Information About the Private School Teachers' Pension Plan

Recent Events in the Financial Markets and the Impact on Your Plan

The fiscal year ended August 31, 2010 saw global financial markets begin a tepid recovery, providing the fund the opportunity for the first positive rate of return in three fiscal years. This followed a period from mid-2007 to early in 2009 when the global investment markets were under severe pressure, resulting in two consecutive fiscal years of negative returns for the fund.

With the worst of the 2007-09 financial crisis over, the road to recovery has proven to be slow and volatile in most parts of the world. While strong economic growth returned to emerging markets, it was much more elusive in the developed world. Europe in particular struggled with a sovereign debt crisis, while the United States still waits for signs of recovery in its housing and employment markets. In this environment, global equity returns were weak, but falling interest rates resulted in attractive returns from fixed-income markets. By the end of the 2009-10 fiscal year, the PSTPP fund returned 6.9%.

Despite weak markets in recent years, long-term investment returns have met long-term return funding objectives. Over the 18-year period since the current funding structure was adopted by the plan sponsors, the PSTPP has on average earned 6.6% each year, which matches the plan funding rate of return.

Although contribution rates have increased due to the low market returns and the lower expected future returns, and will most likely increase further, it is important to note that the pension benefits under the plan are safe.

Pension benefits and cost-of-living adjustments are calculated based on legislated formulas and not on the investment performance of the fund.
The funding status of plan benefits is regularly reviewed, and contribution rate adjustments are made as required to ensure that all pension payments will be made.
We carefully oversee the investment policies, asset mix and fund managers to maximize risk-controlled, long-term investment returns.

About Your Plan

The Private School Teachers’ Pension Plan (PSTPP) is a defined benefit pension plan – a plan that provides a pension based on a benefit formula tied to salary and years of service.

The Plan is relatively small with 10 participating employers and about 194 members. Due to surplus assets arising from investment returns being higher than expected, from 1996 to 2005 teachers and employers benefitted from significant contribution reductions. As of August 31, 2010, the Plan had a funding deficiency of $6.044 million that will be funded through additional teacher and employer contributions over the next 15 years.

Funding Study and Contribution Rates

The funding study of the PSTPP as at August 31, 2010 showed that the cost of future benefits to be earned by teachers was consistent with that identified in the August 31, 2009 actuarial funding valuation of the plan. However, the funding deficiency increased more than expected in the past year due to plan experience different from the long-term funding assumptions. The impact that this increase would have on the cost of amortizing the deficiency was further aggravated by the loss of future contributions from one employer who withdrew from the plan. As a result, if this employer does not rejoin the plan in September 2011, total plan costs will increase 0.55% of teacher salaries, 0.29% for teachers and 0.26% for employers.

We will carefully assess the future membership of the plan in the spring of 2011, determine what actual contribution rate changes are required effective September 2011, and advise all teachers and employers of any changes. The table above shows the current contribution rates.