Pension Security Robert Marchessault, FC IA, FSA Director Pension - - PowerPoint PPT Presentation
Pension Security Robert Marchessault, FC IA, FSA Director Pension & Actuarial Services May 28, 201 9 Page 1 | 2019 05 16 Canadas largest communications company in 201 9 22M+ $23B $85B CUSTOMER CONNECTIONS ANNUAL REVENUE
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Robert Marchessault, FCIA, FSA Director – Pension & Actuarial Services May 28, 201 9
1 in every 350 employed Canadians works at Bell
CUSTOMER CONNECTIONS
ANNUAL REVENUE
ENTERPRISE VALUE
2
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Deferred members
Active DB members
age 52 23 years of service
Retirees and beneficiaries
age 72 $20,000 lifetime pension + $20,000 bridge to age 65
$15.3 B 100% solvent
Bell Canada Plan
$3.8 B 98% solvent
Bell Aliant Plan
$2.1 B 100% solvent
Bell MTS Plan
$1.6 B 100% solvent
Other plans
$0.5 B 100% solvent
BCE Plan
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§ “What if plan were terminated now?” § Snapshot of plan’s security in current environment § Treatment of all benefits earned to date is set out, based on current market rates:
§ payment of commuted values § purchase of annuities § replicating portfolio
§ Results are relatively volatile year-over-year
§ reflects short-term fluctuations § discount rates used to value the liabilities § market rates of return
§ Any shortfalls are amortized over 5 years
4,000 8,000 12,000 16,000 20,000
Surplus Assets Liability
84% 100% 99% 80% 100%
Solvency valuation (Bell Plan)
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§ Long-term view § Assumes plan will continue until last member dies § Uses conservative, long-term assumptions regarding
§ discount rates § mortality § active employee assumptions (salary increases,
retirement/termination rates)
§ Funding requirements are smoothed out (deficits &
fluctuations in equity values are spread over several years)
§ Year-over-year results generally more stable than
solvency measurement
4,000 8,000 12,000 16,000 20,000
Surplus Assets Liability
106% 110% 91%
Going-concern valuation (Bell Plan)
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Under Canadian pension legislation, a pension plan’s assets must be invested separately from the plan sponsor’s assets
§ in trust, available only to pay for pension benefits § can not be used by the company for any other purposes under any circumstances
Plan sponsor is responsible to fund any shortfall in the event of plan termination
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Regularly reassess to adapt to constantly changing environment and evolution of the plans
END POINT: Target Risk Level Plan design changes Plan design changes Bond portfolio changes Bond portfolio changes Funding strategy adjustments Funding strategy adjustments De-risking strategy sophistication De-risking strategy sophistication De-risking & “Lock-down” strategies De-risking & “Lock-down” strategies
Closed DB plans to new entrants Added DC component to existing DB plans for all new hires Align provisions on acquisitions Increased bond portfolio duration over several years Increased allocation: Fixed income grown from 40% of assets in 2008 to 70%
2017 Diversify to find spread Assess if advance contribution is desired Establish guidelines on deficit funding decision process Daily tracking of financial situation Split portfolio by Return Generating (RGP) and Low Risk (LRP) to better align investment strategy with liability Structure to progressively shift to ultimate asset mix with acceptable risk level (glide path) Risk transfer (longevity swap) Fixed income
strategy Keep abreast
initiatives and legislation changes
STARTING POINT
Bell Initiatives
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Page 10 | 2019 05 16 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 17,000
($M)
Projected Solvency Liability (2004)
Bell Canada Pension Plan (solvency liability projection)
Page 11 | 2019 05 16 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 17,000
($M)
Actual Solvency Liability Projected Solvency Liability (2004)
Bell Canada Pension Plan (solvency liability projection vs. actual)
Page 12 | 2019 05 16 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 17,000
($M)
Actual Market Value of Assets Actual Solvency Liability Projected Solvency Liability (2004)
Bell Canada Pension Plan (solvency liability projection vs. actual vs. assets)
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Focus is on managing assets in relation to liabilities with a primary goal of reducing risk in the pension plan over time
To achieve this, the investment policy allocates assets into two categories:
§ 70% low-risk assets (mainly long-term fixed income assets) § Objective of tracking liabilities with low surplus/deficit volatility § 30% return-generating assets (mainly equities) § Objective of adding value above liability
Continuous monitoring of the situation
§ Daily tracking of the solvency situation of the major plans § Quarterly reporting at the Board level § Allows timely intervention if necessary (investment changes, advance contributions)
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Roller-coaster ride in the markets in the last 6 months
While market swings are inevitable, investment policy aims to protect against volatility in solvency position
For each quarter, impact on solvency ratio was kept to ~0.5%
12,000 13,000 14,000 15,000 16,000 17,000 18,000 19,000 20,000 2012 Q4 Q1 Q2 Q3 2013 Q4 Q1 Q2 Q3 2014 Q4 Q1 Q2 Q3 2015 Q4 Q1 Q2 Q3 2016 Q4 Q1 Q2 Q3 2017 Q4 Q1 Q2 Q3 2018 Q4 Q1 85% 100% 99% 93% 94% 96% 93%
100.5% 100.8% 100.2%
Return on assets Change in liability
2018 Q4
$250M decrease 2019 Q1 +7.5% $900M increase
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As per pension plan provisions Not impacted by longevity insurance
Bell Pension Plan
Variable Cash Flow = Unindexed Pension Payments
Pension Payments
Longevity Insurance Contract
Partially re-insured with two global re-insurers Fixed Cash Flow = agreed monthly schedule
~17,000 Bell Retirees Sun Life Assurance Company
NO IMPACT STABLE PAYMENTS ASSUMES RISK
Protection against variability in pension payments
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10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 2015 2020 2025 2030 2035 2040 2045 2050 2055
Annual Cash Flow Exchange - Scenario 3 (Cure for Cancer ) Retirees dying later than expected
Pension Plan Payment to Insurance Company (Fixed Cash Flow) Insurance Company Payment to Pension Plan (Variable Cash Flow)
~$7K net payment by Insurance Company in 2035
10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 2015 2020 2025 2030 2035 2040 2045 2050 2055Annual Cash Flow Exchange - Scenario 1 Assuming actual longevity in line with expected longevity
Pension Plan Payment to Insurance Company (Fixed Cash Flow) Insurance Company Payment to Pension Plan (Variable Cash Flow)small net payment by Insurance Company in 2035 - only net amount is transferred from one entity to the other
§ About half of pension payments are fixed and known from day 1 § Monthly exchange in cash flows is minimal, representing the difference between
§ Fixed payments as established in the contract § Actual pension payments to retirees
§ Protection against greater increases in future longevity than already anticipated
Scenario 1 – actual longevity in line with expected Scenario 2 – retirees living longer than expected (“cure for cancer” scenario)
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Performed annually to maintain strong administrative processes and part of good governance Administrative oversight ensures exactness of pension records 2019 audit
§ already started, same process as in prior years
§ initial letter in April (~8,000) § 1st reminder to be sent in June-July § 2nd reminder to be sent in August-September § temporary suspension of payments would start in November
§ audited retirees can either complete and send in paper audit form enclosed with initial letter or the
electronic audit form can be completed online in minutes (same process as last year)
§ online access through the Benefits site § ID and password were supplied in the initial letter in April
Bell.ca/ mybenefits
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