Actuarial Report (20th) on the Pension Plan for the Public Service of Canada as at 31 March 2023

List of tables

• Table 1 Ultimate best-estimate economic assumptions
• Table 2 Demographic assumptions
• Table 3 State of the Superannuation Account
• Table 4 Financial position of the Pension Fund (Service Since 1 April 2000)
• Table 5 Reconciliation of financial position from plan year 2020 to 2023 by financing arrangement
• Table 6 Experience gains and losses from 31 March 2020 to 31 March 2023 by financial arrangement
• Table 7 Impact of the revision of actuarial assumptions on the financial position
• Table 8 Current service cost for plan year 2025
• Table 9 Reconciliation current service cost (as a percentage of pensionable payroll)
• Table 10 Member contribution rates
• Table 11 Projection of the current service cost on a plan year basis
• Table 12 Projection of the current service cost on a calendar year basis
• Table 13 Projection of the current service cost on a calendar year basis – Group 1
• Table 14 Projection of the current service cost on a calendar year basis – Group 2
• Table 15 Pension fund administrative expenses
• Table 16 Estimated contributions for prior service buyback
• Table 17 Sensitivity of valuation results to variations in key economic assumptions
• Table 18 State of the RCA No. 1 Account
• Table 19 State of the RCA No. 2 Account
• Table 20 RCA No. 1 – Projection of the current service cost on a plan year basis
• Table 21 RCA No. 1 – Projection of the current service cost on a calendar year basis
• Table 22 Estimated government credits
• Table 23 Estimated government cost - Pension Fund
• Table 24 Member contribution rates
• Table 25 Contributor benefits
• Table 26 Pensioner benefits
• Table 27 RCA – Summary of Plan provisions
• Table 28 Reconciliation of balances in Superannuation Account
• Table 29 Reconciliation of balances in Pension Fund
• Table 30 Reconciliation of balances in RCA No. 1 Account
• Table 31 Reconciliation of balances in RCA No. 2 Account
• Table 32 Rates of interest (return)
• Table 33 Summary of membership data
• Table 34 Reconciliation of Group 1 contributors
• Table 35 Reconciliation of Group 2 contributors
• Table 36 Reconciliation of pensioners
• Table 37 Reconciliation of surviving spouses
• Table 38 Reconciliation of children survivors
• Table 39 Reconciliation of pensioners with RCA No. 2 benefits (ERI)
• Table 40 Actuarial value of Pension Fund assets
• Table 41 Asset mix
• Table 42 Real rate of return by asset class
• Table 43 Overall rate of return on assets of the Pension Fund
• Table 44 Rates of return on assets in respect of the Pension Fund
• Table 45 Transfer value real interest rates
• Table 46 Economic assumptions
• Table 47 Sample of assumed seniority and promotional salary increases
• Table 48 Assumed annual increases in number of contributors
• Table 49 Sample of assumed rates of retirement – Main group 1 – Male
• Table 50 Sample of assumed rates of retirement – Main group 2 – Male
• Table 51 Sample of assumed rates of retirement – Main group 1 – Female
• Table 52 Sample of assumed rates of retirement – Main group 2 – Female
• Table 53 Sample of assumed rates of retirement – Operational group
• Table 54 Sample of assumed rates of pensionable disability
• Table 55 Sample of assumed rates of withdrawal – Main group – Male
• Table 56 Sample of assumed rates of withdrawal - Main group - Female
• Table 57 Sample of assumed rates of withdrawal – Operational group
• Table 58 Sample of assumed rates of mortality – For Plan year 2024
• Table 59 Sample of assumed mortality improvement rates
• Table 60 Cohort life expectancy of contributors and non-disabled pensioners
• Table 61 Probability of an eligible spouse at death of member
• Table 62 Spouse age difference with the member at death of member
• Table 63 Assumed rates of children ceasing to be eligible for a survivor allowance
• Table 64 Sample of assumed proportion eligible spouse at termination of employment
• Table 65 Sample of assumed divorce rates
• Table 66 Sensitivity to interest rate risk
• Table 67 Sensitivity of cohort life expectancy to variations in mortality improvement rates
• Table 68 Sensitivity of financial results to variations to the ultimate mortality improvement rates
• Table 69 Climate change scenario – Average nominal annual rate of return on assets in respect of the pension fund (%)
• Table 70 Climate change scenario – Pension fund status as at 31 March 2023
• Table 71 Financial positions at tail-events of best-estimate portfolio as at 31 March 2026
• Table 72 Male contributors (Group 1 - Main group)
• Table 73 Male contributors (Group 1 - Main group) - Summary
• Table 74 Female contributors (Group 1 - Main group)
• Table 75 Female contributors (Group 1 - Main group) - Summary
• Table 76 Male contributors (Group 1 - Operational group)
• Table 77 Male contributors (Group 1 - Operational group) - Summary
• Table 78 Female contributors (Group 1 - Operational group)
• Table 79 Female contributors (Group 1 - Operational group) - Summary
• Table 80 Male and female contributors (Group 1 - Leave without pay and non-active contributors)
• Table 81 Male and female contributors (Group 1 - Leave without pay and non-active contributors) - Summary
• Table 82 Male contributors (Group 2 - Main group)
• Table 83 Male contributors (Group 2 - Main group) - Summary
• Table 84 Female contributors (Group 2 - Main group)
• Table 85 Female contributors (Group 2 - Main group) - Summary
• Table 86 Male contributors (Group 2 - Operational group)
• Table 87 Male contributors (Group 2 - Operational group) - Summary
• Table 88 Female contributors (Group 2 - Operational group)
• Table 89 Female contributors (Group 2 - Operational group) - Summary
• Table 90 Male and female contributors (Group 2 - Leave without pay and non-active contributors)
• Table 91 Male and female contributors (Group 2 - Leave without pay and non-active contributors) - Summary
• Table 92 Male retired pensioners Number of retired pensioners and average annual pension in pay as at 31 March 2023
• Table 93 Male retired pensioners - Summary
• Table 94 Female retired pensioners Number of retired pensioners and average annual pension in pay as at 31 March 2023
• Table 95 Female retired pensioners - Summary
• Table 96 Male disabled pensioners Number of disabled pensioners and average annual pension in pay as at 31 March 2023
• Table 97 Male disabled pensioners - Summary
• Table 98 Female disabled pensioners Number of disabled pensioners and average annual pension in pay as at 31 March 2023
• Table 99 Female disabled pensioners - Summary
• Table 100 Male deferred pensioners Number of deferred pensioners and average annual deferred pension as at 31 March 2023
• Table 101 Male deferred pensioners - Summary
• Table 102 Female deferred pensioners Number of deferred pensioners and average annual deferred pension as at 31 March 2023
• Table 103 Female deferred pensioners - Summary
• Table 104 Surviving spouses Number of surviving spouses and average annual allowance as at 31 March 2023
• Table 105 Surviving spouses - Summary

List of charts

• Chart 1 Pension Fund and Superannuation Account Evolution of liabilities from plan year 2023 to plan year 2065 in $ billions
• Chart 2 Pension Fund – Evolution of cash flows from plan year 2024 to plan year 2042 in $ millions
• Chart 3 Pension Fund – Evolution of Group 1 and Group 2 active membership from plan year 2023 to plan year 2051
• Chart 4 Climate scenarios – Cumulative Canadian GDP impact relative to baseline scenario from 2020 to 2100
• Chart 5 Pension Fund – Range of potential funded ratio for the best-estimate portfolio from plan year 2023 to plan year 2044
• Chart 6 Pension Fund – Likelihood of deficit, permitted and non-permitted surplus due to investment volatility and inflation modelling from plan year 2023 to plan year 2044

1 Highlights of the report

2 Introduction

This actuarial report on the pension plan for the Public Service of Canada (PSPP) was made pursuant to the Public Pensions Reporting Act (PPRA).

This actuarial valuation is as at 31 March 2023 and is in respect of pension benefits and contributions defined by Parts I, III and IV of the Public Service Superannuation Act (PSSA), the Special Retirement Arrangements Act (SRAA), which covers the Retirement Compensation Arrangements Regulations No. 1 and No. 2 (RCA), and the Pension Benefits Division Act (PBDA).

The previous actuarial report was prepared as at  31 March 2020. The next periodic review is scheduled to occur no later than 31 March 2026.

2.1 Purpose of actuarial report

The purposes of this actuarial valuation are to:

• determine the state of the Public Service Superannuation Account (Superannuation Account), the Public Service Pension Fund (Pension Fund) and the RCA Accounts;
• determine the projected current service costs for the Pension Fund and the RCA Accounts; and
• assist the President of the Treasury Board in making informed decisions regarding the financing of the government’s pension benefit obligation.

This report may not be suitable for another purpose.

2.2 Structure of the report

Section 3 presents a general overview of the valuation basis used in preparing this actuarial report and section 4 presents the financial position of the plan as well as the reconciliation of the changes in financial position and the cost certificate.

Finally, section 5 provides the actuarial opinion for the current valuation.

The various appendices provide a summary of the plan provisions, a description of data, methodologies and assumptions employed. The appendices also provide pension plan projections, scenarios illustrating downside risks and the uncertainty of results resulting from future investment returns.

Numbers shown in the tables throughout this report may not add up due to rounding.

3 Valuation basis

3.1 Valuation inputs

This report is based on pension benefit provisions enacted by the legislation, summarized in Appendices A and B.

No amendments were made to the PSSA since the previous valuation. Minor amendments were applied to the Public Service Superannuation Regulations since the previous valuation. Those amendments did not have any impact on the actuarial valuation of the plan.

The Funding Policy for the Public Sector Pension Plans (Funding Policy) was approved by the Treasury Board in 2018. The policy provides guidance and rules to support prudent governance of the plans^{Footnote 1} and ensures that sufficient assets are accumulated to meet the cost of the accrued pension benefits. The methods, assumptions and results of this actuarial valuation are consistent with the provisions of the Funding Policy.

The financial data on which this valuation is based on are composed of:

• the Pension Fund invested assets that the government has earmarked for the payment of benefits for service since 1 April 2000;
• the Superannuation Account established to track the government’s pension benefit obligations for service prior to 1 April 2000.
• the RCA Accounts established to track the pension benefit obligations in excess of those that can be provided under the Income Tax Act limits for registered pension plans.

These pension assets and account balances are summarized in Appendix C.

The membership data are provided by the Department of Public Services and Procurement Canada (PSPC). Membership data and tests performed on them are summarized in Appendix D. 

The valuation was prepared using accepted actuarial practices, methods and assumptions, which are summarized in Appendices E to I.

All actuarial assumptions used in this report are best-estimate assumptions and do not include any margin for adverse deviations. They are independently reasonable and appropriate in aggregate for the purposes of the valuation at the date of this report.

Actuarial assumptions used in the previous report were revised based on economic trends and demographic experience. A complete description of the assumptions is detailed in Appendices F to I.

A summary of the ultimate economic assumptions used in this report and those used in the previous report is shown in the following table.

The following table presents a summary of the demographic assumptions used in this report and those used in the previous report.

3.2 Subsequent events

Certain occupational groups who promote the safety and security of Canadians are eligible to early retirement: retirement after 25 years of service without a pension reduction. The government has announced on 13 June 2024 its intent to expand this early pension eligibility for frontline and security workers under the PS pension plan. Since the details are not yet available and legislative changes have not been introduced yet, we have not reflected any of these potential changes in this report. Pursuant to section 4 of the PPRA, a report on an actuarial review of the PS pension plan could be required when the legislative changes are introduced.

The Pay Equity Act, which came into force on 31 August 2021, applies to all federally regulated employers with 10 employees or more. On 19 August 2024, the Pay Equity Commissioner has granted Treasury Board Secretariat the requested extension of 3 years to post a final pay equity plan for employees of Core Public Administrations by 31 August 2027. Since federal employers are at various steps of the pay equity process, the details of the expected changes to compensation are not known, and the impact of the implementation of the Pay Equity Act has not been considered in this report.

As of the date of the signing of this report, we were not aware of any other subsequent events that may have a material impact on the results of this valuation.

4 Valuation results

This report is based on the pension benefit provisions enacted by the legislation, summarized in Appendices A and B, and the financial and membership data, summarized in Appendices C and D, respectively. The valuation was prepared using accepted actuarial practices, methods and assumptions summarized in Appendices E to I. Emerging experience that differs from the corresponding assumptions will result in gains or losses to be revealed in subsequent reports.

4.1 PSSA – Financial position

The Superannuation Account is credited with all PSSA member contributions and government costs prior to 1 April 2000, as well as with prior service contributions and costs for elections made prior to 1 April 2000.  Beginning on 1 April 2000, member and government contributions are no longer credited to the Superannuation Account. Rather, they are credited to the Pension Fund, and the total amount of contributions net of benefits and administrative expenses paid is transferred to the Public Sector Pension Investment Board (PSP Investments) and invested in the financial markets.

This section presents the financial positions for both PSSA financing arrangements as at 31 March 2023. The results of the previous valuation are also shown for comparison.

In accordance with the PSSA, the actuarial shortfall of $6,050 million could be amortized over a maximum period of 15 years beginning on 31 March 2025. If the shortfall is amortized over the maximum period, 15 equal annual credits of $514 million could be made to the Superannuation Account. The time, manner and amount of such credits are to be determined by the President of the Treasury Board.

It is expected that the government will eliminate the actuarial shortfall of the Superannuation Account by making a one-time credit of $6,425 million as at 31 March 2025 to take into account the interest on the shortfall accumulated from 31 March 2023 to 31 March 2025.

As at 31 March 2023, the Pension Fund has a surplus of $32,006 million and the funded ratio is 123.3%. As such, no special payments are required and there is no non-permitted surplus^{Footnote 2}.

4.2 PSSA – Reconciliation of the changes in financial position 

Table 5 shows the reconciliation of the changes in the financial positions of the Superannuation Account and the Pension Fund. Explanations of the items largely responsible for the changes follow the table.

4.2.1 Recognized investment gains or losses as at 31 March 2020

An actuarial asset valuation method that minimizes the impact of short-term fluctuations on the market value of assets was used in the previous valuation report, causing the actuarial value of the Pension Fund assets to be $1,248 million more than its market value.

4.2.2 Change in methodology

Improvements to the actuarial valuation software were made. The impacts of these improvements increased the Superannuation Account liability as at 31 March 2020 by $184 million and the Pension Fund liability as at the same date by $823 million.

4.2.3 Expected interest on revised initial financial position

The amount of interest expected to accrue during the intervaluation period increased the shortfall by $766 million for the Superannuation Account and increased the surplus by $1,959 million for the Pension Fund.

These amounts of interest were based on the Superannuation Account yields and the Pension Fund returns projected in the previous report for the three-year intervaluation period.

4.2.4 Special credits and payments made in the intervaluation period

The government made a one-time special credit as at 31 March 2022 to eliminate the $7,300 million shortfall reported in the Superannuation Account as at 31 March 2020. After factoring the expected interest, this credit resulted in an increase of $8,047 million in the recorded balance of the Superannuation Account as at 31 March 2023.

No deficit was reported in the Pension Fund as at 31 March 2020. Thus, no special payments were made during the intervaluation period.

4.2.5 Experience gains and (losses)

Since the previous valuation, experience gains and losses increased the Superannuation Account shortfall by $4,330 million and increased the Pension Fund surplus by $21,219 million. The main experience gain and loss items are shown in the following table followed by explanatory notes (i) through (iii). Gains are represented by positive numbers and losses are represented by negative numbers.

4.2.6 Revision of actuarial assumptions

Actuarial assumptions were revised based on economic trends and demographic experience as described in Appendices F to I. These revisions have increased the Superannuation Account shortfall by $1,358 million and increased the Pension Fund surplus by $5,961 million. The impact of these revisions is shown in Table 7 with the most significant items discussed thereafter.

The net impact of the revision of the assumptions is largely attributable to the changes in economic assumptions.

The following revisions were made to the economic assumptions used in the previous report:

• ultimate real rate of return on the Pension Fund was increased from 3.9% to 4.0%;
• real rates of return on the Fund during plan years 2024 to 2034 were increased on average from 3.6% to 3.9%;
• ultimate real projected yield on the Superannuation Account was decreased from 2.1% to 2.0%;
• real projected yields on the Superannuation Account during plan years 2024 to 2043 were increased on average from 1.7% to 1.9%;
• real increases in pensionable earnings during plan years 2024 to 2027 were increased on average from 2.2% to 2.8%;
• ultimate real increase in pensionable earnings was decreased from 0.7% to 0.5%. 

Details of the changes in economic assumptions are described in Appendix F.

Details of the changes in demographic assumptions are described in Appendix G.

4.2.7 Change in the present value of prior service contributions

New members’ prior service election paid through instalments since the last report and changes to payment schedules for some members resulted in a change in the present value of prior service contributions. This change increased the Account shortfall by $12 million and decreased the Pension Fund surplus by $281 million.

4.2.8 Change in the present value of administrative expenses

The administrative expense assumption was increased by 0.05% and corresponds to 0.45% of total pensionable payroll.

For plan year 2024, 37% of total administrative expenses are being charged to the Superannuation Account; it is assumed that the proportion charged to the Superannuation Account will reduce at the rate of 2% per year as in the previous report. An increase in the expected present value of administrative expenses charged to the Superannuation Account due to demographic changes and the increase of the administrative expense assumption resulted in an increase of the Superannuation Account shortfall as at 31 March 2023 of $147 million.

4.2.9 Unrecognized investment gains

An actuarial asset valuation method that minimizes the impact of short-term fluctuations in the market value of assets was also used for this valuation. This method, which is described in Appendix E.1, resulted in an actuarial value of assets that is $9,281 million less than the market value of the Pension Fund assets as at 31 March 2023.

4.3 PSSA – Cost certificate

4.3.1 Current service cost

The details of the current service cost for plan year^{Footnote 3} 2025 and reconciliation with the 2022 current service cost are shown below.

4.3.2 Projection of current service cost

The current service cost is borne jointly by the plan members and the government. Group 1 and Group 2 (as defined in Note A.4.1) member contribution rates are determined such that the government share of the current service cost contribution is 50%. They are determined on a calendar year basis and are shown in the following table.

The projection of the current service costs on a plan year basis, expressed in dollar amount as well as in percentage of the projected pensionable payroll (as defined in Note A.4.2) are shown in the following table.

The following tables show projections of current service cost expressed in millions of dollars and as a percentage of the expected pensionable payroll for the three calendar years following the expected tabling of this report. The ratio of government current service cost to contributor current service cost is also shown. Table 13 and Table 14 show the same results for Group 1 and Group 2, respectively.

The projections of current service cost shown in these tables are based on the member^{Footnote 4} contribution rates presented in Table 10 and government contribution rates required to fund the current service cost. The PSSA allows the President of the Treasury Board to reduce contributions in certain situations.

4.3.3 Administrative expenses

Based upon the assumptions described in Appendix F.3.5, the Pension Fund administrative expenses are included in the total current service costs and are estimated to be as follows.

The Superannuation Account administrative expenses have been capitalized and are shown as a liability in the balance sheet.

4.3.4 Contributions for prior service elections

Member and government contributions for prior service elections were estimated as follows:

4.4 PSSA – Sensitivity of valuation results to economic assumptions

The information required by statute, which is presented in the main report, has been derived using best‑estimate assumptions regarding future demographic and economic trends. The key best‑estimate assumptions, i.e. those for which changes within a reasonable range have the most significant impact on the long-term financial results, are described in Appendices F and G.

Given the length of the projection period and the number of assumptions required, it is unlikely that the actual experience will develop precisely in accordance with the best‑estimate assumptions. Individual sensitivity tests have been performed, projecting the pension plan’s financial status using alternative assumptions.

Table 17 shows the effect on the plan year 2025 current service cost as well as the effect on the liabilities at the valuation date for the Superannuation Account and the Pension Fund when key economic assumptions are varied by one percentage point per annum.

The differences between the results above and those shown in the valuation can also serve as a basis for approximating the effect of other numerical variations in one of a key assumption to the extent that such effects are assumed to be linear.

4.5 RCA – Financial position

This section shows the financial position of the RCA accounts as at 31 March 2023. The results of the previous valuation are also shown for comparison.

The sum of the recorded balance of the RCA No. 1 Account, the refundable tax and the present value of prior service cost contributions as at 31 March 2023 is $2,799 million, which exceeds the actuarial liability of $2,731 million by $68 million.

Since the previous valuation, the actuarial excess of the RCA No. 2 Account reduced from $130 million to $26 million.

4.6 RCA – Current service cost

4.6.1 RCA No. 1 – Current service cost

The current service cost, which is borne jointly by the members and the government, increased by 0.03% to reach 0.21% of pensionable payroll in this valuation for plan year 2025 from 0.18% of pensionable payroll calculated in the previous actuarial report.

The RCA No. 1 current service cost is estimated to be 0.21% of pensionable payroll for plan year 2025 to 2028. The following table shows the estimated RCA No. 1 current service cost in millions of dollars for the next four plan years.

The following table shows the projected current service cost in millions of dollars and as a percentage of the expected pensionable payroll for the three calendar years following the expected tabling of this report. The ratio of government current service cost to contributor current service cost is also shown.

4.6.2 RCA No. 2 – Current service cost

RCA No. 2 was used as an early retirement incentive (ERI) as part of a downsizing initiative by the Government. There is currently no service cost for this program.

4.7 Summary of estimated government costs

Table 22 summarizes the estimated total government credits for the RCA No. 1 and the Superannuation Account on a plan year basis. Table 23 summarizes the estimated total government costs for the Pension Fund on a plan year basis.

5 Actuarial opinion

In our opinion, considering that this report was prepared pursuant to the Public Pensions Reporting Act,

• the valuation data on which the valuation is based are sufficient and reliable for the purposes of the valuation;
• the assumptions used are individually reasonable and appropriate in aggregate for the purposes of the valuation; and
• the methods employed are appropriate for the purposes of the valuation.

This report has been prepared, and our opinion given, in accordance with accepted actuarial practice in Canada. In particular, this report was prepared in accordance with the Standards of Practice (General Standards and Practice – Practice-Specific Standards for Pension Plans) published by the Canadian Institute of Actuaries.

Subsequent events described in section 3.2 were not considered in this valuation since the details were not available at the time the report was prepared. To the best of our knowledge, after discussion with Public Services and Procurement Canada and the Treasury Board of Canada Secretariat, there were no other subsequent events between the valuation date and the date of this report that would have a material impact on the results of this valuation.

Assia Billig, FCIA, FSA
Chief Actuary

Annie St-Jacques, FCIA, FSA

François Lemire, FCIA, FSA

Alexandre Larose, FCIA, FSA

Ottawa, Canada
27 September 2024

Appendix A - Summary of pension benefit provisions

The government has been providing its employees with a pension plan since 1870. Pensions for members of the Public Service are provided primarily under the Public Service Superannuation Act (PSSA) as enacted in 1954 and modified thereafter. Benefits are also provided to public servants under the Special Retirement Arrangements Act. Benefits may be modified in accordance with the Pension Benefits Division Act if there is a breakdown of a spousal union.

Changes since the last valuation

Minor amendments were applied to the Public Service Superannuation Regulations since the previous valuation. Those amendments did not have any impact on the actuarial valuation of the plan.

Summary of pension benefit provisions

Summarized in this Appendix are the pension benefits provided under the PSSA registered provisions, which are in compliance with the Income Tax Act. The portion of the benefits in excess of the Income Tax Act limits for registered pension plans is provided under the retirement compensation arrangements described in Appendix B.

In case of any discrepancy between this summary and the legislation, the legislation shall prevail.

A.1 Membership

Subject to the exceptions mentioned in the next paragraph, membership in the plan is compulsory for all full‑time and part-time employees working 12 or more hours per week (except those who were grandfathered as at 4 July 1994) in the Public Service. This includes all positions in any department or portion of:

• the Executive Government of Canada;
• the Senate and the House of Commons;
• the Library of Parliament; and
• any board, commission or corporation listed in a Schedule to the Act, as well as those designated as contributors by the President of the Treasury Board either individually or as members of a class for persons engaged as seasonal employees and some others.

The main groups of persons employed in the Public Service to which the Act does not apply are:

• part-time employees working less than 12 hours per week;
• persons locally engaged outside Canada;
• employees of some Crown corporations, boards or commissions covered by their own pension plans; and
• seasonal employees, and some others, unless designated as contributors by the President of the Treasury Board.

Since the previous valuation, no entities have left the plan.

A.2 Contributions

A.2.1 Members

Different contribution rates apply to Group 1 and Group 2 contributors (as defined in Note A.4.1). The expected rates are consistent with the government objective of maintaining a 50:50 employer to employee current service cost sharing ratio.

During the first 35 years of pensionable service, members contribute according to the rates shown in the following table.

After 35 years of pensionable service, members contribute only 1% of pensionable earnings. The total pensionable earnings used to determine the contribution rates excludes the earnings from those members with more than 35 years of pensionable service.

Actual and deemed operational members (from Correctional Service Canada (CSC)) contribution rates are those of Group 1 members. In order to keep their rights to an early retirement benefit, deemed operational members contribute an additional 0.62% of their payroll during a calendar year to maintain their entitlement to the operational benefits.

A.2.2 Government

A.2.2.1 Current service

The government determines the normal monthly contribution as the amount which, when combined with the required contributions by members in respect of current service and expected interest earnings, is sufficient to cover the cost, as estimated by the President of the Treasury Board, of all future payable benefits that have accrued in respect of pensionable service during that month and the Pension Fund administrative expenses incurred during that month.

A.2.2.2 Elected prior service

The government matches member contributions made to the Superannuation Account for prior service elections; however, it makes no contributions if the member is paying the double rate.

Government contributions to the Pension Fund in respect of elected prior service are calculated using the same ratio of Government contributions to employee contributions as for the current service cost. For members paying the double rate, the government contributes only the excess of the ratio of Government contributions to employee contributions over 1.

A.2.2.3 Actuarial excess and surplus

The PSSA gives the government the authority to:

• debit the excess of the Superannuation Account over the actuarial liability subject to limitations, and
• deal with any actuarial surplus, subject to limitations, in the Pension Fund as they occur, either by
  • reducing employer contributions or
  • reducing employer and employee contributions or
  • by making withdrawals.

A.2.2.4 Actuarial shortfall and deficit

In accordance with the PSSA, if either a Superannuation Account actuarial shortfall or a Pension Fund actuarial deficit is identified through a triennial statutory actuarial valuation, the actuarial shortfall/deficit can be amortized over a period of up to 15 years.

The President of the Treasury Board will determine the time, the manner and the amount of credits to be made. The shortfall/deficit must be fully paid by the end of the fifteenth fiscal year following the tabling of that report at the latest.

A.3 Summary description of benefits

The objective of the PSPP is to provide an employment earnings–related lifetime retirement pension to eligible members. Benefits to members in case of disability and to the spouse and children in case of death are also provided.

Subject to coordination with the pensions paid by the Canada Pension Plan (CPP) or the Québec Pension Plan (QPP), the initial rate of retirement pension is equal to 2% of the highest average of annual pensionable earnings over any period of five consecutive years, multiplied by the number of years of pensionable service not exceeding 35. Once in pay, the pension is indexed annually with the Consumer Price Index. Such indexation also applies to deferred pensions during the deferral period. Detailed notes on the following overview are provided in the following section.

A.4 Explanatory notes

A.4.1 Member subgroups

Benefit provisions, member’s demographic assumptions (Appendix G), detailed information on membership (Appendix M), and member contribution rates differ depending on the membership date and the type of service being accrued. Before receiving an annuity, contributors and deferred pensioners are divided into the following groups:

1. Group 1: Members who entered the PSPP prior to 1 January 2013.
2. Group 2: Members who entered the PSPP on or after 1 January 2013.

Then, each member can accrue different types of service (see A.4.4 below):

1. Operational members (from Correctional Service Canada) - correspond to members who accrue either:
   1. actual operational service; or
   2. deemed operational service.
2. Main members: correspond to non-operational members.

In this report, membership data is divided into the following subgroups. The eligibility and provisions of each group are further explained in the explanatory notes below.

Contributors: Members who have yet to terminate their employment.

Deferred pensioners: Members who have terminated their employment and have opted, by choice or by default, to defer the moment where they will become retired pensioners.

Retired pensioners: Members who terminated their employment and are currently receiving an annuity.

Disabled pensioners: Members currently receiving an annuity and are disabled.

Surviving spouses: The spouse, of a deceased member, that is currently receiving an annuity.

Surviving children: The child, of a deceased member, that is currently receiving an annuity.

Pending and outstanding members: Members eligible to a either a return of contribution or a transfer value but have yet to receive it as of 31 March 2023. Pending members terminated between 31 March 2020 and 31 March 2023 while outstanding members terminated before 31 March 2020.

A.4.2 Pensionable earnings

Pensionable earnings means the annual employment earnings (excluding overtime but including pensionable allowances such as bilingual bonuses) of a contributor.

Pensionable payroll means the aggregate pensionable earnings of all contributors with less than 35 years of pensionable service. Payroll of members on leave without pay at 31 March 2023 is excluded as they are not considered participating contributors in this report.

A.4.3 Indexation

A.4.3.1 Level of indexation adjustments

All immediate and deferred annuities (pensions and allowances) are adjusted every January to the extent warranted by the increase, as at 30 September of the previous year, in the 12-month average Consumer Price Index relative to the corresponding figure one year earlier. If the indicated adjustment is negative, annuities are not decreased for that year; however, it is carried-forward and the next positive adjustment is diminished accordingly.

A.4.3.2 First indexation adjustment

Indexation adjustments accrue from the end of the month in which employment terminates. The first annual adjustment following termination of employment is prorated accordingly.

A.4.3.3 Commencement of indexation payments

The indexation portion of a retirement, disability or survivor pension normally starts being paid when the pension is put into pay. However, regarding an operational service retirement pension, indexation payments start only when the pensioner is either

• at least 55 years old, provided the sum of age and pensionable service is at least 85; or
• at least 60 years old.

A.4.4 Pensionable service, actual operational service and deemed operational service

Pensionable service of a contributor includes any period of service in the Public Service for which the contributor has been required to contribute or has elected to contribute, if eligible to do so, and such other types of service for which the contributor has elected to make the required special contributions to the Superannuation Account or the Pension Fund. Pensionable service is limited to 35 years.

Actual operational service

Refers to employees working in federal correctional facilities, parole offices and community correctional centres. More specifically, operational service is defined as service by a person employed by Correctional Service Canada (CSC) whose principal place of work is not: the national headquarters or a regional headquarters of CSC; the offices of the CSC Commissioner; or a regional CSC Staff College or any other institution that provides similar training to CSC employees.

Deemed operational service

Refers to CSC employees in operational service for one or more periods totalling at least 10 years, who then cease to be engaged in operational service but continue to be employed by CSC and elect to continue to accumulate operational service and contribute an additional 0.62% of pensionable earnings.

A.4.5 Return of contributions

Return of contributions means the payment of an amount equal to the accumulated current and prior service contributions paid or transferred by the contributor into the plan. Interest is credited quarterly on returned contributions in accordance with the investment return on the Pension Fund.

A.4.6 Annuity payments

Annuities are payable at the end of month until the month in which the pensioner dies or until the disabled pensioner recovers from disability (the last payment would then be pro-rated). Upon the death of the pensioner, either a survivor allowance (Note A.4.16) or a residual death benefit (Note A.4.17) may be payable.

A.4.7 Coordination with CPP (or QPP)

When a pensioner attains age 65 or becomes entitled to a disability pension from the CPP (or QPP), the annual pension amount is reduced by 0.625% of the indexed CPP annual pensionable earnings^{Footnote 5} (or, if lesser, the indexed five-year7 pensionable earnings average on which the immediate annuity is based), multiplied by the years of CPP pensionable service^{Footnote 6}. This coordination does not apply to annual allowance for eligible survivors (note A.4.16).

A.4.8 Immediate annuity

Immediate annuity means an unreduced pension that becomes payable immediately upon a pensionable retirement or pensionable disability. The annual amount is equal to 2% of the highest average of annual pensionable earnings of the contributor over any period of five^{Footnote 7} consecutive years, multiplied by the number of years of pensionable service not exceeding 35. For contributors with periods of part-time pensionable service, earnings used in the five-year average are based on a full 37.5‑hour workweek, but the resulting average is multiplied by the proportion of the actual workweek over a full workweek averaged by the contributor over the entire period of pensionable service.

A.4.9 Deferred annuity

Deferred annuity means an annuity that normally becomes payable to a former Group 1 contributor who reaches age 60 or a former Group 2 contributor who reaches age 65. The annual payment is determined as for an immediate annuity (Note A.4.8) but is also adjusted to reflect the indexation (Note A.4.3) from the date of termination to the commencement of benefit payments.

The deferred annuity of a former Group 1 contributor becomes an immediate annuity during any period of disability beginning before age 60. If the disability ceases before age 60, the immediate annuity reverts to the original deferred annuity unless the pensioner elects an annual allowance (Notes A.4.11, A.4.12, and A.4.13) that is the prescribed actuarial equivalent to the deferred annuity. Similarly, the deferred annuity of a former Group 2 contributor becomes an immediate annuity during any period of disability beginning before age 65, and reverts back to the original deferred annuity if the disability ceases before age 65, unless the pensioner elects an annual allowance as described above.

A.4.10 Transfer value

A contributor who has ceased to be employed in the Public Service and has to his credit two or more years of pensionable service, is a Group 1 contributor and is under age 50, or is a Group 2 contributor and is under age 55, and is eligible for a deferred annuity may elect to transfer the commuted value of his benefit, determined in accordance with the regulations, to

• a locked-in Registered Retirement Savings Plan; or
• another pension plan registered under the Income Tax Act; or
• a financial institution for the purchase of a locked-in immediate or deferred annuity.

A.4.11 Main members - annual allowance

For a Group 1 member, annual allowance means an annuity payable immediately on retirement or upon attaining age 50, if later. The amount of the allowance is equal to the amount of the deferred annuity to which the member would otherwise be entitled, reduced by 5% for each year between 60 and the age when the allowance becomes payable. However, if the member is at least 50 years old at termination, and has at least 25 years of pensionable service , then the difference, in years, between 60 and the age when the allowance becomes payable  is reduced to the greater of

• 55 minus the age when the allowance becomes payable, and
• 30 minus the number of years of pensionable service^{Footnote 8}.

For a Group 2 member, the eligibility age is increased by 5 years, so that annual allowance means an annuity payable immediately on retirement or upon attaining age 55 if later. The amount of the allowance is equal to the amount of the deferred annuity to which the member would otherwise be entitled, reduced by 5% for each year between 65 and the age when the allowance becomes payable. However, if the member is at least 55 years old at termination, and has at least 25 years of pensionable service8, then the difference, in years, between 65 and the age when the allowance becomes payable is reduced  to the greater of

• 60 minus the age when the allowance becomes payable, and
• 30 minus the number of years of pensionable service^{Footnote 8}.

The Treasury Board can waive all or part of the reduction for Group 1 contributors who are involuntarily retired at ages 55 and over with at least 10 years of Public Service employment, or for Group 2 contributors who are involuntarily retired at ages 60 and over with at least 10 years of Public Service employment.

When a Group 1 member in receipt of an annual allowance becomes disabled before reaching age 60, or a Group 2 member in receipt of an annual allowance becomes disabled before reaching age 65, the annual allowance becomes an immediate annuity adjusted in accordance with the regulations to take into account the amount of any annual allowance received prior to becoming disabled.

A.4.12 Deemed operational service - immediate annuity and annual allowance

A deemed operational service immediate annuity differs from an immediate annuity (Note A.4.8) only in that it is available as early as age 50 with 25 years of operational service.

A deemed operational service annual allowance differs from an annual allowance (Note A.4.11) in two ways. Firstly, it is available as early as age 45 with 20 years of operational service. Secondly, the reduction factor is 5% multiplied by the greater of

• 50 minus the age, and
• 25 minus the years of operational service.

The foregoing operational service–related benefits are calculated in relation to both deemed and actual operational service only. Additional non-operational service results in the applicable non-operational benefit where any thresholds or reductions are based on total pensionable service, including operational service.

A.4.13 Actual operational service - immediate annuity and annual allowance

An actual operational service immediate annuity differs from an immediate annuity (Note A.4.8 and Note A.4.12) only in that it is available when the member has accrued 25 years of actual operational service.

An actual operational service annual allowance differs from other annual allowances (Note A.4.11 and Note A.4.12) in two ways. Firstly, it is available as soon as 20 years of actual operational service is accrued. Secondly, the reduction factor is 5% multiplied by 25 minus the years of actual operational service.

The foregoing operational service-related benefits are calculated in relation to actual operational service only. Additional non-operational service results in the applicable non-operational benefit where any thresholds or reductions are based on total pensionable service, including operational service. Also, additional deemed operational service results in the applicable deemed operational benefit where any thresholds or reductions are based on operational pensionable service.

A.4.14 Eligible surviving spouse

Eligible surviving spouse means the surviving spouse (includes a common-law or same‑sex partner recognized under the plan) of a contributor or pensioner except if:

• the contributor or pensioner died within one year of commencement of the spousal union, unless the Treasury Board is satisfied that the health of the contributor or pensioner at the time of such commencement justified an expectation of surviving for at least one year; or
• the pensioner married after ceasing to be a contributor, unless after such marriage the pensioner either:
  • became a contributor again, or
  • made an optional survivor benefit election within 12 months following marriage to accept a reduced pension so that the new spouse would be eligible for a survivor benefit. This reduction is reversed if and when the new spouse predeceases the pensioner or the spousal union is terminated for reason other than death.

A.4.15 Eligible surviving children

Eligible surviving children includes all children of the contributor or pensioner who are under age 18, and any child of the contributor or pensioner who is age 18 or over but under 25, in full-time attendance at a school or university, having been in such attendance substantially without interruption since he or she reached age 18 or the contributor or pensioner died, whichever occurred later.

A.4.16 Annual allowance for eligible survivor(s)

Annual allowance means, for the eligible surviving spouse and children of a contributor or pensioner, an annuity that becomes payable immediately upon the death of that individual. The amount of the allowance is determined with reference to a basic allowance that is equal to 1% of the highest average of annual pensionable earnings of the contributor over five consecutive years, multiplied by the number of years of pensionable service not exceeding 35.

The annual allowance for a spouse is equal to the basic allowance unless the spouse became eligible as a result of an optional survivor benefit election, in which case it is equal to the percentage of the basic allowance specified by the pensioner making the election.

The annual allowance for an eligible surviving child is equal to 20% of the basic allowance, subject to a reduction if there are more than four eligible surviving children in the same family. The allowance otherwise payable to an eligible surviving child is doubled if there is no eligible surviving spouse.

Survivor annual allowances are not coordinated with the CPP (or QPP) and are payable in equal monthly instalments in arrears until the end of the month in which the survivor dies or otherwise loses eligibility. If applicable, a residual benefit (Note A.4.17) is payable to the estate upon the death of the last survivor.

A.4.17 Minimum and residual death benefits

If a contributor or a pensioner dies leaving no eligible survivor, the lump sum normally paid is the excess of the greater of:

• a return of contributions; and
• five times the annual amount of the immediate annuity to which the contributor would have been entitled, or the pensioner was entitled, at the time of death,

less any pension payments already received. Indexation adjustments are excluded from these calculations.

The same formula is used to determine the residual death benefit, which is the lump sum payable upon the death of an eligible survivor but also subtracting all amounts (excluding indexation adjustments) already paid to the survivor.

A.4.18 Division of pension with former spouse

In accordance with the Pension Benefits Division Act (PBDA), upon the breakdown of a spousal union (including common-law), a lump sum can be debited by court order or by mutual consent from the accounts and/or the Pension Fund, as the case may be, to the credit of the former spouse of a contributor or pensioner. The maximum transferable amount is half the value, calculated as at the transfer date, of the retirement pension accrued by the contributor or pensioner during the period of cohabitation. If the member’s benefits are not vested, the maximum transferable amount corresponds to half the member’s contributions made during the period subject to division, accumulated with interest at the rate applicable on a refund of contributions. The accrued benefits of the contributor or pensioner are then reduced accordingly.

Appendix B - Retirement compensation arrangement benefit provisions

Retirement compensation arrangements (RCAs) are arrangements for benefits in excess of benefit limitations of registered pension plans and therefore are less tax-advantageous as the fund must transfer a 50% refundable tax to the Canada Revenue Agency (CRA) immediately. Under the PSSA RCA a debit is made from the RCA Account such that in total roughly half the recorded balance in the RCA Account is held as a tax credit (CRA refundable tax). This Appendix describes the Public Service pension benefits financed through retirement compensation arrangements (RCA No. 1 and RCA No. 2) rather than through the registered PSSA provisions that have a material impact on this valuation

Effective 15 December 1994, RCA No. 1 was established pursuant to the Special Retirement Arrangements Act (SRAA) to provide for all pension benefits in excess of those that may, in accordance with the Income Tax Act (ITA) restrictions on registered pension plans, be paid under the PSSA registered provisions.

Effective 1 April 1995, RCA No. 2 was established by the RCA regulations as an early retirement incentive program (ERI) for certain Public Service employees declared surplus before 1 April 1998 as part of the downsizing initiative. Participation was limited to individuals between ages 50 and 54 who met the conditions specified in the regulations. RCA No. 2 pays the difference between a pension unreduced for early retirement and the reduced pension payable in accordance with the PSSA. It is financed entirely by the government.

The following benefits have been provided under RCA No. 1 since 20 November 1997, unless otherwise indicated, to the extent that they are in excess of the ITA limit.

Appendix C - Assets, accounts and rates of return

C.1 Assets and account balances

The government has a statutory obligation to fulfill the pension promise enacted by legislation to members of the Public Service. Since 1 April 2000, the government has earmarked invested assets (the Pension Fund) to meet the cost of pension benefits.

With respect to the unfunded portion of the PSPP, accounts were established to track the government’s pension benefit obligations, such as the Superannuation Account for service prior to 1 April 2000, and the RCA No. 1 and No. 2 Accounts for benefits in excess of those that can be provided under the Income Tax Act limits for registered pension plans.

C.1.1 Public Service Superannuation Account

PSSA member contributions, government costs and benefits earned up to 31 March 2000 are tracked entirely through the Public Service Superannuation Account, which forms part of the Accounts of Canada.

The Superannuation Account is credited with all PSSA member contributions and government costs prior to 1 April 2000, as well as with prior service contributions and costs for elections made prior to 1 April 2000. It is charged with both the benefit payments made in respect of service earned under the Superannuation Account and the allocated portion of the plan administrative expenses.

The Superannuation Account is credited with interest earnings as though net cash flows were invested quarterly in 20‑year Government of Canada bonds issued at prescribed^{Footnote 9} interest rates and held to maturity. No formal debt instrument is issued to the Superannuation Account by the government in recognition of the amounts therein. Interest is credited every three months on the basis of the average yield for the same period on the combined Superannuation Accounts of the Public Service, Canadian Forces and RCMP pension plans.

Since the last valuation, the Account balance has decreased by $0.2 billion (a 0.2% reduction) to reach $91.3 billion as at 31 March 2023.

C.1.2 Public Service Pension Fund

Since 1 April 2000, PSSA contributions (except for prior service elections made prior to 1 April 2000) have been credited to the Pension Fund. The Pension Fund is invested in the financial markets with a view to achieving maximum rates of return without undue risk.

The Pension Fund has been credited with all PSSA contributions since 1 April 2000, as well as with prior service contributions in respect of elections made since that date. The Pension Fund is also credited with the net investment returns generated by the investment assets managed by PSP Investments. It is debited with both the benefit payments made in respect of service earned and prior service elections made since 1 April 2000 and the allocated portion of the plan administrative expenses.

Since the last valuation, the Pension Fund balance has increased by $54.5 billion (a 44.2% increase) to reach $178.0 billion as at 31 March 2023.

C.1.3 Public Service RCA No. 1 Account

The amount in the RCA No. 1 Account is composed of the recorded balance in the Retirement Compensation Arrangements Account, which forms part of the Accounts of Canada, and a tax credit (CRA refundable tax). Each calendar year, a debit/credit is made from the RCA Account such that in total roughly half the recorded balance in the RCA Account is held as a tax credit (CRA refundable tax).

No formal debt instrument is issued to the RCA No. 1 Account by the government in recognition of the amounts therein. Interest earnings are credited every three months on the basis of the average yield for the same period on the combined Superannuation Accounts of the Public Service, Canadian Forces and RCMP pension plans.

Since the last valuation, the RCA No. 1 Account balance has grown by $89 million (a 6.8% increase) to reach $1,404 million as at 31 March 2023 and the refundable tax has increased by $94 million (a 7.2% increase) to reach $1,391 million.

C.1.4 Public Service RCA No. 2 Account

The amount in the RCA No. 2 Account is composed of the recorded balance in the Retirement Compensation Arrangements Account, which forms part of the Accounts of Canada, and a tax credit (CRA refundable tax). Each calendar year, a debit/credit is made from the RCA Account such that in total roughly half the recorded balance in the RCA Account is held as a tax credit (CRA refundable tax).

No formal debt instrument is issued to the RCA No. 2 Account by the government in recognition of the amounts therein. Interest earnings are credited every three months on the basis of the average yield for the same period on the combined Superannuation Accounts of the Public Service, Canadian Forces and RCMP pension plans.

Since the last valuation, the RCA No. 2 Account balance has decreased by $100 million (a 15.9% reduction) to $528 million as at 31 March 2023 and the refundable tax has decreased by $98 million (a 15.2% reduction) to $546 million.

C.2 Rates of interest (return)

The interest earnings in respect of the Superannuation Account were calculated using the entries in Table 28 which are based on book values since the notional bonds are deemed to be held to maturity. The interest earnings were computed using the dollar-weighted approach and assume that cash flows occur in the middle of the plan year (except for actuarial liability adjustments, which occur on 31 March). The Pension Fund rates of return are those from PSP Investments Annual Report for the respective plan years.

C.3 Sources of asset data

The Superannuation Account, the RCA No. 1 Account, the RCA No. 2 Account and the Pension Fund entries shown in Appendix C.1 above were taken from the Public Accounts of Canada and the financial statements of PSP Investments.

Appendix D - Membership data

D.1 Sources of membership data

The valuation data required in respect of contributors (both active and non-active), pensioners and survivors are extracted from master computer files maintained by the Department of Public Services and Procurement Canada (PSPC).

The main valuation data file supplied by PSPC contained the historical status information on all members up to 31 March 2023.

D.2 Validation of membership data

We performed certain tests on internal consistency, as well as tests of consistency with the data used in the previous valuation, with respect to membership reconciliation, basic information (date of birth, date of hire, date of termination, gender, etc.), salary levels, and pensions to survivors and pensioners.

We assumed that members with unknown gender were 50% male and 50% female.

Based on the omission and discrepancies identified by these and other tests, appropriate adjustments were made to the basic data after consulting with the data provider.

D.3 Membership data

A summary of the valuation data as at 31 March 2023 and reconciliations of contributors, pensioners and survivors during the intervaluation period are shown in Table 33 to Table 39. Detailed membership data upon which this valuation is based are shown in Appendix M. The group of members are defined at A.4.1.

Appendix E - PSSA valuation methodology

E.1 Plan assets

E.1.1 Public Service Superannuation Account

The balance of the Superannuation Account forms part of the Accounts of Canada. The underlying notional bond portfolio described in Appendix C is shown at the book value.

The only other Superannuation Account–related amount consists of the discounted value of future member contributions and government credits in respect of prior service elections^{Footnote 10}. The discounted value of future member contributions and government credits was calculated using the projected Superannuation Account yields.

The present value of prior service contributions, determined as at 31 March 2023 is $10 million.

E.1.2 Public Service Pension Fund

For valuation purposes, an adjusted market value method is used to determine the actuarial value of assets in respect of the Pension Fund. The method is unchanged from the previous valuation.

Under the adjusted market value method, the difference between the observed investment returns during a given plan year and the expected investment returns for that year based on the previous report assumptions, is recognized over five years at the rate of 20% per year. The actuarial value is then determined by applying a 10% corridor, such that the actuarial value of assets is within 10% of the market value of assets. The value produced by this method is related to the market value of the assets but is more stable than the market value.

The only other Pension Fund–related asset consists of the discounted value of future member and government contributions in respect of prior service elections^{Footnote 10}. The discounted value of future member and government contributions was calculated using the assumed rates of return on the Pension Fund.

The actuarial value of the assets, determined as at 31 March 2023 is $169,178 million and was determined as follows.

E.2 Actuarial cost method

As benefits earned in respect of current service will not be payable for many years, the purpose of an actuarial cost method is to assign costs over the working lifetime of the members.

As in the previous valuation, the projected accrued benefit actuarial cost method (also known as the projected unit credit method) was used to determine the current service cost and actuarial liability. Consistent with this cost method, pensionable earnings are projected up to retirement using the assumed annual increases in pensionable earnings (including seniority and promotional increases). The yearly maximum salary cap and other benefit limits under the Income Tax Act described in Appendix B were taken into account to determine the benefits payable under the PSSA and those payable under the RCA No. 1.

E.2.1 Current service costs and member contribution rates

Under the projected accrued benefit actuarial cost method, the current service cost, also called the normal cost, computed in respect of a given year is the sum of the value, discounted in accordance with the actuarial assumptions for the Pension Fund, of all future payable benefits considered to accrue in respect of that year of service. The Pension Fund administrative expenses are also included in the total current service cost.

Under this method, the current service cost for an individual member will increase each year as the member approaches retirement. However, all other things being equal, the current service cost for the total population, expressed as a percentage of total pensionable payroll, can be expected to remain stable as long as the average age and service of the total population remain constant. This is true to the extent that the plan population is mature and stable. For a given year, the government current service cost is the total current service cost reduced by the members contributions during the year.

Member contribution rates were determined such that the members and the government share the total current service at 50/50^{Footnote 11}.

The methods used to allocate the current service were revised from the previous valuation. The new methods were developed to ensure consistency and equity as the demographics of the groups are evolving and to ensure consistency and stability between earnings and costs over a long-term horizon (40-year projection period). The methods used for the current valuation are described below.

E.2.1.1 Method to allocate current service cost to Group 1 and Group 2 – by cost ratio

The current service contribution for Group 1 and Group 2 were determined as follows:

1. Determine the current service cost for the total active main^{Footnote 12} population (Group 1 and Group 2 main contributors) assuming Group 1 benefits and demographic assumptions apply to all contributors.
2. Determine the current service cost as for the total active main population (Group 1 and Group 2 main contributors) assuming Group 2 benefits and demographic assumptions apply to all contributors.
3. Calculate the ratio of (a)/(b) above.
4. Calculate the current service cost for all main contributors and distribute this cost between Group 1 and Group 2 using the ratio determined in (c) above and respective payrolls of both groups. The result produces the current service contribution for Group 1 and Group 2.

E.2.1.2 Method to determine the contribution rates for earnings up to, and in excess of the YMPE – by component cost

1. Determine the current service cost as a percentage of payroll for benefits that are independent of the YMPE (i.e. contingency benefits and most member’s pre-65 benefits).
2. Determine the current service cost as a percentage of payroll for benefits that are dependent of the YMPE (i.e. post-65 benefits and certain member’s pre-65 benefits).
3. Split the resulting service cost as a percentage of payroll determined in (b) above in two contribution rates up to and in excess of the YMPE so that the following ratios are equal:
   1. Contribution rate for earnings up to the YMPE over the contribution rate for earnings in excess of the YMPE, and
   2. Accumulation rate for benefits up to the YMPE over the accumulation rate for benefits in excess of the YMPE (i.e. 1.375% to 2% = 0.6875)
4. Add the rate determined in (a) above to the split contribution rates established in (c). These are the contribution rates for earnings up to, and in excess of the YMPE for each group.

The resulting contribution rates are calculated on a plan year basis. They are then converted in a calendar year basis using a proration method.

This modified cost method respects the fundamental attributes of the projected unit credit cost method and provides an appropriate allocation of the cost between Group 1 and Group 2 contributors and the costs for benefits in relations to earnings up to, and in excess of the YMPE.

E.2.2 Actuarial liability

The actuarial liability with respect to contributors corresponds to the value, discounted in accordance with the actuarial assumptions, of all future payable benefits accrued as at the valuation date in respect of all previous service. For pensioners and survivors, the actuarial liability corresponds to the value, discounted in accordance with the actuarial assumptions, of future payable benefits.

E.2.3 Government contributions

The recommended government contribution corresponds to the sum of:

• the government current service cost;
• the government contributions for prior service; and
• as applicable, special credits/payments in respect of a shortfall/deficit or, as the case may be, debits when an actuarial surplus exists.

Appendix F - PSSA economic assumptions

As per the Funding Policy, all of the assumptions used in this report are best-estimate assumptions, i.e., they reflect our best judgment of the future long-term experience of the plan and do not include margins.

F.1 Inflation-related assumptions

F.1.1 Level of inflation

Price increases, as measured by changes in the Consumer Price Index (CPI), tend to fluctuate from year to year. In 2021, the Bank of Canada and the Government of Canada renewed their commitment to bring inflation at the 2% midpoint of their inflation-control target range of 1% to 3%. Based on economic forecasts as of December 2023, the CPI is expected to be at a level above 2% for the following four years and to revert to the Bank of Canada’s long-term target thereafter. It is assumed that the Bank of Canada will remain committed to meeting the mid-range 2% target in the year 2025^{Footnote 13}. In this report, it is assumed that the level of inflation will be 3.6% in plan year 2024, 2.5% in plan year 2025, 2.1% in plan years 2026 and 2027. The ultimate rate of 2.0% is reached in plan year 2028. The assumed ultimate rate is unchanged from the previous valuation.

F.1.2 Increase in pension indexing factor

The assumption in respect to the year’s pension indexing factor is required to account for indexation of pensions each January 1. It is derived by applying the indexation formula described in Appendix A, which relates to the assumed CPI increases over successive 12-month periods ending on September 30.

F.2 Employment earnings increases

F.2.1 Increase in the year’s maximum pensionable earnings (YMPE)

Since the benefit payable under the plan when a pensioner attains age 65^{Footnote 14} is calculated based on the YMPE, an assumption for the increase in the YMPE is required in the valuation process. The assumed increase in the YMPE for a given calendar year is derived, in accordance with the Canada Pension Plan, from the increase in the average weekly earnings (AWE), as calculated by Statistics Canada, over successive 12-month periods ending on 30 June. The AWE, and thus the YMPE, is deemed to include a component for seniority and promotional increases.

The YMPE is equal to $68,500 for calendar year 2024. It increased by 2.9% compared to 2023. Future increases in the YMPE correspond to the assumed real^{Footnote 15} increase in the AWE plus assumed increases in the CPI.

The real-wage differential (real increase in the AWE) is developed taking into account historical trends, a possible labour shortage, and an assumed moderate economic growth for Canada. Due to elevated inflation that has stayed higher after the economy emerged from the COVID-19 pandemic, the real-differential is assumed to be -0.7% in plan year 2024, 0.4% in plan year 2025, 0.8% for plan years 2026 and 2027, with the ultimate assumption of 0.9% by plan year 2028 (1.0% by 2027 in the previous valuation).  Combined with the assumed inflation, the resulting assumed annual increase in nominal wages is 2.9% starting from plan year 2024.

F.2.2 Increase in pensionable earnings

Pensionable earnings are projected to calculate the pension liability and service cost. The increase in pensionable earnings has two components, the economic increase and the seniority and promotional increase. It is assumed that the economic increase in pensionable earnings is separate from the seniority and promotional increase which is accounted for in the demographic assumptions. Except for the first two years which reflect the current collective agreements, the annual increase in pensionable earnings is assumed to be 0.5% higher than the corresponding increase in CPI. This corresponds to an ultimate increase in average pensionable earnings of 2.5% for plan year 2028 and thereafter (2.7% in the previous valuation for plan year 2029 and thereafter).

F.2.3 Increase in tax-related maximum pensionable earnings (MPE)

The maximum annual pension accrual of $3,506.67 for 2023 will increase to $3,610.00 for 2024, in accordance with Income Tax Regulations. Thereafter, the maximum annual pension accrual is assumed to increase in accordance with the assumed annual increase in the YMPE, which is the same as the assumed annual increase in the AWE.

The tax-related maximum pensionable earnings were derived from both the maximum annual pension accrual under a registered defined benefit plan and the YMPE. The MPE is equal to $202,000 for calendar year 2024.

F.3 Investment-related assumptions

F.3.1 New money rate

The new money rate is the nominal yield on 10-year-plus Government of Canada bonds and is set for each year in the projection period. The real yield on 10-year-plus federal bonds is equal to the new money rate less the assumed rate of inflation.

The one-year average real yield on long-term Canadian federal bonds as at 31 March 2024 is set at -0.3% and assumed to gradually increase to reach 2.0% by plan year 2035 and remain at that level.

The annual nominal yield on 10-year-plus federal bonds is assumed to be 3.3% in plan year 2024. It is projected to increase gradually to its ultimate level of 4.0% in plan year 2035. The assumed rates over the short-term (2024-2027) are consistent with the average of private sector forecasts and take into account the recent market conditions as of 31 December 2023. The ultimate level of 4.0% is equivalent to an ultimate real rate of 2.0%. The ultimate real yield was assumed to be 2.1% in plan year 2034 in the previous valuation. The assumed real new money rates over the plan years 2024 to 2035 are on average 0.2% higher than those assumed in the previous valuation over the same period.

F.3.2 Projected yields on superannuation account

The projected yields on the Superannuation Account are required for the computation of present values of benefits to determine the liability for service prior to 1 April 2000. The projected nominal yields on the Superannuation Account were determined by an iterative process involving the following:

• the combined notional bond portfolio of the three Superannuation Accounts as at the valuation date;
• the assumed future new money interest rates;
• the expected future benefits payable in respect of all pension entitlements accrued up to 31 March 2000;
• the expected future contributions for prior service elections made up to 31 March 2000; and
• the expected future administrative expenses.

Each quarterly interest credit to a Superannuation Account is calculated as if the principal at the beginning of a quarter remains unchanged during the quarter. The projected yield on the Account is 3.1% in plan year 2024. It is projected to reach a low of 2.6% in 2031 and to reach its ultimate value of 4.0% in 2050.

F.3.3 Rate of return on the Pension Fund

The expected annual nominal rates of return on the Pension Fund are required for the computation of present values of benefits to determine the liability for service since 1 April 2000 and the current service cost. The following sections describe how the rates of return on the Pension Fund are determined.

F.3.3.1 Investment strategy

Since 1 April 2000, government and employee contributions, net of benefit payments and administrative expenses, are invested in capital markets by PSP Investments. PSP Investments’ mandate is to achieve a maximum rate of return, without undue risk of loss, with regard to the funding, policies and requirements of the public sector pension plans. PSP Investments’ investment policy is set and approved by its Board of Directors and takes into account the Funding Policy for the public sector pension plans, including the Reference Portfolio set out in this Funding Policy, as well as financial market constraints. The Reference Portfolio is a passively managed, easily investable portfolio used to express the funding risk target of the Government of Canada in respect to the public sector pension plans. It is communicated by the Treasury Board of Canada Secretariat on behalf of the President of the Treasury Board to PSP Investments, which then uses this portfolio as an anchor for its investment policy.

For the purpose of this report and in line with the PSP Investments’ investment policy, the investments have been grouped into four broad categories: fixed income securities, equities, real assets and credit. Fixed income securities consist of a mix of federal, provincial and inflation-linked bonds. Equities consist of public (Canadian and foreign) and private equities. Real assets include real estate, infrastructure and natural resources. Credit is composed of private debt investments, non-investment-grade public debt and quasi-debt investments.

As at 31 March 2023, PSP Investments’ assets consisted of 22% fixed income securities (including 2.5% cash), 37% equity (including 0.5% complementary investments), 30% real assets and 11% credit. PSP Investments has developed a long-term target Policy Portfolio, which consists of 23% fixed income securities, 37% equity, 31% real assets and 9% credit. The Policy Portfolio asset mix weights represent long-term targets. Therefore, it is assumed that the initial asset mix (derived using the actual investments reported by PSP Investments as at 31 March 2023) will gradually converge towards the long-term target Policy Portfolio. The ultimate asset mix is assumed to be reached in plan year 2026.

Net cash flows (contributions less expenditures, excluding special payments, if any) are expected to become negative during plan year 2034 at which point a portion of assets will be required to pay benefits.

Table 41 shows the assumed asset mix for each plan year throughout the projection period.

F.3.3.2 Rates of return by asset class

Rates of return are determined for each asset class in which the Pension Fund assets are invested. With the exception of fixed income securities and cash, rates of return are assumed to remain constant for the entire projection period. The expected progression of fixed income securities’ rates of return reflects the current context of rising long-term yields. A constant rate of return is assumed for more volatile asset classes, reflecting the difficulty to predict annual market returns.

The rates of return were developed by looking at historical returns (expressed in Canadian dollars); these returns were then adjusted upward or downward to reflect future expectations. Given the long projection period, future gains and (losses) due to currency variations are expected to offset each other over time. Hence, it was assumed that currency variations will not have an impact on the long-term rates of return.

As in the previous valuation, an overall allowance for diversification has been added to the rate of return on the total assets. Such diversification is achieved through the rebalancing of the portfolio and aims at keeping the asset mix constant.

All rates of return described in this section are shown before reduction for assumed investment expenses; Appendix F.3.3.3 describes how the returns are adjusted for investment expenses.

Cash

The real yield on cash is assumed to be at 1.1% in plan year 2024, reaching its highest level of 1.8% in plan year 2025 as inflation expectation narrows and start converging to its historical norms in the subsequent years. The real yield on cash is expected to reach its ultimate rate of 0.5% in plan year 2032.

Fixed income securities

As at 31 March 2023, PSP Investments had 22% of its portfolio invested in fixed income securities, including Canadian fixed income, inflation-linked bonds (mostly US Treasury Inflation-Protected Securities (TIPS)) and cash. It is assumed that the proportion invested in fixed income securities (including cash) will increase to 23% of Pension Fund assets in plan year 2026 and remain at that level for the projection period.

The fixed income securities’ ultimate mix (excluding cash) in plan year 2026 and thereafter is expected to consist of 24% federal bonds, 20% provincial bonds, 33% US TIPS and 23% emerging market debt, which reflects PSP Investments’ long-term target allocation.

As described in Appendix F.3.1 above, the assumed real yield on 10-year-plus federal bonds is assumed to be negative in plan year 2024 and then increase gradually to its ultimate level of 2.0% in plan year 2035. Compared to cash, the yield on 10-year-plus federal bonds is 140 basis points lower in plan year 2024 and 100 basis points lower in plan year 2025 due to the inverted yield curve. Starting in plan year 2026, the yield on 10-year plus federal bonds is assumed to be higher than cash and is assumed to reach the ultimate spread of 150 basis points by plan year 2035.

Since the current PSP Investments’ Policy Portfolio and its long-term target Policy Portfolio are composed of universe bonds (long, mid and short term), it is assumed that fixed income securities are composed of universe bonds for the entire projection period. Due to their overall shorter maturity, the yields on universe bonds are lower than the yields on long-term bonds. As a result, the spreads of universe bonds over cash are lower than those of long-term bonds over cash. The spread of the universe federal bonds over cash is assumed to be negative 83 basis points in plan year 2024 due to the inverted yield curve but will gradually increase to 79 basis points in plan year 2035.

Credit quality is another important factor affecting bond spreads. The spread on provincial bonds versus cash is expected to be greater than the spread of federal bonds versus cash. However, that spread is smaller than the spread on emerging market bonds, which present additional credit risk and currency risk. The initial spread of universe provincial bonds over cash is assumed to be negative 47 basis points while the ultimate spread is assumed to be 174 basis points (in plan year 2035). The initial spread of emerging market debt over cash is assumed to be 127 basis points and the ultimate spread is assumed to be to 299 basis points in plan year 2035. Inflation-linked bonds offer protection against inflation, which tends to lower the spread versus cash. The initial spread of inflation-linked bonds (US TIPS) over cash is assumed to be 98 basis points and is expected to increase to 110 basis points in plan year 2035.

The expected real rates of return for individual bonds take into account the coupons and market value fluctuations due to the expected movement of their respective yield rates. An ultimate fixed income real rate of return of 2.1% is assumed for 2035 and thereafter.

Equity

As of 31 March 2023, 37% of the assets of the Pension Fund are invested in equities (both public and private). In the derivation of the real rates of return for these equity investments, consideration was given to dividend yields, expected growth of the underlying economies, and long-term risk premiums for various factors such as size and geography.

Public equities are composed of developed market equities, developed market small capitalization equities (small caps), and emerging market equities.

Various elements contribute to the return on an equity investment such as earnings, dividends paid to shareholders, fluctuation in valuation, and exchange rates for non-Canadian investments.

Over long periods, valuation changes and currency fluctuations are not expected to contribute significantly to the return on broad equity markets. Therefore, it is assumed that expectations regarding dividend yields and earnings growth are sufficient to project future equity returns, with additional adjustments for the riskiness of small caps and emerging market equities. Based on historical dividend yields for developed markets and PSP Investments' Policy Portfolio equity allocation, the income derived from dividend and buybacks yield on developed market equities is expected to be 3.1%. Growth in earnings is proxied using GDP growth per capita; and it is expected to add 0.9% to the overall real return of developed market equities. Hence, the expected return on developed market equities is 4.0%. Because of their additional risk, small caps are assumed to yield an additional 0.2% and emerging market equities are assumed to yield an additional 1.0%.

The overall real return on public equities, based on PSP Investments’ relative allocation to developed market, small caps and emerging market equities, is projected to be 4.3%.

The expected real return for private equities is expected to be 70 basis points higher than for public equities, reflecting the additional risk inherent with investments in private markets. Thus, the real rate of return for private equity is projected to be 5.0%.

Real assets

As at 31 March 2023, 30% of the assets of the Pension Fund are invested in the real assets (43% real estate, 40% infrastructure, and 17% natural resources). The expected real rate of return on real assets is the asset-value weighted average returns of the three sub-classes. The returns on real estate and infrastructure assets are derived from two components: income returns and asset valuation growth. Each component references historical data and judgment on the expectation of the future outcomes such as projected per capita GDP growth rate. Since natural resources is a relatively new type of asset class, the historical data on returns is limited. Therefore, the return on natural resources is assumed as the weighted average returns of real estate and infrastructure. The income returns for real estate and infrastructure are 3.5% and 2.9% respectively. In addition, a 0.6% growth return is assumed for both asset classes. Collectively, the real assets are projected to earn 3.9% throughout the projection period.

Credit

As of 31 March 2023, 11% of the assets of the Pension Fund are invested in credit. Based on the information received, PSP Investments’ exposure to this asset class is made through High-yield bonds. It is assumed that the return on credit would yield 250 basis points above Canadian federal universe bonds adjusted to U.S. market. Thus, Credit is projected to earn 3.7% real throughout the projection period.

Table 42 summarizes the assumed real rates of return by asset class throughout the projection period, prior to reduction for investment expenses.

F.3.3.3 Investment expenses

Over the last three plan years, PSP Investments’ operating and asset management expenses averaged 0.7% of average net assets. It is assumed that going forward, PSP Investments investment expenses will average 0.7% of average net assets. The majority of those investment expenses were incurred through active management decisions.

The objective of active management is to generate returns in excess of those from the Policy Portfolio, after reduction for additional expenses. Thus, the additional returns from a successful active management program should equal at least the cost incurred to pursue active management. In nine of the past ten years, PSP Investments’ additional returns from active management exceeded related expenses. For the purpose of this valuation, it is assumed that additional returns due to active management will equal additional expenses related to active management. These expenses are assumed to be the difference between total investment expenses of 0.7% and the assumed expenses of 0.2% that would be incurred for the passive management of the portfolio.

The next section shows the overall rate of return on the fund net of investment expenses.

F.3.3.4 Overall rate of return on assets of the Pension Fund

The best-estimate rate of return on total assets is derived from the weighted average assumed rate of return on all types of assets using the assumed asset mix proportions as weights. The best-estimate rate of return is further increased to reflect additional returns due to active management and allowance for rebalancing and diversification, and reduced to reflect all investment expenses. Table 43 shows how the ultimate nominal and real rates of return are developed.

The resulting nominal and real rates of return for each projection year are as follows:

It is assumed that the ultimate real rate of return on investments will be 4.0% in 2035, net of all investment expenses. This represents an increase of 0.1% from the previous valuation. The real rates of return over the first ten years of the projections are on average 0.3% higher than assumed for the corresponding years in the previous valuation. The real rate of return on assets takes into account the assumed asset mix as well as the assumed real rate of return for all categories of assets. The nominal returns projected for the Pension Fund are simply the sum of the assumed level of inflation and the real return.

Using the variable nominal rates of return on assets in the previous table is equivalent to using a unique flat nominal discount rate of 6.1% for the purpose of calculating the liability at 31 March 2023 for service since 1 April 2000.

F.3.4 Transfer value real interest rate

Interest rates for transfer values are determined in accordance with the Standards of Practice published by the Canadian Institute of Actuaries (CIA). The CIA issued amendments to the standards for determining the interest rates used for the computation of commuted value which are effective 1 February 2022.

Details can be found in the Section 3540 of the CIA Standards of Practice.

The following table shows the assumed transfer value real interest rates used in this report:

F.3.5 Administrative expenses

PSP Investments operating expenses are implicitly recognized through a reduction in the real return on the Pension Fund. The same approach was used in the previous valuation.

The administrative expenses are assumed to be 0.45% of pensionable payroll, which is 0.05% higher than the previous valuation. The assumption reflects the average of administrative expenses over the last three years. It does not consider events, plan changes for example, that can lead to significant short-term variations in administrative expenses expressed as a percentage of payroll.

For plan year 2024, 39% of total administrative expenses are being charged to the Superannuation Account; it is assumed that the proportion charged for the Superannuation Account will reduce at an annual rate of 2% the same as in the previous report. Expenses expected to be debited to the Superannuation Account in the future have been capitalized and are shown as a liability on the balance sheet, whereas the expenses to the Pension Fund are shown on an annual basis as they occur.

F.3.6 Summary of economic assumptions

The economic assumptions used in this report are summarized in the following table.

Appendix G - PSSA demographic assumptions

G.1 Demographic assumptions

Given the size of the population subject to the PSSA, the plan’s own experience, except where otherwise noted, was deemed to be the best model to determine the demographic assumptions. Assumptions from the previous valuation were updated to reflect past experience to the extent it was deemed credible.

Members age and service are determined by rounding their exact value to the nearest integer at the beginning of the plan year.

G.1.1 Seniority and promotional salary increases

Seniority means length of service within a classification, and promotion means moving to a higher paid classification. The assumption of the previous report was changed by giving equal credibility to the plan’s experience over the last three plan years and the assumption from the previous valuation.

G.1.2 New contributors

As the active population of the plan is expected to grow, new contributors are projected to replace members that cease to be active as well as increase the number of contributors over time.

The assumed percentage increase in the number of contributors for each plan year is shown in the following table. The increase for Plan year 2024 is based on actual headcounts.

It is assumed that the distribution of new members by age, gender, service, and salary level (which is adjusted by the economic increases) will be on average the same as those of members with less than one year of service at each of the three years preceding the valuation date.

G.1.3 Pensionable retirement

Pensionable retirement means ceasing to be an active member and immediately starting to receive an annuity (immediate annuity or an annual allowance) for reasons other than disability.

The assumed rates of pensionable retirement were revised to reflect the intervaluation experience.

Where less data was available, limited credibility was given to the intervaluation experience. In particular, no credibility was given to the experience of Group 2 members with more than 10 years of service (since group inception is in 2013).

For Group 2 contributors, the retirement assumption for members with more than 10 years of service was developed using the same methodology as in previous valuations.

Group 2 rates between ages 55-64 were derived from Group 1 retirement rates in a way that a member aged 50 has the same probability of reaching age 65 in either group.

Retirement rates for ages 65 and above are the same for both Group 1 and 2.

The intervaluation experience shows that members slightly postponed their retirement compared to the expected rates.

Tables 49 to 53  provide sample rates of pensionable retirement.

G.1.4 Disability retirement

The disability incidence rate assumption was revised to reflect the intervaluation experience, by giving equal credibility to the plan’s experience over the last three plan years and the assumption from the previous valuation. The intervaluation experience for ages above 59 was combined since it was less credible.

Disability incidence is independent from plan provisions. As such, the incidence rates are the same for all members. Rates for ages between 60 and 64 only apply for Group 2 members (main and operational).

It is assumed that 75% of future new disability pensioners will receive a CPP (or QPP) disability pension at the onset of disability. In those cases, the coordination of the plan with CPP (or QPP) is assumed to start immediately instead of age 65. This is unchanged from the previous valuation.

G.1.5 Withdrawal

Withdrawal with less than two years of service includes termination of employment for any reason.

Withdrawal with two or more years of service means termination of employment for reasons other than death, disability or retirement with an immediate annuity or an annual allowance. The withdrawal rate assumption was revised to reflect the plan experience.

Main members

The assumed withdrawal rates were developed by giving equal credibility to the plan’s experience over the last three plan years and the assumption from the previous valuation.

In addition, for Group 2 contributors aged 50 to 54 with 2 to 10 years of service, the assumed withdrawal rates were developed by giving equal credibility to the plan’s experience over the last six plan years and the assumption from the previous valuation.

Table 55 and Table 56 provide samples of the assumed rates of withdrawal for the main group.

The rates for age 50 to 54 for at least 2 years of pensionable service shown in the two following tables only apply for Group 2. Group 1 members under those criteria are expected to retire.

Operational members

Assumed withdrawal rates for operational service vary on the basis of service only. They were developed by giving equal credibility to the plan’s experience over the last three plan years and the assumption from the previous valuation.

The assumed rates of withdrawal are the same for actual operational contributors as well as for deemed operational contributors.

G.1.6 Proportions of terminating contributor opting for a deferred annuity

Following a termination of employment with a least 2 years of pensionable service, members not immediately retiring are entitled to defer their annuity (Appendix A.4.9). It is assumed that members:

• Main group 1 members below age 50;
• Main group 2 members below age 55;
• Operational members with less than 20 years of deemed or operational service;

can opt to transfer the commuted value of their deferred pension out of the Plan (Appendix A.4.10).

This assumption was revised to reflect the intervaluation experience. A constant rate was selected to account for the limited experience in some age and service groups.

The proportion of members, upon withdrawal, who elect a deferred annuity is assumed to be:

• Main members: 70%
• Operational members: 45%

The proportion of members, who, upon termination of employment, are eligible to either an annual allowance (Appendix A.4.11) or a deferred annuity and who elect a deferred annuity is assumed to be 0% for all members.

G.1.7 Mortality

The mortality rates assumed for contributors, non-disabled pensioners, disabled pensioners and surviving spouses were derived by giving 50% credibility to the plan’s experience over the last three years and 50% credibility to the previous assumption. The mortality experience for members was weighted by salary^{Footnote 16} to reflect the impact of socio-economic status on mortality rates. It is assumed that an above (below) average socio-economic status, which is partly dictated by salary level, leads to longer (shorter) life expectancy.

For surviving spouses, in the previous valuation, the mortality rates for ages below 60 were revised to zero given the low number of surviving spouses aged below 60 and the minimal impact on the valuation of these rates. However, although these reasons remain true, the surviving spouse mortality rates in this valuation are non-zero for ages 15 to 115. The mortality rates for surviving spouse aged below 55 are assumed to be the same as for members. The mortality rates for surviving spouse aged from 55 to 59 are a blend of members mortality rates and experience of surviving spouse. Reinstating mortality rates for ages below 60 increases the consistency of the application of the mortality rates.

The following table shows a sample of assumed mortality rates. The rates are weighted by salary for contributors and pensioners.

Mortality improvement factors

Mortality rates are reduced in the future in accordance with the same mortality improvement assumption used in the 31st Actuarial Report on the Canada Pension Plan. Mortality improvements are expected to continue in the future but at a slower pace, reaching the ultimate improvement rate of 0.8% for ages below 88 in plan year 2040. Further, it is assumed that, ultimately, mortality improvement rates for males will decrease to the same level as females.

Factors shown in the 31st Actuarial Report on the Canada Pension Plan are based on calendar years. These factors have been interpolated to obtain plan year mortality improvement factors (as at 31 March).

A sample of assumed mortality improvement rates is shown in the following table.  An analysis of the sensitivity of financial results to variations of this assumption is provided in appendix K.2.

The following table shows the calculated cohort life expectancy^{Footnote 17} for contributors and non-disabled pensioners based on the mortality assumptions described in this section.

G.1.8 Family composition^{Footnote 18}

Eligible spouse at the time of death

Upon the death of a member, the surviving spouse and children may be eligible to receive an annual allowance for eligible survivors (Appendix A.4.16).

The assumptions regarding spouse survivors were revised based on the intervaluation experience.

The assumption regarding the probability of a member, upon death, leaving a spouse eligible (Appendix A.4.14) to a survivor pension slightly decreased at younger ages and did not change materially at ages over 60.

Spouse age difference at the time of death

The assumed eligible spouse age difference at the time of death of the member is shown in the following table.

A widow is always assumed to be younger. A widower is assumed to be older when death occurs at a younger age and is assumed to be younger when death occurs at later ages. Other than the ultimate age difference set at age 90, no changes were made to this assumption.

Gender difference

The sex of each eligible surviving spouse is assumed to be the opposite of the deceased member’s.

Eligible children at the time of death

It is assumed that deceased members will have no eligible child survivors.

Children ceasing to be eligible for a survivor allowance

For actual eligible children at valuation date (see Appendix A.4.15), the following table shows the rates of children ceasing to be eligible to a survivor allowance.

Appendix H - Transfer value valuation methodology and assumptions

Section 92 (1) of the Public Service Superannuation Regulations states that demographic assumptions used for the calculation of transfer value are those of the last actuarial report filed prior to the calculation date. This section summarizes the methodology and assumptions required for the calculation of transfer values.

H.1 Valuation methodology

A contributor who has ceased to be employed in the Public Service is eligible to a deferred annuity and may elect to transfer the commuted value of the accrued pension benefits if that contributor:

• has two or more years of pensionable service and
• is under
  • age 50 if a Group 1 contributor, or
  • age 55 if a Group 2 contributor.

The transfer value payment made to the former contributor represents the present value of the benefit accrued at the time of termination. The present value evaluates the following benefits:

• the former contributor’s accrued pension which is payable from age 60 for a Group 1 contributor or from age 65 for a Group 2 contributor;
• the former contributor’s accrued pension which is payable immediately based on the probability that the contributor becomes disabled after termination but prior to age 60 for a Group 1 contributor or age 65 for a Group 2 contributor;
• 50% of the former contributor’s accrued pension which is payable to surviving spouses based on the probability that the former contributor has an eligible surviving spouse at the time of death.
• 10% of the former contributor’s accrued pension payable to children based on the probability that the former contributor has eligible children at the time of death.

H.2 Economic assumptions

Interest rates for transfer value amounts are determined in accordance with Section “Pension Commuted Values” of the Standards of Practice – Pensions published by the Canadian Institute of Actuaries.

H.3 Demographic assumptions

For the purpose of calculating the transfer value amount payable to a former contributor, the following demographic assumptions are used.

H.3.1 Mortality assumptions  

The mortality rates and mortality improvement rates for a former contributor in receipt of an annuity, for a former contributor becoming disabled after termination, and a surviving spouse upon the death of the former contributor are respectively the same as discussed in Appendix G.1.7.

H.3.2 Disability incidence

The disability incidence rates are used to determine the proportion of former contributors becoming disabled during the period after termination and prior to the attainment of age 60 for former Group 1 contributors or age 65 for former Group 2 contributors are respectively the same as discussed in Appendix G.1.4

H.3.3 Probability of an eligible spouse at death of former contributor

In order to be eligible for a survivor benefit, the survivor must be an eligible spouse^{Footnote 19} as at the termination date and remain eligible up until the time of death of the former contributor. Given that the PSPP does not capture the marital status at the time of termination, it is assumed that the proportions of former members married at termination are the same as for the Canadian population.  As such, the data was extracted from the Statistics Canada Table 17-10-0060-01 for the years 2021 and 2022 for all ages below age 71.

The expected proportion of the former contributors having an eligible spouse at time of termination is determined by combining marital status of married (and not separated), separated (not living in common law) and living in common law.

Table 64 shows the expected proportions of former contributors having an eligible spouse at time of termination.

Once determined to be married at termination, a former contributor’s probability of remaining in the marriage after the time of termination diminishes over time by reason of a possible divorce or death of the spouse before the member.

Once married, an individual is subject to the possibility of a divorce which would remove the survivor coverage at the former contributor’s time of death if the spouse has survived to such time. As no experience data is available for the PSPP, it was assumed that the probabilities of divorce after marriage of former members are the same as for the Canadian population. As such, the data was extracted from the Statistics Canada Table 39-10-0053-01 for the years from 2013 to 2017.

For individual transfer value calculation purposes, it is assumed that at the date of termination, the spouse is three years younger than the male contributor and three years older than the female contributor.

It is assumed that deceased former members will leave no eligible child survivors.

Appendix I - RCA valuation methodology and assumptions

I.1 Valuation of the account balance

The amounts available for benefits comprise the recorded balances of the RCA (RCA No. 1 and RCA No. 2) Accounts, which form part of the Public Accounts of Canada as well as a tax credit (CRA refundable tax) with respect to the RCAs.

Interest is credited on the RCA Accounts every three months in accordance with the actual average yield on a book value basis for the same period on the combined Superannuation Accounts of the Public Service, Canadian Forces – Regular Force and RCMP pension plans. The actuarial value of the account balance is equal to the book value.

I.2 Valuation of liabilities

Described in this Appendix are the liability valuation methodologies used and any differences in economic assumptions from those used in the PSSA valuation.

I.2.1 Terminally funded RCA benefits

The following RCA benefits are being terminally funded (i.e. not prefunded but on an occurrence basis):

• Early Retirement Incentive (ERI) program
• pre‑retirement survivor benefits
• minimum death benefit
• elective service

Except for the now-closed ERI program, the above benefits are terminally funded because they are uncommon or of little financial significance. For example, the pre‑retirement survivor benefit becomes payable only when the average salary is less than 1.4 times the YMPE. As well, the minimum death benefit is expected to occur only with deaths at younger ages, where the probability of death is small.

I.2.2 RCA No. 1 post‑retirement survivor benefits

The limit on the amount of spousal annual allowance that can be provided under the PSSA decreases when the member’s pension is reduced due to the CPP (or QPP) offset, which usually occurs at age 65.

This benefit was valued conservatively by assuming the plan limit is always coordinated with the CPP (or QPP). The liability overstatement is minor because the probability of the former contributor dying prior to age 65 is small. (This overstatement tends to be offset by the understatement of accrued liability caused by terminally funding the pre‑retirement survivor benefit.)  The projected accrued benefit cost method was used to estimate the liabilities and normal costs for this RCA No. 1 benefit.

I.2.3 RCA No. 1 continued benefit accrual for former deputy heads

All former deputy heads that have accrued or are accruing benefits are included. For those accruing benefits, it was assumed that they would cease to do so when first eligible to receive an immediate annuity.  

I.2.4 RCA No. 1 excess pensionable earnings

The projected accrued benefit cost method was used to estimate plan liability and current service costs for retirement benefits in excess of the Maximum Pensionable Earnings (MPE).

I.2.5 Administrative expenses

To compute the liability and current service costs, no provision was made regarding the expenses incurred for the administration of either the RCA No. 1 Account or the RCA No. 2 Account. These expenses, which are not debited from the RCA Accounts, are borne entirely by the government and are commingled with all other government expenses.

I.3 Actuarial assumptions

The valuation economic assumptions described in Appendix F were used without any modifications.

I.4 Valuation data

The RCA No. 1 and RCA No. 2 pension benefits in payment were provided as at 31 March 2023.

RCA No. 1 and RCA No. 2 benefits expected to be paid in respect of contributors and accrued spousal allowances of current retired members were all derived from the membership data described in Appendix D and shown in Appendix M.

Appendix J - PSSA projections

The results of the following projections were computed using the data described in Appendices D and M, the methodology described in Appendix E and the assumptions described in Appendices F and G.

J.1 Projection of the Superannuation Account and the Pension Fund liabilities

Prior to 1 April 2000, the PSSA Superannuation Account tracked all government pension benefit obligations related to the PSSA. The Superannuation Account is now debited only with benefit payments made in respect of service earned before that date and administrative expenses; it is credited with prior service contributions related to elections made prior to 1 April 2000 and interest earnings.

Starting 1 April 2000, the PSSA is financed through the Pension Fund. The Pension Fund is credited with employer and member contributions, investment earnings and prior service contributions for elections made since 1 April 2000. The Pension Fund is debited with benefit payments made in respect of service earned since that date and administrative expenses.

Chart 1 presents the evolution over time of the Pension Fund and the Superannuation Account liabilities.

Chart 1 - Text version

Table 1 Pension Fund and Superannuation Account – Evolution of liabilities over time from plan year 2023 to plan year 2065 in $ billions

Plan Year	Superannuation Account Liabilities	Pension Fund Liabilities
2023	97	137
2024	95	147
2025	91	158
2026	88	169
2027	84	181
2028	81	194
2029	77	207
2030	73	221
2031	69	236
2032	66	251
2033	62	267
2034	58	282
2035	54	298
2036	51	315
2037	47	332
2038	43	350
2039	40	368
2040	37	387
2041	34	406
2042	31	426
2043	28	447
2044	26	469
2045	23	491
2046	21	515
2047	19	540
2048	17	566
2049	15	593
2050	13	620
2051	12	649
2052	10	678
2053	9	708
2054	8	738
2055	6	769
2056	5	800
2057	5	831
2058	4	862
2059	3	894
2060	3	927
2061	2	959
2062	2	993
2063	1	1,027
2064	1	1,063
2065	1	1,098

J.2 Evolution of cash flows under the pension fund

Contributions that are higher than payouts ensure that the Pension Fund has sufficient liquidity to cover all the payouts in a year. However, as the population of the Pension Fund matures, the amount of payouts will increase and will eventually exceed the contributions. This will result in negative cash flows to the Pension Fund.

It is expected that the Pension Fund will have negative cash flows from plan year 2034, at which point a portion of the assets will be required to pay benefits. However, regular liquid revenue from the Pension Fund such as fixed income interest, stock dividends, infrastructure and real estate rents will be readily available to cover the excess payouts. Nevertheless, it should be noted that although negative cash flows will begin in the plan year 2034, the Pension Fund’s overall assets are expected to grow for the entire duration of the projection presented below when investment income is taken into consideration.

Contributions shown in Chart 2 represent the cost of the plan and do not consider reduction in contributions that could be put in place by the President of Treasury Board.

Chart 2 - Text version

Table 2 - Pension Fund and Superannuation Account – Evolution of liabilities over time from plan year 2023 to plan year 2065 in $ billions

Plan year	Contributions	Payments	Net Cash Flow
2024	6,385	4,327	2,058
2025	6,655	4,795	1,860
2026	6,901	5,164	1,737
2027	7,169	5,682	1,487
2028	7,530	6,086	1,444
2029	7,875	6,667	1,208
2030	8,253	7,139	1,114
2031	8,615	7,831	784
2032	8,998	8,427	571
2033	9,333	9,231	102
2034	9,716	9,916	(200)
2035	10,042	10,821	(779)
2036	10,447	11,554	(1,107)
2037	10,778	12,549	(1,771)
2038	11,208	13,336	(2,128)
2039	11,588	14,387	(2,799)
2040	12,077	15,189	(3,112)
2041	12,491	16,277	(3,786)
2042	13,026	17,062	(4,036)

J.3 Evolution of group 1 and group 2 active membership

Due to the implementation of Division 23 of Part 4 of the Jobs and Growth Act, 2012 (S.C. 2012, c. 31), members who entered the Plan prior to 1 January 2013 are considered Group 1 members and members who entered the Plan on or after 1 January 2013 are considered Group 2 members. The benefit costs of Group 2 members are generally less than that of Group 1 members. Chart 3 shows the evolution of membership between the two groups. By plan year 2063, we project that there will be no Group 1 active members left in the Plan.

Chart 3 - Text version

Table 3 - Pension Fund – Evolution of cash flows from plan year 2024 to plan year 2042 in $ millions

Plan Year	Group 1 Count	Group 2 Count
2023	172,597	224,342
2024	162,549	249,473
2025	152,732	255,170
2026	143,543	260,281
2027	134,290	272,360
2028	125,634	283,862
2029	116,815	295,548
2030	108,269	306,981
2031	99,469	318,688
2032	90,722	329,943
2033	82,107	341,082
2034	73,736	351,993
2035	65,456	362,827
2036	57,544	373,309
2037	49,668	383,770
2038	42,192	393,847
2039	35,202	403,453
2040	28,424	412,863
2041	22,686	421,248
2042	17,275	429,323
2043	13,022	436,255
2044	9,618	442,355
2045	6,873	447,812
2046	4,952	452,461
2047	3,375	456,783
2048	2,403	460,516
2049	1,665	464,031
2050	1,177	467,313
2051	804	470,497

Appendix K - Assessing and illustrating downside risks

This appendix presents the impacts on the liability, the funded status and the service costs of the Plan due to downside risks caused by potential adverse scenarios. These scenarios are:

• the yield of the 10-year-plus Government of Canada bonds decreases by 1% for the Account and the return of the fixed income investments decreases by 1% for the Fund,
• the future mortality improvement is faster than expected, and
• the climate change leads to stresses in the economy.

K.1 Decrease in yield for the Account and return for the Fund

Consistent with the Canadian Institute of Actuaries’ Educational Note Guidance on Selection and Disclosure of Plausible Adverse Scenarios, the interest rate risk is illustrated by stress-testing the fixed income investments only. For the Superannuation Account, all assets are tracked using the 10-year-plus Government of Canada bonds, therefore all assets are considered fixed income investments. The interest rate risk is measured by lowering by 1% the best estimate yields of future 10-year Government of Canada bonds. For the Fund, the fixed income investments are the fixed income securities and the credit assets. Based on the Fund asset mix, a decrease of 1% in the return of the fixed income investments results in a decrease of 0.4% in the return of the Fund. The resulting liability, the funded status and the service costs, where applicable, for the Account and the Fund are shown in Table 66 .

The interest rate risk stress test results in the actuarial liability increasing by $3,430 millions for the Account and by $8,964 millions for the Fund relative to the best estimate. The Account’s actuarial shortfall increases while the Fund’s funded status remains in surplus. The Fund’s service cost for plan year 2025 increased by $603 millions, which is a 9.2% increase from the best-estimate.

K.2 Future mortality improvement higher than expected

This valuation assumes that the current mortality rates applicable to the members of PSPP will improve over time in line with the mortality improvement assumption contained in the 31st Actuarial Report on the Canada Pension Plan. The improvement factors are assumed to reach the ultimate rates in plan year 2040. However, if the improvement factors were underestimated, the future mortality would be lower than expected which in turn poses downside risk to the funded status of the Plan.

The following table measures the effect on the life expectancy when mortality is assumed to improve at a faster pace than under the best-estimate scenario with the ultimate mortality improvement rates being doubled compared to their best-estimate values. The cohort life expectancy of a member aged 65 in 2023, and for a member aged 65 in 2039 are presented in the table below.

Table 68 presents the impacts on the liability, the funded status, and the service costs of the Plan if the ultimate improvement factors were to be doubled compared to their best-estimate value. The best-estimate mortality improvement assumption is described in Table 59 of Appendix G.

K.3 Impact from climate changes

K.3.1 Context

There is general consensus that climate change may have an overall negative impact on society and the economy worldwide^{Footnote 20}. Given the magnitude of the potential socio-economic impacts, climate change may also have an impact on the Plan. The demographic, economic and investment environments can all be affected by climate change in the future. However, there is a lot of uncertainty on the direction and magnitude of these potential impacts, and the risk is constantly evolving.

In view of the high level of uncertainty, the current best practice is to conduct scenario analysis rather than incorporate future climate policy and technology impacts into the best-estimate assumptions. Through the analysis of scenarios that are intentionally adverse, this section focuses on assessing the downside risk of climate change only. The section is not meant to represent forecasts or predictions.

K.3.2 Illustrative scenarios

After reviewing various published articles and research papers on climate change scenario analysis, three scenarios with different pathways of Canadian GDP growth rates relative to a baseline scenario are selected to assess the impact on the Plan.

Scenario 1 can be classified in the ‘orderly transition’ category of scenarios. It assumes successful climate policies are introduced early. Canadian GDP growth rates are lower relative to the baseline scenario mainly caused by the disruption in the economy from implementation of climate change policies. The cumulative difference in GDP projections relative to the baseline scenario grows to -10% by 2050, then stays constant until 2100.

Scenario 2 can be classified in the ‘disorderly / delayed transition’ category of scenarios. It assumes that climate change policies only start in 2030. There is no impact on GDP relative to the baseline scenario until 2030, but late action leads to a stronger impact than scenario 1 after 2030. The cumulative difference relative to the baseline scenario is 0% by 2030, -15% by 2050 and -20% by 2100.

Scenario 3 can be classified in the ‘failed transition’ category of scenarios. It assumes that no further climate change policies are implemented. The cumulative difference relative to the baseline scenario is 0% by 2030, -8% by 2050 and -30% by 2100.

Chart 4 shows the difference in Canadian GDP growth rates relative to the baseline scenario for each scenario.

Chart 4 - Text version

Table 4 - Climate scenarios – Cumulative Canadian GDP impact relative to baseline scenario from 2020 to 2100

Scenarios	2020	2025	2030	2035	2040	2045	2050	2060	2070	2080	2090	2100
Scenarios 1: Orderly transition	0%	-2.5%	-5%	-6.3%	-7.5%	-8.8%	-10%	-10%	-10%	-10%	-10%	-10%
Scenarios 2: Disorderly/delayed transition	0%	0%	0%	-3.8%	-7.5%	-11.3%	-15%	-16%	-17%	-18%	-19%	-20%
Scenarios 3: Failed transition	0%	0%	0%	-1.9%	-3.8%	-5.6%	-8%	-12%	-17%	-21%	-26%	-30%

K.3.3 Methodology

The three scenarios are translated into potential impacts on the Plan, using the following simplified approach:

• Changes in Canadian GDP growth are translated one-for-one into changes in the increase in the YMPE and MPE assumption.
• Changes in Canadian GDP growth are translated 50% into changes in the increase in average pensionable earnings.
• Changes in global GDP growth are also incorporated in the assumed investment returns through the growth in earnings component which is proxied by changes in Canadian GDP growth per capita. The growth in earnings is used to develop the assumption on rates of return on public equities, private equities, and real assets. These three asset classes are ultimately expected to represent about 68% of the Pension Fund. Table 69 shows the assumed average annual rate of return for each scenario for the 5, 10 and 20-year periods.

This simplified model allows for an initial assessment of climate change risk on the Plan.

K.3.4 Results

The impact on the Plan for each scenario is shown in the following table. It is important to note that the hypothetical scenarios are meant to illustrate downside risks only and are not meant to be forecasts or predictions.

Appendix L - Uncertainty of future investment returns

L.1 Introduction

The projected financial status of the Pension Fund depends on many demographic and economic factors, including new contributors, average earnings, inflation, level of interest rates and investment returns. The projected long-term financial status of the Pension Fund is based on best-estimate assumptions. The objective of this section is to present a range of outcomes resulting from various alternative investment returns scenarios. The alternatives presented illustrate the sensitivity of the long-term projected financial position of the Pension Fund to changes in the future economic outlook. In this appendix, any references to assets, liabilities, surplus/(deficit), annual special payments and service cost are related to those of the Pension Fund.

Section L.2 illustrates how investment experience may affect the funding status of the Pension Fund over time. The impact of financial market tail events on the financial status of the Pension Fund is explored in Section L.3, where a severe one-time financial shock is applied to the best-estimate portfolio with the purpose of quantifying the impact on the funded ratio over the short-term horizon.

L.2 Range of potential funded ratios due to investment volatility and inflation modelling

Chart 5 illustrates a range of funded ratios (actuarial value of assets over actuarial liabilities) that could be expected under the best-estimate portfolio. It takes into account that actuarial valuation would occur every three years starting in 2023, that deficits are covered by additional government contributions, and that legislation under section 44.4 (1) of the PSSA is applied in case of non-permitted surplus (surplus in excess of 25% of liabilities).

As shown in Chart 5, the median expected funded ratio is relatively flat over the projection period and the range of potential outcomes widens with time.

Chart 5 - Text version

Table 5 - Pension Fund – Range of potential funded ratio for the best-estimate portfolio from plan year 2023 to plan year 2044 31 March

Percentile	2023	2026	2029	2032	2035	2038	2041	2044
5%	123%	107%	93%	85%	80%	76%	75%	73%
10%	123%	113%	100%	92%	88%	84%	83%	81%
25%	123%	121%	112%	107%	103%	101%	99%	98%
Median	123%	129%	127%	126%	125%	125%	125%	126%
75%	123%	137%	145%	149%	153%	157%	161%	165%
90%	123%	148%	164%	176%	185%	197%	209%	221%
95%	123%	156%	177%	194%	209%	226%	242%	261%

Chart 6 illustrates the probabilities associated with three possible funded statuses over the next 20 years: deficit, surplus less than 25% of liabilities, and non-permitted surplus.

Chart 6 - Text version

Table 6 - Pension Fund – Likelihood of deficit, permitted and non-permitted surplus due to investment volatility and inflation modelling from plan year 2023 to plan year 2044 31 March

	2023	2026	2029	2032	2035	2038	2041	2044
Deficit	0%	2%	10%	17%	21%	24%	25%	26%
Permitted Surplus	100%	35%	36%	32%	29%	27%	25%	23%
Non-Permitted Surplus	0%	63%	54%	51%	50%	49%	50%	51%

The likelihood of the permitted surplus is determined as 100% minus probability of deficit minus probability of non-permitted surplus.

The charts of this section reflect the actual fund return up to 31 March 2023.

L.3 Financial market tail events

This section focuses on the inherent volatility in PSP Investments’ portfolio and the extreme outcomes that could result. During plan year 2009, the nominal return on Plan assets was negative 22.7% due to the economic slowdown. Such an event could be characterized as low probability (also referred to as a “tail event”). However, when these events do occur, the impact on the funded ratio may be significant. This section analyzes the impacts that tail-event returns would have on the Plan’s funded ratio and the projected surplus/(deficit) as at 31 March 2026 (the expected date of the next scheduled statutory actuarial review).

To illustrate this, returns other than the best-estimate are assumed to occur in plan year 2024 followed by the best-estimate returns for plan years 2025 and 2026.

The returns are assumed to follow a normal distribution. Two percentiles were selected to analyze: 10th and 2nd percentiles. The left tail event is the occurrence of a nominal return such that the probability of earning that return or less is equal to 10% (or 2%). The right tail event is the occurrence of a nominal return such that the probability of earning that return or more is equal to 10% (or 2%).

Extreme events occurring during the intervaluation period can result in the plan either requiring a special payment when there is a severe economic downturn or exceeding the non-permitted surplus threshold when market conditions are extremely favorable. Table 71 shows the impact on the financial position on the Pension Fund of such potential isolated tail-events. The table also shows that the impact of an isolated tail-event is dampened over time when investment conditions revert to the best-estimate scenario. Furthermore, the use of the actuarial value of assets mitigate the funding risk caused by extreme returns.

Appendix M - Detailed information on membership data

In this appendix, the ‘Age’ and ‘Service’ nomenclature refers to completed years calculated at the beginning of the plan year, while pensionable earnings are defined in Appendix A.4.2.  

Appendix N - Acknowledgements

• The Superannuation Directorate of the Department of Public Services and Procurement Canada provided the data on plan members.
• The co-operation and able assistance received from the above-mentioned data provider deserve to be acknowledged.
• The following individuals assisted in the preparation of this report:
• Linda Benjauthrit, ACIA, ASA
• Simon Brien, ACIA, ASA
• Yann Bernard, FCIA, FSA
• Ayoub Ezzahouri
• Alexandre Filiatreault, FCIA, FSA
• Julie Fortier
• Shufen Lee, ACIA, ASA
• Guillaume Lepine-Mathieu, ACIA, ASA
• Kelly Moore
• Jeffrey Muller, FCIA, FSA
• Mieke Steenbakker Lucuik