CIA (e)Bulletin/(e)Bulletin de l'ICA
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March 2018

Wrap-up: Montréal Pension and Investment Seminar

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By Joseph Gabriel, FCIA

February’s Pension and Investment Seminar—the first offered entirely in French—was a resounding success, with 100 members taking part. Audio from the seminar is available on the website (you must be logged in to the members’ site to access it).

Retirement Age Public Statement

The opening session saw Jacques Tremblay, a past president and Michel St-Germain, Chair of the CIA Pension Advisory Committee, provide an update from the Single Topic Task Force on Retirement Age. They discussed the popular perception that economic growth is one of the main factors that will support the retirement of future generations, while establishing that working longer will also help. They mentioned that increased working lifetime will not affect labour market opportunities for younger workers.

Proposed measures that would not only address the sustainability of the Canadian retirement system but would also assist public finances in covering soaring healthcare costs included increasing the normal retirement age from 65 to 67, and increasing the postponed retirement age for the Canada Pension Plan (CPP), Old Age Security (OAS), and the Québec Pension Plan (QPP) to 75. There is more to come from the CIA on the issue of retirement age.

Québec Funding Regulations: Actuarial and Investment Implications

The second session tackled actuarial and investment implications from changes in Québec regulations around the removal of solvency funding and the implementation of the required stabilization provision (SP), generally known as the provision for adverse deviations (PfAD). Michel St-Germain and Ramy Rayes explored many interesting perspectives on the increased use of fixed-income securities, controlling duration, consideration to alternative investments, and rethinking asset/liability matching, all potentially having an impact of the required level of SP. Interesting questions they raised included the reported (while not funded) solvency position and its possible influence on investment decisions, and the hope that the announced legislative measures will help stop the erosion of defined benefit pension plans.

Purchasing Annuities in the New Legislative Environment

The event continued with the repercussions of pension legislative changes on the strategies for purchasing annuities. Louis-Bernard Désilets and Alan Savoie illustrated the impact of the changes with case studies, bringing a more interactive approach to the presentation. Their conclusions attracted the audience’s attention, as they showed that risks are the same, that annuity purchases are a good option for managing maturity, and that the new legislative environment provides plan sponsors with increased flexibility with regards to annuity purchases.

All Models Are Wrong, but Some Are Useful

After an excellent luncheon, Ramy Rayes took the floor for a second time and spoke about qualitative considerations in asset liability modelling. He presented traditional models, qualitative assessments, and case studies pertaining to a correction to the Canadian housing market and climate change. Outlining the importance of a qualitative approach to the traditional quantitative models to avoid restricted comprehension of unfavourable results, he quoted British statistician George Box, who claimed “All models are wrong, but some are useful”.

More on Pension Plans

The last session, led by Tommy Ouellet, touched on investment opportunities for pension plans in a low interest rate environment—a very relevant topic over the last several years. He concluded by emphasizing that regardless of the interest rate environment, any optimal investment solution must be based on a complete asset/liability analysis within a well-defined risk management framework.

Question and Answer

Participant questions and comments raised issues such as the life expectancy of retirees, the flexibility of retirement options with cost neutrality, and delivery of public plan promises.

As an actuary myself, I was pleased to hear that Canada’s public pension plans are some of the most rigorously funded and monitored in the world; unfortunately, this may not be the case for healthcare funding. 

Thank You for a Great Seminar

I’ll take this opportunity to thank the organizing committee members, namely Alison Rose, June Smyth, Stephen Cheng, Alan Cooke, Gordon Ripley, and Tulio Walles Mora, for preparing such an outstanding event.

Keep an eye on our upcoming events, especially the June 21–22 Annual Meeting in the great city of Toronto (registration will be opening soon). I look forward to seeing you there!

Joseph Gabriel, FCIA, is CIA staff actuary, education.


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