OMERS president and CEO Michael NobregaDarren Calabrese/The Globe and Mail
Pension funds want Ottawa to let them in on the new private-sector retirement savings pools, allowing the funds to compete head-to-head against banks and insurers.
The desire to cater to small businesses and self-employed savers signals a shift in the way big funds operate, and comes as the country's retirement system enters a period of massive reforms.
Some big funds want the federal government to allow more players to administer the new pooled registered pension plans (PRPPs), Michael Nobrega, chief executive officer of the Ontario Municipal Employees Retirement System told reporters in Toronto on Monday.
Federal Finance Minister Jim Flaherty signalled in December that the government will push forward with the development of PRPPs to help allay a looming retirement savings crisis. Ottawa said the PRPPs, which are designed for people without company pension plans, will be administered by "regulated financial institutions." The institutions will essentially offer pension plans that small businesses or self-employed people can sign up for. The idea is that through regulations and new laws, governments will ensure that plan administrators charge lower management fees than are currently available.
"Right now, it's insurance companies and the banks," Mr. Nobrega said. "I would suspect that the federal government would be wise to include a broader range of providers other than simply the banks and insurance companies, because the pension funds do have the muscle and investment systems to do it."
Financial institutions, and especially life insurers, lobbied for the creation of PRPPs as an alternative to expanding the Canada Pension Plan. Ottawa backed the idea because it was leery of taking more money off paycheques during the economic recovery, and did not have the necessary provincial support to expand the CPP, though it is still considering doing so.
Under the PRPP proposal, plan administrators would be responsible for receiving contributions to a plan from individuals and employers, and responding to enquiries from them.
"Consultations are still in their early stages," Bram Sepers, a spokesman for Ted Menzies, minister of state for finance, said Monday. "As of today, no decisions have been made. Pension funds are only one of the stakeholder groups being consulted for the development of PRPP legislation."
The establishment of PRPPs comes as a number of pension funds are seeking new avenues for profit and growth. Last month, OMERS launched "additional voluntary contributions," a program in which its members can elect to invest additional money with the fund.
"We are seeing millions of dollars coming in," said Jennifer Brown, OMERS' chief pension officer. So far, close to 2,000 people have signed up for the program, she said.
The Ontario government gave OMERS the ability to provide third-party investment management services in 2009. Like other major funds, OMERS is shifting its asset mix, taking more control of its investments, and seeking ways to boost its relevance in the retirement market.
OMERS reported its 2010 financial results on Monday, showing an annual return of 12.01 per cent or $5.4-billion, up from 10.6 per cent or $4.3-billion in 2009. For the first time since the financial crisis, the fund's assets exceeded their 2007 level, and now amount to $53.3-billion. However, its funding deficit still tripled to $4.5-billion as its pension benefit obligations have increased.
The run-up in equity markets last year is helping pension funds to recuperate. Last week the Caisse de dépôt et placement du Québec, which has been looking to offer its depositors more tailor-made investment strategies, posted a 13.6-per-cent return.
"It really was the product of a lot of things that we started doing in 2009: simplifying, taking our leverage down, getting out of complex derivatives," Caisse CEO Michael Sabia said in an interview Monday. The pension manager was able to sell a number of assets it was looking to shed, including complex real estate debt, into a relatively strong market.
But Mr. Sabia is quick to point out that one year's returns don't make a trend, and he is working to position the fund for the long term. Having removed some of its key risks, the Caisse is now embarking on the second chapter of Mr. Sabia's turnaround plan, in which it will decide what investment areas to focus on in the future.
"The business we're in is a marathon, it's not a sprint," Mr. Sabia said.