Canada Life Canadian Employees Pension Plan

Valuation Report as at January 1, 2006

 

Canada Life has filed the actuarial report for the Canada Life Canadian Employees Pension Plan as at January 1, 2006 with FSCO.  Here are some salient points covered in the report.

 

1.   Partial Wind Up

 

As a partial wind up of the plan had taken place as at June 30, 2005, the results of the valuation have been separated between the PWU (Partial Wind Up) group and the Retained (everybody else) group.  The valuation report shows the results on a going-concern basis as well as wind-up basis.  The following comments are based on the results of the going-concern valuation.

 

2.  Assets, Liabilities and Surplus

 

The following table shows the comparative financial positions as at January 1, 2003 and January 1, 2006.  All amounts are in $ million.

 

	1.1.2006			1.1.2003
	PWU	Retained	Total
Assets   Liabilities         Active and Disabled Members         Pensioners and Survivors         Deferred and Inactive Members         Crown DC Members         Total Liability   Surplus (Assets – Liabilities)	292.7     22.6 68.0 93.1 0.6 184.3   108.4	508.0     101.4 176.0 37.2 1.1 315.7   192.3	800.7     124.0 244.0 130.3 1.7 500.0   300.7	591.5     203.6 163.2 43.4 1.4 411.6   179.9

 

Some observations on the results:

• Assets have been valued at market.
   

• The inter-valuation period (2003-2005) experienced an investment gain of $133.3 million.
   

• The yield on assets (that takes into account both the dividends/interest income and capital gains/losses) for the inter-valuation period was
   

• 2003 :  13.2%

• 2004 :  10.4%

• 2005 :  15.3%
   

•  The yield shown above is net of expenses.  The expenses are assumed to be 0.5% of the assets.  For this purpose, only the assets supporting the liabilities (viz. 500.0) need to be taken into account.  On this basis, the maximum expense provision would work out to be $2.5 million.  This can be compared with the actual expenses charged to the fund ($2.9 million for 2003, $3.3 million for 2004 and $3.3 million for 2005).  These expenses have been shown on an accrued basis – but not yet been reimbursed from the fund. 

 

3.  Employer Costs

 

The employer costs for the years 2006 – 08 are estimated to be $8.9 million for 2006, $9.1 million for 2007 and $9.4 million for 2008.  In view of the level of surplus in the fund, Canada Life will not be permitted to pay any contributions into the fund.  These costs have decreased significantly due the large number of employee terminations arising from the partial wind up.  The estimated employer costs for 2005 (as disclosed by the report of valuation as at January 1, 2003) was $20.3 million.

 

4.  Valuation Assumptions

 

Some changes in the assumptions have been made since the last valuation.  The following would be of interest:

 

·        Valuation Interest Rate - Change from 6.5% to 5.25%

·        Inflation Rate – Change from 3.0% to 2.5%

·        Salary Increases – Change from 5.0% to an effective rate of 3.75% (a salary scale was used that gave an effective flat rate of 3.75%).

·        The maximum pension payable under the pension plan was updated to reflect the changes in Income Tax Act.

·        The mortality table was updated from UP94 Table with projection to 2013 to UP94 Table with mortality improvements projected to 2015.

 

These changes (along with some other changes) have resulted in an increase of $30.9 million in the actuarial liability and an increase in the employer current service cost by 1.5% of the pensionable earnings.

 

  

5.  Membership Statistics

 

The following membership statistics will be of interest:

 

	At 1.1.2006	At 1.1.2003
Actives Deferred Vested Pensioners and Beneficiaries Partial Wind Up   Total	1,607 717 847 2,146#   5,317	3,662 772 851 -   5,285

 

# This number includes 79 members who were still accruing service at December 31, 2005, 1905 members with deferred pension entitlements, and 162 members in receipt of monthly pensions.

 

 

February 6, 2007