Municipal Pension Plan

2013 Report to Members It s about A Secure Tomorrow 6 Ways To get the Most from your pension plan Gen Y, Are you ready? Municipal Pension Plan Summer 2014 Your Plan: 2013 Year at a Glance

Work Live Save What we Spend Here 2013 Brendan Dick is a wealth of information about the Municipal Pension Plan. He served as Board Chair in 2013 and has played an active role in the Plan s management since his appointment to the Board in 2003. Brendan is the director of pension and benefits for the Hospital Employees Union. Brendan Dick, 2013 Chair, Municipal Pension Plan Board of Trustees The Conference Board of Canada released a report in 2013 about BC s public sector plans. What did it say about the Municipal Pension Plan? Brendan Dick: It said the Plan is a success story. The Conference Board s research discovered the public sector pension plans in BC are good for the BC economy, communities and individual plan members. This is great news for both our plan members and all British Columbians because it means the Plan funds and investments are being well managed, and the large savings pool created by the BC public sector pension plans results in around $60 billion more in capital for the Canadian economy over the time period of 2012 2035. The report illustrates that it s important plan members under- stand why their pension plan is so valuable to their financial futures. Only one quarter of working British Columbians who do not have a trusteed pension plan contribute to RRSPs. If BC public sector plan members saved the same as typical RRSP savers in the province, they would accumulate about $2.2 billion less in savings every year. So members can feel good about their membership in the Plan. Not only is it preparing them for retirement but it is supporting the BC economy, too. If the Plan is healthy, why are contribution rates going up in July? Brendan Dick: Good question. Every three years an independent actuary completes a review of the Plan s funded position to make sure we know exactly how the Plan is doing. This review is called a valuation. The latest valuation was completed for the year as at December 31, 2012. The valuation showed the Plan was 96.5 per cent funded. This was due to lower than expected investment returns and members living longer. A contribution rate For Our Cover: Plan member Rhonda poses with daughter Poppy and partner Mike. Rhonda works as an ENP Technologist in Victoria, BC. 2 Report to Members Say Cheese! Want to appear in one of our publications? Email us at: CommsPhotos@pensionsbc.ca. Photo by Nadine Wallace, Public Service Pension Plan member

learned This is necessary to ensure that plan members working and contributing today can count on a secure pension when they retire. 6Ways To get the most from your Pension Plan increase is necessary to ensure the Plan is in a fully funded position and that plan members working and contributing today can count on having a secure pension when they retire. Raising contribution rates is how we keep the Plan stable and secure for the long-term benefit of all members. The contribution rate increase is 1.4 per cent of salary for members and employers starting in July 2014. Both employers and employees will pay about 0.7 per cent of salary. What is happening with cost-of-living adjustments for retirees? Brendan Dick: Changes are coming to how cost-of-living adjustments are granted to retired members. The method is changing because the way costof-living adjustments are granted today is not sustainable for the long term. Plan demographics and investment markets are shifting, and the Board has a duty to govern the Plan in a way that is fair and equitable to all plan members. These changes help to ensure the Inflation Adjustment Account s financial health for the long term, and balance the needs of today s retired members and the retired members of the future. 1 2 3 4 Register and use My Account. Find out if you can purchase service. Do a personalized pension estimate online. Nominate your beneficiary. 5 Attend a pension seminar. $2.2 billion more saved by plan members over typical RRSP savers. BC public sector pension plans encourage a high rate of retirement savings. BC Residents of a similar income do not save for retirement as well as BC public sector pension plan members. 6 In the lower mainland? Attend the 2014 AGM! Contributing Today for a Secure Tomorrow Report to Members 3

YEAR AT A How the Plan s investments performed for period ended December 31, 2013 14.9% Return for 2013 Against a benchmark 12.8% With a five-year annualized return of 9.8% We beat the benchmark by 2.1% INVESTMENT RETURNS Where the Plan s assets are invested as at December 31, 2013 4% Short term (ex. Treasury Bills) 3% Mortgages (ex. Retail shopping malls) 12% Bonds (ex. Canadian National Railway Co.) 3% Real return bonds (ex. Government bonds) 13% Canadian equities (ex. Royal Bank of Canada) 6% Infrastructure and renewable resources (ex. Energy utilities and farmland) 5% Private placements (ex. Lululemon) 15% Real estate (ex. Delta Hotels) 7% Emerging markets (ex. Brazil, India) 32% Global equities (ex. Google) Gender breakdown as at December 31, 2013 27% Males 73% Females Plan membership as at December 31, 2013 75,284 (Retired) 33,630 (Inactive) 182,053 (Active) 290,967 Total Plan Membership The Plan continues to grow Last year: 12,994 New active members 5,175 New retirees

GLANCE The Plan is doing well! How we divided our investments Asset Allocation as at December 31, 2013 We kept within our asset allocation policy What does it all mean anyway? Terms and jargon defined: Policy range: Defines the investment range for each asset class. The investment range for any given asset class must be within the policy range to comply with the Board s investment policy. Our rate of return for each asset category Rate of return vs. Benchmark year ended December 31, 2013 Policy range Target Benchmark Actual 21.5% Fixed income 52.9% Public equity 15.1% Real estate 4.8% Private placements 5.7% Infrastructure & renewable resources (per cent) 60 50 40 30 20 10 (2.5%) Fixed income 24.5% Public equity 7.9% Real estate 25.6% Private placements 10.9% Infrastructure & renewable resources (per cent) 60 50 40 30 20 10 We met the benchmark in nearly all categories Benchmark: A standard to compare against investment returns. Total assets in 2013 (billions) $31.1 What it costs to run the plan year ended December 31, 2013 Cost for 2013: 0.31% 0.21% Investment Management 0.10% Benefits Administration Yearly cost since 2009 0.8 0.6 0.4 0.2 0 Benefits Administration 2009 2010 Total assets at December 31, 2012 + $1.6 Contributions + $4.7 Investment Returns - $1.6 Pensions, Benefits, Expenses Total assets at $35.8 December 31, 2013 Investment Management The cost is consistently low 2011 2012 2013 Note: all numbers are unaudited

Your Plan Cost-of-living adjustments Cost-of-living adjustments are added to retiree pension payments. The Board will be changing how cost-of-living adjustments are granted to ensure they are sustainable for the long-term benefit of all Plan members. Here s what you need to know as an active member: 1. The Plan is healthy and your basic pension is secure and guaranteed for life. 2. Your pension has two sources: your basic pension is paid from the Basic Account, and cost-of-living adjustments are paid from the Inflation Adjustment Account. 3. Future cost-of-living adjustments are not guaranteed. However, once cost-of-living adjustments are granted, they become part of your basic pension. 4. The current method of granting cost-ofliving adjustments is not sustainable for the long term future. The Board is examining different models to structure cost-of-living adjustments in a way that is sustainable for all members: the retirees of today and the retirees of tomorrow. 5. Members will be updated via direct mail and through the Plan website. *Canadians Retirement Future: Mind the Gap by Benjamin Tal and Avery Shenfeld, February 20, 2013 Gen Y, Are you Ready? A 2013 report* by CIBC says the average 35-year-old is saving less than half of what their parents did at the same age. The authors predict that, unless they build up their savings, young adults face at least a 20 per cent drop in their standard of living once they retire. Register for a Your Pension, Your Future seminar to learn more about how the Municipal Pension Plan is building some of your retirement savings. 6 Report to Members

in 2013 The fine print Plan Rule and Policy Changes Police and fire fighters: separate pension benefits Effective January 1, 2014 In the Municipal Pension Plan, there are different benefit groups based on whether someone works in a publicsafety occupation (police or fire fighter) or non-public safety occupation. Some members have earned service in both a public safety and non-public safety occupation. Changes to the Plan Rules ensure that the pension benefits for the public safety occupations and for the nonpublic safety occupations are determined according to their separate provisions. The Plan Rule changes only affect members who have service in public safety occupations and service in non-public safety occupations. If you are unsure whether you are affected by the separate pension benefit provisions please contact the Plan. Changes in nominating a beneficiary Effective March 31, 2014 The Wills, Estates and Succession Act sets out new rules for nominating your beneficiary for pension purposes. As a result you may have more options to protect your family, leave a legacy to your community and customize your estate planning the way you want. For example, you may be able to nominate multiple and/or alternate beneficiaries, allocate different shares of your pension to multiple beneficiaries, nominate organizations (such as a society or charity), and more. These changes expand the number of options available to you but you are not required to do anything your existing nomination remains valid. If you have a spouse, they are automatically your beneficiary unless they have waived their rights to any pension benefits. This means your ability to nominate beneficiaries may be limited. These changes are good news because they give you more flexibility and control over what happens to your pension entitlement in the event of your death. Contribution rate increase for members and employers Effective July 1, 2014 The Plan underwent an actuarial valuation as of December 31, 2012. The results of the valuation include changes to contribution rates. All members and employers will see a contribution rate increase of about 0.7 per cent of salary. Contributing Today for a Secure Tomorrow The contribution rates are outlined in the Plan Rules which will be updated effective July 1, 2014 to reflect the new rates. Check your rates online Contact Us The Municipal Pension Plan is here to help you understand your options. Visit mpp.pensionsbc.ca. Report to Members 7

Your Plan Trustees Trustees are appointed to the Municipal Pension Board of Trustees by the following Plan Partners and appointing authorities. Eight Trustees and eight Alternate Trustees are appointed as employer representatives. Eight Trustees and eight Alternate Trustees are appointed as employee representatives. Employer Representatives As at December 31, 2013: Appointing Authority primary Alternate Government of BC Lucas Corwin Philip Twyford Angie Sorell Hilary Woodward Union of BC Municipalities Robert Hobson Richard Taylor Frank Leonard Health Employers Association of BC Mary Procter John Johnston Lyn Kocher Tony Collins BC Public School Employers Association Hugh Finlayson Hilary Brown Plan Partners (BC and UBCM) Ken Bayne Diana Lokken Employee Representatives As at December 31, 2013: Appointing Authority primary Alternate Hospital Employees Union Brendan Dick Kelly Knox Canadian Union of Public Employees, Patti Price BC Division Council of Joint Unions and Organizations Brian Northam Judy Filion Health Sciences Association of BC Dennis Blatchford Rebecca Maurer BC Nurses Union Debra Ducharme Bella Brown BC Police Association and BC Professional Harold Heyming Todd Sweet Fire Fighters Association Plan Partners Gary Johnson Donisa Bernardo (Municipal Employees Pension Committee) Steven Polak Barbara Sinclair New Member s Benefit Statement When can you retire? How much service have you earned toward your pension? Find out in your new and improved Member s Benefit Statement! Your Member s Benefit Statement is the official annual record of your service and salary. Visit the Municipal Pension Plan website mpp.pensionsbc.ca and click on the My Account log on to view past statements. 8 Report to Members New look! Your 2013 MBS My Account fast. convenient. secure. Log on to My Account at any time to review your personal information your annual benefit statements your service summary Make contact: use My Account to send a secure email if you need to update or have questions about your account. Sign up today! Do a pension estimate in your pajamas: log on to My Account Contact Us Phone Victoria... 250 953-3000 Toll-free in Canada and the U.S... 1 800 668-6335 Fax... 250 953-0421 E-mail...MPP@pensionsbc.ca Mailing Address: Municipal Pension Plan PO Box 9460 Victoria BC V8W 9V8 mpp.pensionsbc.ca Reg. T.M. Municipal Pension Board of Trustees 2004-049 2013 MPP R2M 2014.04.25 QPR103991