The Ontario government has been advised to follow the lead of other jurisdictions within Canada and internationally by creating a massive pension fund to manage the retirement savings of public-sector workers.
A report commissioned by the government says pooling various pension plans together under one roof would create economies of scale, reduce administration costs and broaden investment opportunities, particularly for smaller funds.
The report, released on Friday, recommends that the new pension fund manage at least $50-billion in assets. "There is strong evidence to suggest that large pension funds outperform smaller and medium-sized funds," says the report, written by William Morneau, executive chairman of consulting firm Morneau Shepell.
Ontario already has three large funds – the Ontario Teachers' Pension Plan, the Ontario Municipal Employees Retirement System and the Healthcare of Ontario Pension Plan, which together manage just over $212-billion in assets.
But it also has dozens of tiny funds that each manage less than $1-billion in assets. The report says a group of funds that together manage assets of $100-billion on behalf of a diverse group of public-sector workers – ranging from university professors to hospital custodians and public transit employees – should be considered for the pooled arrangement. It recommends that the government introduce legislation making participation mandatory.
Finance Minister Dwight Duncan was not available for comment on Friday. He asked Mr. Morneau to look at pooling pension-fund assets to help the cash-strapped province curb spending and erase a projected deficit of $14.4-billion.
Mr. Morneau estimates that creating a pooled fund would produce annual savings of between $75-million and $100-million. British Columbia and Alberta both have investment firms that manage pooled assets from several public-sector pension plans. Britain is looking at similar measures.