Saving For Retirement Under Healthcare Of Ontario Pension Plan
For over 50 years, the Healthcare of Ontario Pension Plan has been building the foundation for a financially secure retirement for Ontario’s healthcare workers. Central to our goal of providing a stable and secure pension plan, is our commitment to excellence, it guides all aspects of our organization and as a leading pension plan provider, and our sole mission is to deliver on our pension promise to our 295,000 members.
Delivering on a pension promise is really what drives everything we do here. HOOPP exists to pay pensions, so everybody in the organization buys into that and thinks about what we need to do to make sure we can deliver our members’ pension as efficiently as possible both from an investment point of view and from a client services point of view 2014 was an excellent year for HOOPP,
We saw the value of our assets rise by 92 billion dollars over the year from 51.6 billion to 608 billion and that represents a return of 17.71 per cent, which is a significant improvement over our last year’s result of 855 per cent, Most importantly, we’ve been able to maintain our fully funded status, which rose to 115 per cent, which is a great outcome, Being fully funded means that we have sufficient assets on hand to meet all our current and future pension obligations regardless of the economic backdrop,
The greatest measure we have of our investment’s success is our ability to provide stable and secure pensions to our members, In support of this, HOOPP moved to a risk-based approach to managing our investment portfolio, which enhances our ability to meet our current and future pension obligations, Liability-driven investing at its core is a risk management strategy, It’s about identifying the major risks that would impede our ability to make pension payments to our members and take smaller risks so that way when major market events take place, we’re well positioned to take advantage of them over that long-term time horizon.
- HOOPP’s risk management approach really had its genesis in the tech meltdown that happened between 2000 and 2002, and what happened at that period of time is we looked at the major risks in the plan we found there were three major risks, that being equity market risks, declining long-term interest rates and an unexpected rise in inflation. So what we did was reposition the portfolio to better match off against those risks and to position us to withstand those types of market events more effectively in the future. This long-term investment approach combined with prudent risk management has allowed us to build a sufficient surplus, which has enabled the board to maintain the price of the plan at the same level of the plan at the same level that it’s been at for the past decade And also this year it’s enabled us to improve benefits for members at a time when many other global pension plans are looking at ways to cut benefits to members to shore up funding. Our board has been able to enhance the cost of living adjustment benefit to our pensioners.
So up till now, our cost of living adjustment has been 75% of the consumer price index and this year it will now be 100% of the consumer price index.
- HOOPP’s strong investment returns and risk management approach have enabled the fund to build and maintain financial strength despite the challenging financial markets experienced over the past decade.
In fact, CEM Benchmarking, who is a global leader in performance measurement, told us that we have the top 10-year result of all major global pension plans globally. Research shows that the best way to provide retirement security is with a defined benefit model, the model used by HOOPP. Why does the defined benefit model provide better retirement security than alternative models? Defined benefit plans are the best model for a number of reasons
- Professional management so we have a top-notch team of professionals managing the money, which you couldn’t have on your own.
- The cost of operating the HOOPP plan is about 0.3 per cent per year.
- The individual account would be more like 2 per cent per year And that may not sound like that big of a difference but if you compound that over the life of a plan you end up with twice as much money If you retired from a HOOPP pension plan in 2008, you got exactly what you were expecting. An individual trying to retire in 2008, you may have decided you had to work longer And while we’re confident in the value we have provided our members to date, we understand the need to be well positioned for the future.
There are a number of things that have been done this year that have positioned the organization very well for success in the future. We’re actually looking at changing out our pension plan admin system which should allow us to service our members much more effectively into the future. We’re always trying to look out as far as we can, so we look out 10-15 years in the future and try to think about things that could change or twists and turns that could happen that may cause us to change the way we manage the pension plan. So we’re always trying to think ahead and try to position ourselves to meet the challenges that could happen in the future. The fund has had a very good year, it’s in good shape. We have a significant surplus and you can sleep well knowing your pension is secure.