It was certainly a “Merry Christmas” for retirees of the Salaried Pension Plan when the Board of Governors approved an increase of 6.39% in pension payments starting in January 2015. The full increase applies to those who retired on or before June 30, 2010, with lower increases for those retiring July 2010 and later. The total is made up of a 1.41% regular increase equivalent to the 2013/14 average increase in CPI plus a 4.98% supplementary “catch-up” increase for CPI not paid in the previous 3 years. The rate of return on pension assets for the year ended June 30, 2014 was 18.40% and, when added to the rates of return for the previous 4 years, gives a 5-year average rate of return of 10.89%. The pension plan provides that the average rate of return above 4.5% can be paid to retirees as a pension increase.

The rates of return on pension assets for the years 2011 to 2014 are 14.95%, 3.85%, 10.79% and 18.40% (average 12.00%). While it is not possible to predict the rate of return for 2015, it is likely that the 5-year average rate of return will be sufficient for a January 2016 pension increase equivalent to the increase in CPI. The current year’s investment return has gotten off to a modest start with a gross (before investment management fees and administrative expenses) rate of return of 0.8% for the first 3 months of 2014/15. Investment markets continue to be volatile and month-to-month variations in investment returns can be expected.

The audited fund financial statements for the year ended June 30, 2014 and other information related to the Salaried Pension Plan can be found on the on the HR Pension Plans Documents page.

We are still awaiting a decision by the Ontario government on the creation of a “Super Fund” to manage the pension fund investments of Ontario Universities. Some direction is expected in the Spring 2015 Provincial Budget. In the meantime, the Pension Trust Committee continues to monitor investment performance and makes recommendations for changes when appropriate.

The June 30, 2014 Actuarial Valuation of the Salaried Pension Plan will be completed soon, which will set the University contribution requirements for the next 3 years. The valuation will reflect any changes to the Pension Plan since the last valuation, including changes in employee contributions and benefits, projected salary increases and retirement dates and projected investment returns. The mortality rates will also be adjusted to reflect the longer lives (and thus longer period of pension payments) enjoyed by McMaster retirees. While other employers have moved to group RRSP or other forms of retirement plan, we should be grateful that McMaster has maintained a defined benefit pension plan for the majority of its salaried employees.

R.A. West
MURA representative, Pension Trust Committee