2014 Annual Report. April 1, 2013, to March 31, 2014

Transcription

1 2014 Annual Report April 1, 2013, to March 31, 2014

2 Contents 2014 Trustees message Our plan: positive for the economy Economic Benefit #1: Retired plan members have spending power Economic Benefit #2: Pension fund investments contribute billions to the economy Economic Benefit #3: Retired plan members are more likely to avoid government assistance Plan membership Member services About the membership Which member are you? Benefits and contributions How plan benefits work How contributions work Financial information Investments Financial health valuation moves to Plan holdings Governance and rule changes Plan governance and agents Plan rule changes Financial statements ii WorkSafeBC Pension Plan 2014 Annual Report

3 2014 Trustees message Our plan: positive for the economy The WorkSafeBC Pension Plan has more than 5,000 members, from active members who started work this week to retired members who have been enjoying their retirement for decades. As trustees, we take pride in the fact that we oversee a plan that is providing, or will provide, pensions to all our members. But really, the pride should belong to you, the member. After all, it is your plan; if you re an active member, you re the one who contributes to the plan with every paycheque, and you re the one building your future. You can also take pride in the fact that the investments you are making with your contributions today help the local, provincial, national and even global economies. And the pension you will receive on retirement will help the economy in different, but equally important ways. Two recently-released studies have examined these dual impacts of public sector pensions, such as the WorkSafeBC Pension Plan: Economic Impact of British Columbia s Public Sector Pension Plans, from the Conference Board of Canada, and The Top 10: Investing for Canada on the World Stage, from the Boston Consulting Group. The studies show there are many reasons why economies benefit from public sector pension plans. Here are three of the biggest: Economic Benefit #1: Retired plan members have spending power Each year, the WorkSafeBC Pension Plan pays out more than $35 million in pension payments to retired members. Because the vast majority of retired members live in British Columbia, we know that this amount is, for the most part, utilized within the province. But where does that money go? Much of the income retired members receive in retirement goes to local businesses such as grocery stores, restaurants and retail stores, on transportation, services, housing, entertainment and more. The trickle-down effect of the expenditures leads to additional employment through a variety of sectors (everybody from grocery clerks to food servers to mechanics to taxi drivers) which in turn helps the economy. The window is closing! Do you have leaves to purchase from 2010 or earlier? If you are an active member (meaning you are currently contributing to the plan, on an approved leave of absence or receiving benefits from an approved salary continuance plan), you have until March 31, 2015, or termination of employment (whichever occurs first) to purchase any eligible leaves of absence (LOAs) or periods of non-contributory service that ended on or before March 31, In addition, members who were active as of March 31, 2010, have until March 31, 2015, or termination of employment (whichever occurs first) to apply to reinstate any refund of pension contributions previously taken. For all LOAs and periods of non-contributory service ending on or after April 1, 2010, a five-year application deadline applies. Members who rejoin the plan on or after April 1, 2010, must apply to reinstate any refund within five years from when they recommence contributions to the plan or before they terminate employment, whichever comes first. For more information, please see the PensionFacts, Purchasing leaves of absence and Reinstatement of a refund or talk to WorkSafeBC People Services. WorkSafeBC Pension Plan 2014 Annual Report 1

4 Economic Benefit #2: Pension fund investments contribute billions to the economy If you re an active member, when you contribute money to the plan through each paycheque, it becomes part of about $1.6 billion the plan invests through its investment agent, the British Columbia Investment Management Corporation. Investments are diverse and include holdings in public equities, bonds, real estate, infrastructure and private equity. These investments work to support large and small businesses and their communities throughout BC, Canada and beyond. Investments from the WorkSafeBC Pension Plan and other BC public sector plans are expected to contribute about $65.6 billion (in 2012 dollars) to Canada s gross domestic product (GDP) between 2012 and As part of that, in this same period, about $8.1 billion (in 2012 dollars) of additional GDP would be added to British Columbia s economy. Economic Benefit #3: Retired plan members are more likely to avoid government assistance With a pension from the WorkSafeBC Pension Plan, plan members will be less likely to need the Guaranteed Income Supplement (GIS) or other income-tested government programs on retirement. In fact, the Conference Board of Canada study showed that only 10 to 15 per cent of Canadian retirees with a defined benefit pension like the WorkSafeBC pension collect the GIS, compared to 45 to 50 per cent of other Canadian retirees. The money the government doesn t spend on the GIS and similar programs means more money becomes available for public services. It is for these reasons and more that WorkSafeBC Pension Plan members should feel proud of their pension, proud of their plan and proud of their contributions impact on the economy. 2 WorkSafeBC Pension Plan 2014 Annual Report

5 Plan membership Member services You re #1 The WorkSafeBC Employee Benefits Section in the People Services Division offers members a variety of pension services. Staff in this section are experienced, well trained and available to help pension plan members with a wide range of requests, including providing plan information and assisting with pension applications. In addition, members can obtain WorkSafeBC Pension Plan assistance through the plan s administrative agent, the BC Pension Corporation, at worksafebc.pensionsbc.ca. In many cases, the WorkSafeBC Pension Plan sends important information directly to members. For example, members receive a Member s Benefit Statement each year, which summarizes the benefits members have earned. The web plays a significant and expanding role in providing services to plan members. For example, the online My Account feature allows active members to view their personal information and access a personalized pension estimator on the plan s website. It also allows retired members to review their monthly payment history and tax information. In addition, all of the plan s publications and forms are available online. For additional copies of the print-friendly version of this annual report or any other publication, please contact the Employee Benefits Section of WorkSafeBC s People Services Division, the WorkSafeBC Pension Plan or visit the plan s website at worksafebc.pensionsbc.ca. About the membership Strength in numbers There are more than 5,000 members in the WorkSafeBC Pension Plan, making it one of the larger pension plans in British Columbia. Members are divided into three membership groups: Active members Active members are members who are currently contributing to the plan, on an approved leave of absence or receiving benefits from an approved salary continuance plan (i.e., long-term disability plan). There are 3,051 active members in the plan. Inactive members Inactive members are members who have terminated their employment and left contributions in the plan. There are 479 inactive members in the plan. Retired members Retired members are those who are receiving a pension, including those who are receiving a disability pension. There are 1,559 retired members in the plan. WorkSafeBC Pension Plan 2014 Annual Report 3

6 Active members by age as at March 31, 2014 < 40 years % 40 < 50 years % 50 < 55 years % 55 < 60 years % 60 years % This shows the number of active members, broken down by age group. More than two-thirds of active members are between the ages of 40 and 60. Age demographics are a key measurement used in the actuarial valuation. Knowing the number of plan members approaching retirement helps the trustees and actuary understand how the number of retired members might change in coming years. Active members by gender as at March 31, 2014 Male 1,100 36% Female 1,951 64% This shows the number of active members, broken down by gender. The gender makeup of active members is a key factor used in the actuarial valuation. Because the average female has a longer life expectancy than the average male and will therefore likely draw their pension for a longer period of time the trustees and actuary must factor this information in when preparing a valuation. Membership profile as at March 31, 2014 Active members 3,051 60% Retired members 1,559 31% This shows the number of members in each membership group: inactive, retired and active. Inactive* members 479 9% * Members no longer employed, but with money in the plan. 4 WorkSafeBC Pension Plan 2014 Annual Report

7 Number of members as at March 31 4,704 4,795 4,883 5,006 5,089 1,193 1,293 1,382 1,462 1, ,993 3,016 3,015 3,043 3,051 This shows that the growth in retired membership continues to outpace growth in active membership. While this broad demographic trend is impacting the WorkSafeBC Pension Plan, it is important to understand that the plan is fully funded, meaning that this has been taken into account and the basic pension benefit is secure now and into the future Active Inactive* Retired * Members no longer employed, but with money in the plan. Ratio of active to retired members as at March This shows that retired members continue to make up a larger per cent of plan membership as a whole (a trend expected to continue for another decade as more and more baby boomers reach retirement age). While this broad demographic trend is impacting the WorkSafeBC Pension Plan, it is important to understand that the plan is fully funded, meaning that this has been taken into account and the basic pension benefit is secure now and into the future WorkSafeBC Pension Plan 2014 Annual Report 5

8 Which member are you? If you re a plan member, the WorkSafeBC Pension Plan has been with you from your first contribution and will continue for the rest of your life, assuming you leave your money in the plan. Sometimes, depending on the pension option you choose at retirement, your pension can work at assisting loved ones beyond your lifetime. Members are made up of many people at different stages of their personal and professional lives. Read through the member profiles below and relate your life to the circumstances experienced every day by these and other members. We re confident you ll find some valuable information that you can use to help you make the most of your WorkSafeBC Pension Plan. Are you young and starting out with the plan? Franka, one year in the plan I m 23, and my retirement is decades away. I ve got an awful lot of things I want to do before I even start thinking about settling down, let alone retiring. I m pretty sure I m going to return to school next year to complete my degree, so I m not even sure how long I ll be with WorkSafeBC. Welcome to the WorkSafeBC Pension Plan you re now one of more than 5,000 members, including more than 3,000 active members like yourself. If you re like Franka, work may not be your life priority right now and, as she notes, your retirement could be four or five decades away, and contributing now to the plan might seem pointless. Rest assured, one day you will be thankful for those contributions, even if they only represent a short period of your working life. Here are some things you might want to do right now to learn about the plan and understand why it s important to your future: Read A Guide for Plan Members and the New Member FAQ online. These comprehensive resources will help you understand and make the most of your plan. When you receive it in the mail, spend some time perusing the Report to Members and the Member s Benefit Statement; verify your personal information is correct and learn more about your future pension. If you do decide to leave WorkSafeBC, first check out the Transferring service and Termination of employment PensionFacts; they provide great information for people in important transitional stages of life and will give you the facts about important options and deadlines. Talk to WorkSafeBC Employee Benefits. The WorkSafeBC Employee Benefits Section of the People Services Division offers members a variety of pension services. Staff are experienced, well trained and available to help you with a wide range of requests, including providing pension plan information and assisting with pension applications. 6 WorkSafeBC Pension Plan 2014 Annual Report

9 Small children, parental leave and a possible change in scenery. Sound familiar? Matt, 10 years in the plan It s a busy time for my family: our three-year-old son is starting to run around our condo and another child is coming. Frankly, we ll soon need a bigger place. Maybe I can spend some of my planned parental-leave time house hunting. Who knows? We might even end up in Edmonton working with my brother at an energy company. Plus my ailing father lives in Alberta and it would be nice to be closer to him. Either way, there s a lot of life to live between now and retirement! If you re like Matt, your family is clearly your life priority. You ve got some obligations to your children and maybe your parents. You may be looking at changing jobs or even changing provinces. The plan can provide you a lot of information to help you in these busy and transitional times. Here are some things you might want to do right now to learn how the plan works with you during important life changes: First and foremost, talk to WorkSafeBC Employee Benefits. The WorkSafeBC Employee Benefits Section of the People Services Division offers members a variety of pension services. Staff are experienced, well trained and available to help you with a wide range of requests, including providing pension plan information and assisting with pension applications. When you receive it in the mail, spend some time perusing the Report to Members and the Member s Benefit Statement; verify your personal information is correct and learn more about your future pension. If you do decide to leave WorkSafeBC, first check out the Transferring service and Termination of employment PensionFacts; they provide great information for people in important transitional stages of life. Check the Purchasing leaves of absence PensionFacts for information about deadlines and options relating to your parental leave. Depending on your financial situation, or if an inheritance is anticipated, you may want to read the Your pension and your RRSP room PensionFacts. Read the Mid Career FAQ online it provides a high-level summary of the plan for members in mid career; you may learn something you didn t even know pertained to your situation. Divorced? Time poor? Does it seem like you re caring for your entire family? Julie, 18 years in the plan Yup, I m busy. I m a 49-year-old divorced single mother supporting two teenagers and two parents. I run around between my kids dance and music lessons, looking after my parents, and, of course, work. I truly don t feel like I have time to pay attention to my pension. If you re reading this, you could be part of the growing sandwich generation (looking after both children and parents) and you have a lot of competing life priorities. It s important you understand that the plan offers a lot of great services online, so you can look into pensions at your convenience. Here are some things you might want to do right now to help you through your challenging personal situation: If you re going through a separation or divorce, you ll want to read the How a separation or divorce affects your pension PensionFacts; it could help you through some difficult waters. WorkSafeBC Pension Plan 2014 Annual Report 7

10 Read the Protecting Your Pension Benefit: A Guide for Nominating Beneficiaries before Retiring if you ve been thinking at all about nominating beneficiaries to receive your pension benefit when you die. Depending on your financial situation, or if an inheritance is anticipated, you may want to read the Your pension and your RRSP room PensionFacts. Read the Mid Career FAQ online it provides a high-level summary of the plan for members in mid career; you may learn something you didn t even know pertained to your situation. Have you had any leaves of absence? Check the Purchasing leaves of absence PensionFacts to see if you can purchase your service for these leaves. And, as time permits: Talk to WorkSafeBC Employee Benefits. The WorkSafeBC Employee Benefits Section of the People Services Division offers members a variety of pension services. Staff are experienced, well trained and available to help you with a wide range of requests, including providing pension plan information and assisting with pension applications. When you receive it in the mail, spend some time perusing the Report to Members and the Member s Benefit Statement; verify your personal information is correct and learn more about your future pension. Is retirement something that will happen before the next Winter Olympics? Adewale, 23 years in the plan Both my children are out of the house and my wife and I are in the process of determining how much money we ll need in retirement when the time comes. It s a few years away yet, but we re starting to plan. You re approaching an exciting point in your career. Retirement is getting closer, but before making the move you and your spouse or partner will have to make sure the numbers make sense. How much will your pension be? Will you have any income from RRSPs or other savings? What about expenditures? Here are some things you might want to do right now as you start thinking more seriously about retirement: First and foremost, talk to WorkSafeBC Employee Benefits. The WorkSafeBC Employee Benefits Section of the People Services Division offers members a variety of pension services. Staff are experienced, well trained and available to help you with a wide range of requests, including providing pension plan information and assisting with pension applications. An independent certified financial advisor is a good resource for you to determine your monetary needs and income in retirement. Do you think you may want to return to work at some point after retiring? Read the Re-employment of a retired member PensionFacts for information. Depending on your financial situation, you may want to read the Your pension and your RRSP room PensionFacts. Have you had any leaves of absence? Check the Purchasing leaves of absence PensionFacts to see if you can purchase your service for these leaves and to learn about options and deadlines. When you receive it in the mail, spend some time perusing the Report to Members and the Member s Benefit Statement; verify your personal information is correct and learn more about your future pension. 8 WorkSafeBC Pension Plan 2014 Annual Report

11 Though your spouse, if applicable, is automatically your beneficiary, read the Protecting Your Pension Benefit: A Guide for Nominating Beneficiaries before Retiring if you ve been thinking at all about nominating beneficiaries to receive your pension benefit when you die. Read the Near Retirement FAQ online it provides a high-level summary of the plan for members in mid career; you may learn something you didn t even know pertained to your situation. Though you may not quite be ready to cross the threshold, it s never too early to learn about your pension options on retirement. Read Choosing Your Best Pension Option for more. Are you close enough to retirement to taste it? Rachel, 30 years in the plan I m ready for retirement. I ve been with WorkSafeBC for three decades and I know the time is right to take the next step in my life. My husband and I have a lot a lot of travel plans and we both are keenly interested in community work. Bring it on! We are so glad to see you re looking forward to retirement. The approximately 100 people who retire with a WorkSafeBC pension each year undergo a range of emotions, from apprehension to doubt to anticipation to happiness. It s an important time in your life and a step you needn t take alone. Here are some things you might want to do right now to help you prepare for the big step: First and foremost, talk to WorkSafeBC Employee Benefits. The WorkSafeBC Employee Benefits Section of the People Services Division offers members a variety of pension services. Staff are experienced, well trained and available to help you with a wide range of requests, including providing pension plan information and assisting with pension applications. Read Choosing Your Best Pension Option for information on your pension options on retirement. Have you had any leaves of absence? Check the Purchasing leaves of absence PensionFacts to see if you can purchase your service for these leaves and to learn about options and deadlines. Do you think you may want to return to work at some point after retiring? Read the Re-employment of a retired member PensionFacts for information. Though your spouse is automatically your beneficiary, read the Protecting Your Pension Benefit: A Guide for Nominating Beneficiaries when Retiring if you ve been thinking at all about nominating beneficiaries to receive your pension benefit when you die. Read the Near Retirement FAQ online it provides a nice high-level summary of the plan for members nearing retirement. WorkSafeBC Pension Plan 2014 Annual Report 9

12 Are you retired? Joan, 55 years in the plan I worked for WorkSafeBC for 32 years, and I ve been retired for 23 and, though I m slowing down, I enjoy every minute of it. I am incredibly grateful for my pension and want to make sure I keep up to date with how the plan is doing. If you re retired and reading this, thank-you for making the effort to stay in touch with the plan. You re one of about 1,600 retired WorkSafeBC Pension Plan members. Even though your basic pension benefit is guaranteed, it s a good idea to keep an eye on things to see if there is any important news or opportunities you may need to know about. Here are some things you might want to do right now: Make sure to read and review the annual After Work, mailed to you every January. It includes important information about when you ll receive your pension payments, plan finances as well as any other pertinent information you may want to review. Visit worksafebc.pensionsbc.ca and register for My Account if you haven t already done so. Are you a member of the WCB Retirees Association? They ve been around for more than 30 years and help maintain friendships created while working at WorkSafeBC. As an organization, they plan and participate in many events. They re at wcbra.com. Make sure your family is aware of the In the event of a death PensionFacts. When the time comes, it will provide them important pension information to help get them through a difficult time. Read the Retirement FAQ online it provides a high-level summary of the plan for members nearing retirement and includes lots of information about when the timing of your pension payments, non-guaranteed cost-of-living adjustments, taxes and more. 10 WorkSafeBC Pension Plan 2014 Annual Report

13 Benefits and contributions How plan benefits work Plan benefits Basic pension (guaranteed) The basic pension benefit is defined, meaning the pension is based on the member s pensionable years in the plan, the average of the member s highest five years of pensionable salary (not necessarily the last five years) and the member s age at retirement. The pension is not based on contributions to the plan, nor is it based on the investment performance of the plan s assets. The advantage of a defined benefit plan is that the pension is predictable. Members are entitled to a pension benefit after two years of contributory service and after reaching a qualifying age. The plan also provides survivor and disability benefits. At March 31, 2014, the plan provided pensions to 1,559 retired members, an increase of 6.6 per cent from the previous year. The basic pension is paid from the plan s basic account. Other benefits Cost-of-living adjustments (non-guaranteed) Inflation indexing is a non-guaranteed cost-of-living adjustment (COLA) to retired members basic pensions. COLAs are paid only if there is sufficient money in the inflation adjustment account (IAA), which is funded by member and employer contributions. COLAs may be provided each year based on changes in the Consumer Price Index (see Note 10 to the Financial Statements) if funds are available. In 2014, retired members received a COLA of 1.1 per cent. The trustees regularly monitor the plan s ability to continue to provide non-guaranteed COLAs. While future increases are not guaranteed, once granted, the COLA becomes part of retired members basic, guaranteed benefits. Average and median pensions in pay as at March 31, 2014 Average pension in pay $25,328 Median pension in pay $21,211 Members basic, lifetime pensions are calculated as a function of service and salary, not by members contributions. WorkSafeBC Pension Plan 2014 Annual Report 11

14 Average value of new pensions for the year ended March 31, 2014 Total present value Service Total new Average annual Average annual Median annual Average new pensions (years) pensions salary base pension pension present value ($ Millions) < $ 85,000 $10,000 $ 9,500 $154,000 $ < ,000 21,500 22, , < ,000 23,400 26, , < ,000 36,200 34, , < ,000 38,200 38, , < ,000 48,400 46, , ,000 38,200 35, , Total 116 $69.3 Average of all pensions $91,000 $32,800 $31,100 $579,000 This shows the relationship between members years of service, the annual average salary, the average annual pension, the median annual pension and the average present value of their pension. The WorkSafeBC Pension Plan is a defined benefit pension plan, meaning basic, lifetime pensions are calculated as a function of member s service and salary, and not by their contributions. New pensions by age at retirement Broken down by years of pensionable service for the year ended March 31, 2014 Service (years) < < < Total < < < < < < Total Average years Average age 61 This shows the relationship between members ages at retirement and their years of service. Members retiring and collecting a pension between the ages of 55 and 59 have more service, on average, than members retiring at age 60 or older. 12 WorkSafeBC Pension Plan 2014 Annual Report

15 New pensions, by type, for the year ended March 31 Pre-retirement Post-retirement Long term Regular limited members* limited members* disability Deferred Survivor Total * Prior to 2013 new limited members were included as part of new regular pensions. This shows the five-year trend for the breakdown in new pensions by type. Pensions for the year ended March 31 $ Millions New pensions Pension In force at Basic Inflation Total during year terminations end of year pensions paid supplements paid pensions paid ,559 $32.7 $5.0 $ , , , , This shows the five-year trend for the number of total pensions in pay at the end of each year, and the dollars paid out. Percentage of new pensions by age at retirement for the year ended March 31, 2014 < 55 years 3 2.6% 55 < 60 years % This shows the demographic breakdown (by age) of new regular pensions. Most new pensions are given to members 60 and over. 60 < 65 years % 65 years % WorkSafeBC Pension Plan 2014 Annual Report 13

16 Percentage of new pensions by years of service for the year ended March 31, 2014 < 10 years % 10 < 15 years % 15 < 20 years % 20 < 25 years % This shows the breakdown of new regular pensions by years of service. Most new pensions are given to members who have more than 20 years of service. 25 < 30 years % 30 < 35 years % 35 years 8 6.9% Purchases (value) year ended March 31 $ Thousands This shows the cost to the members and employers of purchased leaves of absence by members in 2013 and For more information on purchasing service, members can read the Purchasing leaves of absence PensionFacts. Leaves of absence Reinstatements 8 Arrears 3 Other Purchases (number) year ended March This shows the number of purchased leaves of absence by members in 2013 and For more information on purchasing service, members can read the Purchasing leaves of absence PensionFacts. Leaves of absence Reinstatements Arrears Other 14 WorkSafeBC Pension Plan 2014 Annual Report

17 Termination and refund benefits paid (number)* year ended March This shows the number of termination, death and refund benefits paid to members or their beneficiaries. * Termination and refund benefits paid include refunds of contributions and commuted value payments; deferred pensions are included in pension statistics. Termination and refund benefits paid (value)* year ended March 31 $ Thousands ,520 4,071 5,372 1,221 2,321 This shows the dollar value of termination, death and refund benefits paid to members or their beneficiaries. * Termination and refund benefits paid include refunds of contributions and commuted value payments; deferred pensions are included in pension statistics. WorkSafeBC Pension Plan 2014 Annual Report 15

18 How contributions work Members of the WorkSafeBC Pension Plan contribute to the plan through automatic deductions from their salary. Plan members and WorkSafeBC pay contributions to fund future pension benefits. When plan members terminate employment, retire or reach 35 years of pensionable service, they no longer contribute. Members and WorkSafeBC pay different amounts above and below the year s maximum pensionable earnings (YMPE) as defined by the federal government. Members do not make Canada Pension Plan contributions on any earnings in excess of the YMPE, but do make WorkSafeBC Pension Plan contributions. The YMPE for 2014 is $52,500. The following contribution rates, effective March 31, 2014, are applied to pensionable salaries: For the plan member, 6.50 per cent of pensionable salary up to and including the YMPE and 8.00 per cent of pensionable salary for salary in excess of the YMPE For WorkSafeBC, 9.63 per cent of pensionable salary up to and including the YMPE and per cent of pensionable salary for salary in excess of the YMPE The above rates include contributions to both the basic account, from which pension benefits are paid, and the inflation adjustment account, from which cost-of-living adjustments are paid. Contribution revenue year ended March 31, 2014 $ Thousands Transfers from other plans $1,964 5% Member contributions $16,104 39% Employer contributions $23,109 56% This shows that the bulk of contribution revenue comes from the employer, followed by the members. Contributions from members and the employer ensure there will be pensions for members. Knowing where contributions come from, with special consideration of transfers from other plans (which is a large variable on a year-to-year basis) provides key information to the trustees and actuary. Contributions year ended March 31 $ Millions Member Employer This shows total contributions are increasing; this is due to more members as well as changes to contribution rates WorkSafeBC Pension Plan 2014 Annual Report

19 Financial information Investments Report on 2013/14 investment results The investment portfolio of the WorkSafeBC Pension Plan (plan) grew by $164 million over the fiscal year, ending with a total market value of $1.6 billion as at March 31, The plan s investment portfolio earned a return of 12.3 per cent net of fees, outperforming its market benchmark return of 10.5 per cent. The plan s investments did well in the 2013/14 fiscal year, primarily because of the very strong global equity markets. The plan s combined public equities returned 21.7 per cent, with strong performance by global equities (28.8 per cent) and Canadian equities (17.7 per cent). In contrast, emerging market equities returned 3.7 per cent. Investments in Canadian real estate earned 6.9 per cent. The plan s combined fixed income portfolio, comprised of money market funds, bonds and mortgages, returned 0.6 per cent as the interest rate environment remained at very low levels. Over the course of the year, the plan trustees undertook a strategic review of the long-term policy asset mix for the plan, taking into account advice from bcimc (the plan s investment agent) and the plan s actuary. As a result of this review, the plan s long-term strategic asset mix was revised: the allocation to nominal bonds and mortgages was reduced and the allocation to global equities, emerging markets, real estate, private placements and infrastructure was increased. The revised asset mix reflects the continued importance of diversification by asset class and geographic region, while seeking to enhance the long-term returns for the plan. Investment returns play a significant role in meeting the plan s pension obligations. The plan has shifted to a greater emphasis on tangible, physical investments like land, buildings, regulated utilities and renewable resources, all of which are ideally suited for the long-term financial objectives of the plan. The objective of these types of investments is to provide reliable cash flows with some capital appreciation, as well as protect against inflation and short-term volatility in public markets. These investments also allow for more direct asset management and in so doing enable bcimc to influence the strategic direction of these companies and create long-term value for the plan. Responsible investing is an integral part of the investment beliefs shared by the plan and bcimc. The plan and bcimc believe that companies that do a good job of managing environmental, social and governance (ESG) matters have less risk and perform better financially over the longer term. There is a recognition that ESG matters may differ across companies, regions, asset classes and over time. As a result, the plan and bcimc are committed to responsible investing as a way of protecting and growing the long-term financial value of the plan s funds; bcimc acts on the plan s behalf and with the support of the trustees. Plan members can learn more about bcimc s responsible investment activities by reviewing the Responsible Investing factsheets and newsletters, the Shareholder Engagement Guidelines and Priorities and proxy voting records available on bcimc s website. Managing investment costs is an important component of investment management. The plan s investment fees with bcimc continue to be significantly below those of other investment managers. This is because bcimc operates on a cost recovery, not-for-profit basis and its large asset size provides access to substantial economies of scale. By carefully managing the plan s investment management expenses, a greater proportion of investment return will pass through to the plan, contributing to its long-term sustainability. WorkSafeBC Pension Plan 2014 Annual Report 17

20 Investment asset mix and performance as at March 31, 2014 Approved Target Actual asset Rate of Performance (All values %) range asset mix mix value return benchmark Fixed income Short-term Mortgages Nominal bonds Real return bonds (6.4) (6.0) Equities Canadian equities Global equities Emerging markets Real estate Private placements Infrastructure & renewable resources (irr) Other* ** ** Asset mix total * Includes strategies and investments specifically approved by the trustees that do not correspond to the listed asset classes. ** The plan began investing in "other" assets in October of As a result annual rates of return are not available for this asset class. The rates of return for private placements and strategic investments reflect the preliminary December 31, 2013, internal rates of return which is the industry standard for calculating returns for illiquid assets. The illiquid assets are only valued once a year as of December 31 and the final returns are not available until July. As such, the portfolio returns reflect the December 31 preliminary returns and the benchmark return reflects the December 31 results. This shows the plan is diversified. By spreading around its assets, the plan reduces its overall risk. If one sector has a poor year, this may be offset by a stronger performance in another sector. This table also shows how well each asset class performed in As a member, if your plan has high rates of return, this is good news; it means your plan s investments are doing well. A rate of return exceeding the performance benchmark is also positive news. Though your pension is guaranteed no matter what the rate of return, high returns contribute to the overall health of the plan, including helping to potentially reduce future contribution rate increases. In addition, trustees use performance information to evaluate the relative performance of the fund manager, the British Columbia Investment Management Corporation. 18 WorkSafeBC Pension Plan 2014 Annual Report

21 Market outlook for 2014/15 The WorkSafeBC Pension Plan (plan) has a long-term investment horizon and is able to withstand shortterm market volatility. The plan trustees and the British Columbia Investment Management Corporation (bcimc) remain focused on holding a diversified investment portfolio that follows a disciplined, long-term approach to managing the plan s funds. Global stock markets have experienced a strong start to 2014 but returns are expected to be more modest than last year. Fixed income investments also had a positive start as they benefited from a decline in bond yields in This outlook will continually be monitored, taking into account the various risks in the capital markets and the global economy, in order to protect capital and build long-term wealth for the plan. Bonds (market value) as at March 31, 2014 Government 79% This shows the percentage of corporate and government bonds held by the plan. Corporate 21% Canadian equities (market value) as at March 31, 2014 Actively managed 66% Indexed 34% This shows the percentage of actively managed and indexed Canadian equities held by the plan. Indexed refers to a portfolio of securities that are in approximately the same proportion as a public market index (e.g., Standard & Poor s/toronto Stock Exchange Composite). Actively managed refers to a portfolio of securities that is designed to outperform a public market index over the long term. Global equities (market value) as at March 31, 2014 Actively managed 46% Indexed 54% This shows the percentage of actively managed and indexed global equities held by the plan. Indexed refers to a portfolio of securities that are in approximately the same proportion as a public market index (e.g., Standard & Poor s/toronto Stock Exchange Composite). Actively managed refers to a portfolio of securities that is designed to outperform a public market index over the long term. WorkSafeBC Pension Plan 2014 Annual Report 19

22 Canadian equities by sector as at March 31, 2014 Indexed (%) Actively managed (%) Information technology Utilities Health care Consumer staples Telecommunication services This shows the per cent of actively managed and indexed Canadian equities held by the plan, separated by sector. Financials and energy make up more than half of Canadian equities. Consumer discretionary Industrials Materials Energy Financials Global equities by sector as at March 31, 2014 Indexed (%) Actively managed (%) Utilities Telecommunication services Materials Energy Consumer staples Health care This shows the percentage of actively managed and indexed global equities held by the plan, separated by sector. Financials make up the largest segment, followed by consumer discretionary and information technology. Industrials Information technology Consumer discretionary Financials WorkSafeBC Pension Plan 2014 Annual Report

23 Equities by country as a percentage of total portfolio as at March 31, 2014 (%) Australia 1.0 Switzerland 1.1 Germany 1.2 France Japan U.K This table shows the breakdown, by country, of publicly-traded equities held by the plan. Publicly-traded equities make up 45.3 per cent of the plan s entire portfolio. The percentages in the table are percentages of the plan s entire portfolio, not of publicly-traded equities. Other developed countries 3.1 Emerging markets 6.5 Canada 11.4 U.S Investment holdings (market value) as at March 31, 2014 $ Millions Other % Mortgages % Short term % Private placements % IRR* % Emerging markets equities % Canadian equities % Real estate % This shows where the plan s dollars are invested. About one quarter of the plan s investments are in bonds (a source of safe, fixed income) and one quarter are in global equities. Global equities include many companies in many sectors, most notably financials, information technology and industrials. The plan s investment holdings are structured to minimize investment risk and achieve consistent long-term results. Bonds % Global equities % * Infrastructure and renewable resources WorkSafeBC Pension Plan 2014 Annual Report 21

24 Real estate by location as at March 31, 2014 International 5.6% Quebec and Maritimes 5.8% British Columbia 17.0% This shows the real estate investments held by the plan, separated by location. Prairies 34.9% Ontario 36.7% Domestic real estate by type as at March 31, 2014 Other 0.7% Mixed use 0.9% Hospitality 7.4% Retail 10.8% Industrial 11.2% This shows the domestic real estate investments held by the plan, separated by type. The plan holds a diverse range of real estate holdings, with almost half its domestic real estate held as offices. Residential 22.9% Office 46.1% 22 WorkSafeBC Pension Plan 2014 Annual Report

25 Investment performance year ended March 31 Market value rates of return (All values %) Rate of return Performance benchmarks Annual rates Five-year annualized rates Ten-year annualized rates annual rate by % of investment category portfolio Short-term DEX 91-day T-Bill Money market DEX 91-day T-Bill Bonds DEX All Government Short-term Bonds DEX Bond Universe Canadian universe bonds DEX Bond Universe Global government bonds JP Morgan GBI Global Hedged Real return bonds 3.5 (6.4) (6.0) DEX Real Return Bond Mortgages Combined mortgages benchmark Fixed-term DEX ST Bonds + 1% Construction DEX 1 Year T-Bills +1% Mezzanine DEX 1 Year T-Bills +2.5% Canadian equities S&P/TSX Composite Index Indexed S&P/TSX Composite Index Enhanced S&P/TSX Capped Composite index Active S&P/TSX Capped Composite index Active small cap S&P/TSX Small Cap Index Global equities (unhedged) MSCI World ex-canada Net Global MSCI World ex-canada Net U.S. indexed S&P 500 U.S. enhanced S&P 500 U.S. active Russell 1000 U.S. active small cap Russell 2000 Europe MSCI Europe Net Asian indexed MSCI Pacific Net Asian active MSCI AC Asia Pacific ex-japan Net Emerging markets MSCI Emerging Market Active Real estate CPI + 4% Private placements MSCI World ex-canada Net Infrastructure and renewable resources Nominal Other Performance benchmark indices abbreviations CPI = Consumer Price Index DEX = PC Bond Debt Market Indices GBI = Government Bond Index MSCI = Morgan Stanley Capital International S&P = Standard & Poor s S&P/TSX = Standard & Poor s/toronto Stock Exchange Equity or Capped Equity (Source of annual rates: British Columbia Investment Management Corporation) This shows the financial returns the plan achieved in 2013/14 (and the annualized five- and tenyear periods) compared with benchmarks and prior years. It also demonstrates the diversity of plan holdings. Diversity is important in reducing the risk inherent in any one investment type or geographical location. This table also shows the plan achieved returns of 12.3 per cent in Benchmarks are standards to compare against actual investment returns. 2 Bonds and money market investments with less than five years to maturity. 3 The rates of return for private placements and strategic investments reflect the preliminary December 31, 2013, internal rates of return which is the industry standard for calculating returns for illiquid assets. The illiquid assets are only valued once a year as of December 31 and the final returns are not available until July. As such, the portfolio returns reflect the December 31 preliminary returns and the benchmark return reflects the December 31 results. 4 The plan began investing in other assets in October As a result, annual rates of return are not available for this asset class. WorkSafeBC Pension Plan 2014 Annual Report 23

26 Investment portfolio as at March 31, 2014 Market value Asset mix ($ Thousands) market value (%) Short term Money market $ 8, Government bonds (1 5 years) 58, , Bonds Nominal bonds 289, Global government 14, Real return bonds 54, , Mortgages 41, Canadian equities 163, Global equities* U.S. 193, Global 82, Europe 100, Asia 59, Thematic 23, Currency hedging 1, , Emerging markets equities 100, Real estate 223, Private placements and infrastructure and renewable resources Private placements 74, IRR** 76, , Other 15, Total investments 1,583, Comparison $1,419,047 This shows the diversity of the plan s investments. While global equities make up the largest proportion of holdings, they comprise less than a third of the plan s holdings. Diversity is part of risk management; with more investments and investment types in the portfolio, each investment s relative weight in the plan is reduced. * Asset classifications vary from the financial statements for the purpose of performance reporting on global equities in line with the Statement of Investment Policy and Procedure. ** Infrastructure and renewable resources. 24 WorkSafeBC Pension Plan 2014 Annual Report

27 Top ten holdings as at March 31, 2014 Canadian equities Market value Total Canadian Company ($ Thousands) equity (%) Royal Bank of Canada $ 9, The Toronto-Dominion Bank 8, Bank of Nova Scotia 6, Suncor Energy Incorporated 5, Canadian National Railway Company 4, Valeant Pharmaceuticals International 4, Canadian Natural Resources Limited 4, Bank of Montreal 3, Manulife Financial Corporation 3, Enbridge Incorporated 3, Total top 10 $ 54, Total Canadian equity $163, These show the key investments the plan holds. It also demonstrates the diversity that the plan holds; even the most highly-held companies make up only a small per cent of total holdings. Global equities Market value Total global Company ($ Thousands) equity (%) Apple Incorporated $ 6, Exxon Mobil Corporation 5, Google Incorporated 4, Roche Holding AG 4, Microsoft Corporation 3, Royal Dutch Shell Plc 3, Johnson & Johnson 3, Nestlé S.A. 3, General Electric Company 3, JPMorgan Chase & Company 3, Total top 10 $ 40, Total global equity $460, Emerging markets equities Market value Total emerging Company ($ Thousands) markets equity (%) Chinese state-controlled companies* $ 6, Samsung Electronics Company Limited 2, Taiwan Semiconductor Manufacturing 2, Housing Development Finance Corporation Limited 2, British American Tobacco Plc 1, Vale S.A. 1, HDFC Bank Limited 1, ITC Limited 1, Aberdeen Asset Management Plc 1, SABMiller Plc 1, Total top 10 $ 23, Total emerging markets equity $100, * Company exposures are based on the ultimate parent company exposure regardless of where the security is listed or traded. As a result, the client exposure report shows Chinese state-controlled companies as one of the top exposures because the ultimate parent company for many companies in China, is the Chinese government. WorkSafeBC Pension Plan 2014 Annual Report 25