You have by now received your January 2014 pension payment, which included an increase of 0.37% (prorated if you started receiving your pension in 2013). While this is a very small increase, it is better than the zero increase for the past 4 years. The rate of return on pension assets for the year ended June 30, 2013 was 10.79% and, combined with the rates of return for the previous 4 years, provided a 5-year average of 4.87%, 0.37% greater than the 4.5% threshold necessary before pensions are increased. This is the last year in which the 5-year average rate of return will include the negative 11.69% return in 2009, which has kept the average rate low. Thus, we can look forward to higher increases in the future. While the pension increase each year is restricted to the 5-year average increase in the Consumer Price Index (CPI), if the average investment rate of return exceeds the average CPI, the plan provides for a supplementary increase to capture some of the shortfall of previous years. It is thus possible that any increase in January 2015 may exceed CPI.

The current year’s investment return has gotten off to a good start with a gross (before investment management fees and administrative expenses) rate of return of 3.9% for the first 3 months of 2013-2014.

The audited fund financial statements can be found on HR's McMaster Pension Plans Documents page.

The implementation of decisions to diversify a portion of fund investments into long-term bonds, real estate and infrastructure has been further deferred as the current unusually low interest rates persist. We are also awaiting a decision by the Ontario government on the creation of a “Super Fund” to manage the pension fund investments of Ontario Universities. A technical working group of experts is to advise the government on this issue in 2014.

The pension plan text restatement was completed in 2013 and has included plan amendments since 2008, changes in pension plan legislation, and improved the wording to make the plan easier to understand and administer. The restated pension plan text will be available on the Working At McMaster web site soon.

R. A. West
MURA representative, Pension Trust Committee