Question 1: Is my pension secure?
The short answer is yes. And how do we know that your pension is secure?
Have a look at this graph. The bar on the left shows the value of all the pensions promised
to members. Based on the 2019 valuation, the CAAT Pension
Plan is 120% funded. That means that for every dollar of pension promised to members, there
is $1.20 dedicated to stand behind it. There are 2.6 billion dollars in funding reserves
to serve as a cushion against the unexpected – that keeps contributions stable while
you are working and your pension strong once you’re retired.
This works because the CAAT Plan is a defined benefit, or DB, pension plan. That means you
can depend on a secure retirement income, with a lifetime pension based on a formula.
Only about 1 in 6 Canadians have a DB pension. The other kind of pension plan you may have
heard of is a Defined Contribution, or DC savings plan.
These plans are like savings accounts, in that members make contributions and are then
responsible for investing the money, as well as associated fees.
Ultimately, their retirement income is based on whatever they managed to earn from their
investments, and if the markets should drop, these members may not be able to retire when
they want to. Even worse, there’s a chance DC plan members could outlive their retirement
savings. A DB plan, on the other hand, is a pension
promise. Your pension is calculated using a formula that uses your earnings, your service,
and your age. You don’t have to worry about investments
or be a market guru when it comes to your contributions to the CAAT Plan. And no matter
how long you live, your pension will be paid to you every month for the rest of your life.
With the CAAT Plan, your contributions, which you make on every pay, are all that you pay
towards this lifetime benefit. These DB pension features provide the security,
confidence and certainty you need when preparing for retirement.
The CAAT Plan is a jointly sponsored pension plan. This means that the Plan is run by members
and employers together. The Plan’s governors are aligned to the common goals of: benefit
security, contribution stability, and equity. Members make contributions and employers match
those contributions, so costs and risks are equally shared.
Funding decisions are made to ensure ongoing benefit stability. It’s fair to all, because
the people who have the risks, share the costs, and make the decisions. This model is effective
and results in secure, stable pensions for members. Thanks for watching. Be sure to watch our next video, is my pension worth more than
my contributions? This retirement planning video is based on
Plan provisions in effect as of January 1st, 2020. There is lots more information and details
available on our website, including the Plan terms, which govern above all else.