earlier this year. The four participating pensions within the report
included the Healthcare of Ontario Pension Plan (HOOPP), the
Alberta Investment Management Corporation (AIMco), OPSEU
Pension Trust (OPTrust) and the Caisse de depot et placement
du Quebec (CDPQ).
One of the first key lessons of the report highlights the success
of the collaborations between diverse stakeholders such as labour,
government, business and finance, which allows for each sector to
perform the role best suited to their expertise.
“Having the right balance between governance and accountabil-ity
to all the stakeholders is like the magic triangle,” said Kevin
Uebelein, CEO with AIMco. “Without that, it’s hard to build on.”
In fact, the report states, “Strong, independent governance is
perhaps the most important element of the Canadian model.”
This is epitomized by many Canadian public pension plans and
those that participated in the report, which operate at an arm’s
length from government, are run as high performing investment
management institutions and meet high standards of transparen-cy,
accountability and ethical conduct.
SETTING THEMSELVES APART
Jim Keohane, president and CEO of HOOPP, speaking on the
panel in Toronto, explained that Canadian pensions have had re-markable
success withstanding financial crises – something that
sets the Canadian model apart from other pension models.
“There are three factors that can adversely affect pension plans:
a decline in long-term interest rates, a decline in equity markets
and an unexpected rise in inflation,” said Keohane. “It’s about un-derstanding
and controlling those risks.”
This attention to risk, he further added, led to the creation of
different portfolio structures such as liability matching – a further
expansion of risk control at the pension plan level.
From an HR professional standpoint, pension funds like
OPTrust, which has about half union and half non-unionized em-ployees,
can’t distinguish who are who at the board level (which is
a good thing).
“I think our governance structure works well because our trust-ees,
when they come to the table, you can’t tell which side they
represent because they are laser-focused on ensuring that the
member interests are fully protected,” said Hugh O’Reilly, presi-dent
and CEO with OPTrust.
This is a lesson that can be learned by both HR and employee
representatives. Oftentimes issues, and the way in which they are
addressed, should be indistinguishable and handled in a fair and
Also from an HR standpoint are the challenges facing pension
funds. These are not dissimilar to issues being faced by other pen-sions
on a global scale. Over the next five to 10 years, according to
the report, innovation, leadership, change management and pub-lic
policy will need to be addressed in order to meet the following
challenges. They include:
Lower expected returns and interest rates over the long term
will make it harder to meet pension promises.
More pressure is being placed on plan sustainability as active
members continue to support a growing and aging retired plan
A pension gap is growing between who has a good pension and
who does not.
As pension funds grow, they gain economies of scale but also
become more complex and difficult to navigate global investment
Value-for-money will become more of a concern as pensions
grow and fall under more scrutiny. Trust will need to be continu-ously
built and maintained.
Regulatory environments in Canada remain fragmented and
are not always up to date with pension fund sophistication. Also,
world regulations have become more complex and uncertain post-financial
The inevitability of another financial downturn or crisis will test
the strategies of the current pension models.
Overall, collaboration between HR stakeholders, trustees, pen-sion
boards and others will help navigate challenges and maintain
the already strong governance model being built by the current in-carnation
of the Canadian pension model. The current benefits of
risk mitigation and accountability are the foundation that future
pension models will be built on. n
TRphotos, Cultura Motion / Shutterstock.com
OFTENTIMES ISSUES, AND
THE WAY IN WHICH THEY
ARE ADDRESSED, SHOULD
AND HANDLED IN A FAIR
AND EQUITABLE WAY.
30 ❚ DECEMBER 2017 ❚ HR PROFESSIONAL