Ont. Teachers' Pension Plan posts first surplus in 10 years

Ontario education workers will be in legal strike position as of Sept. 23, as their union took the first step Thursday toward job action. (file photo)

TORONTO -- The Ontario Teachers' Pension Plan says it began 2014 with an estimated funding surplus of $5.1 billion -- the first in a decade.

The pension plan attributes the surplus to the increased value of its investment portfolio last year, coupled with changes to inflation protection for beneficiaries and higher contributions that were recently introduced.

If full inflation protection was restored and contributions were reduced to the base level, the plan said it would be 91 per cent funded -- meaning it would still be in a funding deficit.

"A preliminary surplus is good news, however our plan continues to face demographic challenges as well as market uncertainty," said Ron Mock, the plan's president and chief executive officer.

The fund note says teachers live longer, as a group, than the general population. As a result, the plan has 2,900 pensioners who are 90 or older including 126 who are more than 100 years old.

Over the years, the ratio of working-aged teachers to retired members has shifted from four-to-one in 1990, when the plan was created, to 1.4 working plan members per retiree currently. In total, the plan administers pensions of 307,000 active and retired teachers in Ontario.

The retirement fund says it ended last year with $140.8 billion in assets, up from $129.5 billion at the end of 2012.

Its rate of return was 10.9 per cent in 2013, a year in which many individual and professional investors benefited from strong growth in equity markets.

The plan says its one-year return was ahead of its benchmark, which was 9.3 per cent in 2013.

The value of the plan's equity investments (both public and private) totalled $61.9 billion at Dec. 31, 2013, up from $59.5 billion a year earlier.

The plan's equities portfolio had a one-year return of 27.6 per cent, exceeding the benchmark return of 26.3 per cent and creating $600 million of added value.

Teachers' Private Capital investments increased to $14.8 billion from $12.0 billion at Dec. 31, 2012 -- a 26.9 per cent return for the year, which was below the benchmark of 33.4 per cent.

Fixed income investments had $56.9 billion of net assets at year end, compared to $60.0 billion at Dec. 31, 2012. The one-year return of minus 7.9 per cent was better than the benchmark return of minus 8.1 per cent.

The natural resources group's investments totalled $10.8 billion at year end compared to $9.2 billion at December 31, 2012. The investment return was 4.2 per cent, which matched the benchmark.

Real assets, which comprise real estate and infrastructure, had total assets of $30.9 billion at year end, up from $26.5 billion at December 31, 2012.