension reclassification”, a widespread practice that masks the system's real status unless further pension information becomes available. The model is clearly linked to actuarial practice in social security and gives partial support to the practical adaptation of Swedish methodology carried out by OSFI (2012) in applying the concept of the contribution asset to the Canadian Pension Plan (CPP) balance sheet, which includes disability and survivor benefits.

Pension funds' allocations to hedge funds: an empirical analysis of US and Canadian defined benefit plans

This article investigates the characteristics of US and Canadian pension funds that allocate assets to hedge funds. The typical pension fund that invests in hedge funds is a large sophisticated pension fund that diversifies its portfolio across numerous classes of investments, private equity in particular, uses a core-satellite organization and has access to low delegation costs for alternative assets. Moreover, we find that pension funds investing in hedge funds significantly obtained higher global returns.

An Actuarial Balance Model for DB PAYG Pension Systems with Disability and Retirement Contingencies

In this paper we develop a theoretical basis for drawing up a “Swedish” type actuarial balance sheet for a defined benefit pay-as-you-go (DB PAYG) scheme with retirement and disability benefits. Our model enables us to obtain the system's expected average turnover duration, measure the scheme's solvency and explore the phenomenon identified as “pension reclassification”, a widespread practice that masks the system's real status unless further pension information becomes available. The model is clearly linked to actuarial practice in social security and gives partial support to the practical adaptation of Swedish methodology carried out by OSFI (2012) in applying the concept of the contribution asset to the Canadian Pension Plan (CPP) balance sheet, which includes disability and survivor benefits.

Pensions, Privatization, and Poverty: The Gendered Impact

Le présent article porte sur les conséquences genrées différentielles de la politique canadienne sur les pensions, ce qui contribue en revanche à la pauvreté des femmes âgées quand elles sont à la retraite. Ce phénomène est surtout lié au fait que la responsabilité de la sécurité économique relève de plus en plus du privé au Canada, où l'on préfère beaucoup laisser le secteur privé et la famille s'occuper du bien-être des citoyens plutôt que de compter sur l’État. Le présent article examine l'effet négatif sur les femmes de la tendance à créer des régimes d'employeur à cotisations déterminées au lieu de régimes de retraite à cotisations déterminées, le recours croissant aux dépenses fiscales pour encourager les épargnes privées de retraite et le fractionnement des revenus de pension. L'analyse se fonde sur des aspects socio-économiques de la vie des femmes et conclut qu'il faut renforcer les régimes de retraite publics, comme la Sécurité de la vieillesse et le Régime de pension du Canada si l'on veut remédier à l'inégalité économique des femmes à la retraite.

Measuring Longevity Risk for a Canadian Pension Fund

In this paper we consider two particular Canadian defined benefit pension plans to illustrate the importance of adequate mortality forecasting on actuarial liabilities. An employer who sets up an employee defined benefit pension plan promises to periodically pay a certain sum to the participant until death. Both the employee and the employer finance these periodical payments during the beneficiary’s career. Any shortcoming of funds in the future is, however, the employer’s responsibility. It is therefore essential for the employer to be able to predict with a high degree of confidence the total amount that will be required to cover its obligations to the future retiree. If increases in life expectancy were predictable and taken into consideration when establishing retirement funds, assessing future liabilities would be riskless in that respect. Unfortunately, future survival rates are uncertain. On that account, pensioners may outlive their life expectancies and expose pension funds to longevity risk. We present different tools to hedge this risk and the potential cost for two Canadian public pension plans.

Pension Funds' Allocations to Hedge Funds: An Empirical Analysis of U.S. and Canadian Defined Benefit Plans

This paper investigates the characteristics of US and Canadian pension funds that allocate assets to hedge funds. The typical pension fund that invests in hedge funds is a large sophisticated pension fund that diversifies its portfolio across numerous classes of investments, private equity in particular, uses a core-satellite organization and has access to low delegation costs for alternative assets. Moreover, we find that pension funds investing in hedge funds significantly obtained higher global returns.

Revisiting industrial democracy and pension trusteeship: The case of Canada

This article examines the extent to which industrial democracy theory may be applied to the operation of Canadian pension fund boards by analysing the balance of power between employers, employees and unions on joint consultative private and public sector pension boards in Ontario and Quebec. The article focuses on three indicators of industrial democracy: shareholder activism; involvement in fund investment policies (including socially responsible investment); and forms of collective action to invest pension funds in support of union objectives. It concludes that industrial democracy is stronger where it is supported by traditions of tripartism and concertation and by statutory employee rights to representation on private sector funds. Its conclusions also question whether Canada can be classed unequivocally as a ‘liberal market economy’, on the grounds that the economic regulatory regime in Quebec differs substantially from the rest of the country.

Avoiding blame, doing good, and claiming credit: Reforming Canadian income security

Abstract: This article examines federal legislation, An Act to Amend the Canada Pension Plan and the Old Age Security Act (Bill C‐36), from the vantage point of the contemporary politics of welfare state reform. Government decisions on the Canadian Pension Plan (CPP) and Old Age Security (OAS) made in the 1990s noticeably generated political and administrative feedback to the policy agenda and policy development processes. Bill C‐36 was the response by policy‐makers to solve these issues and use the occasion to make other changes they had been contemplating. The legislative reforms contained the imposition of specific losses for one group; the introduction of benefits for another group, both geographically diffuse clienteles; and, for all covered by these programs, modest improvements in service provision. Inside the federal public service, officials responsible for the CPP Disability program acted effectively as policy entrepreneurs, making use of a window of opportunity, and the necessity of amending the legislation, prompted by the focusing event of a critical audit report.

Canadian pension plan administrators and legal liability

Legal issues concerning Canadian private pension plans have grown in prominence, paralleling mounting concern over the adequacy of such pension plans to pay for benefits accrued by an ageing population nearing retirement. These concerns have become even more acute as a result of the global economic downturn and corresponding poor performance of pension plan investments. This article surveys the sources of legal obligations relating to pension plan administration, and provides a case study of a recent court decision in which the plan administrator was convicted of breaching certain quantitative investment regulations under Canadian law. Finally, it concludes by setting out a number of best practices to assist pension plan administrators in avoiding and limiting their exposure to legal liability.

Seeking Certainty in Uncertain Times: A Review of Recent Government-Sponsored Studies on the Regulation of Canadian Pension Plans

The need for reform of the regulation and design of workplace pensions for Canadians sparked three major provincial reviews by Ontario, Alberta and British Columbia, and Nova Scotia between November 2008 and January 2009. While Canadians with incomes below half the average wage are generally well served by government plans (CPP/QPP), those with moderate and higher earnings depend on workplace plans and/or personal savings to avoid substantial drops in their living standards in retirement years. As the three provincial reports make clear, it is time to fix the problems of workplace pension plans.

Aging and the Necessity of a Radical Reform of the Canadian Pension System

Compared to the 29 other members of OECD, Canadian workers must satisfy themselves with a rather timorous public pension system, particularly those who earn a middle or higher income. This weakness is somewhat corrected by private pension organizations, but only a third of employees are covered by them. The author proposes that all workers have access to such programs and even that they are mandatory. There would be many of them; they would function on the basis of capitalization; they would be public or private. The choice of the capitalization financial principle is almost essential, due to future population aging. The author displays his convictions about these proposals, as well as practical ways to implement such a program.

Modernizing Private Pensions: Canada Responds to a Global Challenge

The ongoing transition of the Canadian pension system offers valuable lessons for the rest of the world. Improving the voluntary and contractual retirement saving arrangements that constitute the private pillars of the system requires recognition among policy makers and the public that shoring up current defined benefit plans is an inadequate response to the financial crisis and economic slump. Improving capital accumulation plans, and more importantly, fostering new large-scale hybrid plans, offer a better foundation for the future.

The Impact of Gender and Immigration on Pension Outcomes in Canada

This paper analyzes Canadian retirement incomes by focusing on the dynamics of gender and immigration. We demonstrate that elderly women living alone and post-1970 immigrants are more likely to rely on the means-tested component of Canada's pension system, the Guaranteed Income Supplement (GIS), which is an indication of their restricted capacity to maintain an autonomous household. The strong reliance of the Canadian pension system on both public and private earnings-related pensions accentuates the disparities within the labour market, causing both women and immigrants to have lower earnings in retirement. In addition, immigrants suffer from the residency requirements attached to basic pension programs.

The Impact of Gender and Immigration on Pension Outcomes in Canada

This paper analyzes Canadian retirement incomes by focusing on the dynamics of gender and immigration. We demonstrate that elderly women living alone and post-1970 immigrants are more likely to rely on the means-tested component of Canada's pension system, the Guaranteed Income Supplement (GIS), which is an indication of their restricted capacity to maintain an autonomous household. The strong reliance of the Canadian pension system on both public and private earnings-related pensions accentuates the disparities within the labour market, causing both women and immigrants to have lower earnings in retirement. In addition, immigrants suffer from the residency requirements attached to basic pension programs.

Everything Old Is New Again: A Reflection on the State of the Defined-Benefit Pension Plan

Workplace pension plans have always been an important part of the Canadian pension system. The introduction of the Old Age Security Act in 1951 and the Canada/Quebec Pension Plans in 1966 was intended to supplement rather than replace such plans. While workplace pension plans grew substantially in size and number throughout most of the twentieth century, in the 1990s they began to decline. This paper argues that it is time for pension stakeholders to come together to develop a national policy for pensions that will stem the decline and restore the former health of workplace pension plans.

Everything Old Is New Again: A Reflection on the State of the Defined-Benefit Pension Plan

Workplace pension plans have always been an important part of the Canadian pension system. The introduction of the Old Age Security Act in 1951 and the Canada/Quebec Pension Plans in 1966 was intended to supplement rather than replace such plans. While workplace pension plans grew substantially in size and number throughout most of the twentieth century, in the 1990s they began to decline. This paper argues that it is time for pension stakeholders to come together to develop a national policy for pensions that will stem the decline and restore the former health of workplace pension plans.

Canadian Oil and Gas Companies' Activities With the Former Soviet Oil Ministry: The Cold War Era 1973 - 1980

Abstract Picture of Hugh W. Leiper (Available In Full Paper) Hugh W. Leiper is a native Albertan born in Didsbury, but raised in the Turner Valley Oilfields. During World War II, due to a shortage of manpower, he roughnecked on drilling rigs in the summer months holiday period. He graduated from South Turner Valley High and later studied Petroleum Engineering at Mount Royal College. However, due to a shortage of funds, left Mount Royal and went to work on the rigs. He was in the rig cellar when the infamous Atlantic No. 3 at Leduc blew out of control in March 1948. He assisted in the killing of this wild well. At the early age of 20 he was promoted to a Tool Push for General Petroleums. In 1954, he joined Great Plains Development Co. as Drilling Superintendent, and in 1957 joined Pacific Petroleums in the same capacity. He became Production Manager at Fort St. John and Edmonton, later moving to Calgary as Operations Manager for Canada, United States and International operations. In 1963, he was admitted to the Society of Petroleum Engineers and still maintains his membership in that society. He is a graduate of the MODC Drilling School at Odessa, Texas, the Petroleum Production School at Kilgore, Texas, Offshore Drilling and Production School at Houston, Texas, the Atlantic Advanced Business School at Dalhousie University, Halifax and the Business Management School at the Banff School of Fine Arts. His paper entitled, Use Offset Well Data to Reduce Drilling Problems, was presented to the CIME and published in the World Oil magazine. Hugh was placed on the Board of the Soviet/Canadian Oil Working Group by the Federal Energy Department and assisted in the forming of the Canadian Drilling Research Association, becoming its Charter and only Chairman, and remained in that capacity during the years 1973 to 1980. In 1980, he joined Morguard Resources as Executive Vice President and remained in this position until his retirement. Morguard operated, purchased and managed oil and gas properties for several large Canadian pension funds such as Pensionfund Energy Resources Limited, Ontario Municipal Retirement System, "OMERS " and Exchange Resources. Hugh remains active as President of his own company, Leiper Energy Services Ltd. He is on the selection committee of the Canadian Hall of Fame, a Board Member of the Petroleum Historic Society and is a member of the Calgary Petroleum Club. Hugh was inducted into the Canadian Hall of Fame in 2002. Abstract An agreement of Canadian-Soviet Cooperation in Industrial Applications of Science and Technology was signed on January 27, 1971 by the Canadian Industry Trade and Commerce Minister —Jean Luc Pepin. This agreement established a mixed Canadian-Soviet Commission of various working groups to provide cooperative technical contacts and exchanges on a systematic long-term basis. In 1974, eleven major and independent oil companies formed the Canadian Drilling Research Association. The objectives were to engage in the exchange of drilling and production technology with foreign governments or entities of interest to the members of the Association.