FACULTY PENSION PLAN 101

November 18, 2019

L I L Y L EE , M EM BER SERVI CES ASSO CI ATE

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Agenda

1. Welcome2. About the Plan3. Investment Options4. Your Responsibilities5. Options at Retirement

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UBC Faculty Pension Plan

Regulators: BC Financial Services Authority

(Pension Benefits Standards Act)

Canada Revenue Agency (Income Tax Act)

Defined ContributionPension Plan

About the Plan

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About the Plan• UBC Pension Administration Office Member services Co-administers the Plan with Sun Life Financial

• Sun Life Financial Recordkeeper and custodian Online access at www.mysunlife.ca/ubcfpp Sun Life Customer Care Centre

► Dedicated telephone number ► 1-844-UBC-3131 (1-844-822-3131)

• FPP Board of Trustees

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Board of Trustees

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Employee:5% up to YBE 3.2% between

YBE & YMPE5% above YMPE

Employer:10% up to YBE 8.2% between

YBE & YMPE10% above YMPE

Defined ContributionPension Plan

Pension Contributions

Year’s Basic Exemption (YBE) for 2019 = $3,500Year’s Maximum Pensionable Earnings (YMPE) for 2019 = $57,400

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5% x $3,5003.2% x $53,9005% x $38,600

10% x $3,5008.2% x $53,90010% x $38,600

Example of annual member pension contributions for a FPP member earning $96,000 per year in 2019:

annual member contribution = $3,829.92*per pay cheque contribution = $159.58

annual employer contribution = $8,629.92*per pay cheque contribution = $359.58

* Payroll rounding

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Plan's Mission Statement

The main purpose of the Plan is to provide a well-managed, cost-effective retirement plan, designed to assist members in meeting their financial responsibilities, both leading up to retirement and, if the member chooses, through retirement.

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Plan Considerations Lower risk through broad diversification Provide flexibility regarding contribution,

investment, retirement and withdrawal options

Low cost

High level of member service One part of member’s overall retirement

plan

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Statistics

Year ending December 31, 2018Total Plan Membership 6297

Active members 55%

Deferred members 25%

Retired members 20%

Total Contributions to the Plan $65.6 million

Total Transfers into the Plan $7.0 million

Total Retirement Benefits Paid $53.5 million

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FPP Annual Report

Visit our website: faculty.pensions.ubc.ca > Plan Governance > Annual Reports & Financial Statements

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What If… I take a leave of absence

Paid Unpaid Consult the HR benefits website for details:

www.hr.ubc.ca/wellbeing-benefits/benefits/details

My marital status changes I need to complete or change my

beneficiary designation Default = Estate

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What If… I am totally disabled before retiring I pass away before retiring I change jobs

appointed to an eligible position appointed to a non-eligible position

I need to update my: mailing address FPP statement preferences

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Am I able to… Make voluntary contributions?

Yes, if you have room Sign in to your account online

Under Requests

Select Contribute

Submit a Voluntary Contribution Form by campus mail or email to fpp@hr.ubc.ca

For details visit faculty.pensions.ubc.ca. On the Home page, under For Plan Members, click Learn More and then under Quick Links click on Voluntary Contributions.

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Employee Contributions= $3,829.92

5% up to YBE 3.2% between YBE & YMPE5% above YMPE

Employer Contributions = $8,629.92

10% up to YBE 8.2% between YBE & YMPE10% above YMPE

Example for a FPP member earning $96,000 per year:Money purchase limit:18% of your earned income to a maximum of $27,230 (2019)

18% x $96,000 = $17,280

Voluntary Contribution Limit= $4,820.16

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Example of annual member pension contributions for a FPP member earning $96,000 per year:

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Am I able to… Transfer in external registered plans?

Yes Registered plans held at an external Canadian

financial institution (RRSP, LIRA, LIRRSP) Transfer out fees Application for Direct Transfer of Assets

Registered Pension Plans from another Canadian employer

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Am I able to… Transfer in external registered plans?

Yes Registered plans held at an external Canadian

financial institution (RRSP, LIRA, LIRRSP) Transfer out fees Application for Direct Transfer of Assets

Registered Pension Plans from another Canadian employer

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I leave the University before retirement?

Leave funds in the Plan Withdraw non locked-in account

balance Transfer to other registered plans

Canadian financial institution New employer in Canada No transfer out fee

What If…

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Am I able to… Take my account balance in cash if I

leave the University before retiring?

Depends Small amount

• Total value not exceeding 20% of YMPE• Example:

Threshold to withdrawal cash in 2019 20% x $57,400 (2019 YMPE) = $11,480

Non-resident

Termination Options Matrix

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Cost of Investing Management Expense Ratios (MER) Manager expertise, research, custodial

charges, operating expenses, etc. How are these fees charged?

Article: Why Fees Matter

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Impact of FeesExample:

$100,000 @ 6.00% average annual return over 20 years

Fee 0.50% 1.50% 2.50%

Total fees paid $28,938 $79,543 $121,735

Net value after fees $291,776 $241,171 $198,979

BC Securities Commission Investment Fee Calculator:www.investright.org/investing-101/investment-fee-calculator

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Fund Management Fees

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Investment Funds

• UBC FPP Balanced Fund

• UBC FPP Bond Fund• UBC FPP Canadian

Equity Fund• UBC FPP Foreign

Equity Fund• UBC FPP Short Term

Investment Fund

and GIC’s

• Sun Life Financial• Terms - 1 to 5 years• Redeemable, subject to

market value adjustment

• Fund rates of return and GIC rates are available by signing in to your FPP account online and selecting Accounts > Investment performance.

Investment Options

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Canadian Equities 20% 100%

Foreign Equities 30% 100%

Real Estate (CAD) 10%

Government and corporate bonds 40% 100%

Treasury bills and short-term paper 100%

Assets (Millions)September 30, 2019 $2,108.6 $67.9 $167.6 $171.9 $36.0 $26.2

Assets (Percentage)September 30, 2019 81.13% 2.73% 6.74% 6.91% 1.45% 1.05%

Investment Policy Asset Mix

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Variability versus Returns

Chart1

Short-Term Investment FundShort-Term Investment Fund

Bond FundBond Fund

Balanced FundBalanced Fund

Canadian and Foreign Equity FundsCanadian and Foreign Equity Funds

Variability of Returns

Rates of Return

Short-Term Investment Fund

Bond Fund

Balanced Fund

Canadian and Foreign Equity Funds

15

30

45

60

Sheet1

Short-Term Investment Fund15

Bond Fund30

Balanced Fund45

Canadian and Foreign Equity Funds60

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World Stock Market CapitalizationRelative sizes of world stock markets, end-1899 versus start-2019

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World Stock Market Capitalization

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Long Term Asset Class Returns

Growth of $100 from December 1949 to December 2018

Value of $100 (Annualized Rate of Return)

US Equities in $C:$174,401 (11.4%)

Canada Equities: $51,987 (9.5%)

Bonds: $12,937 (7.3%)

T-Bills: $3,259 (5.2%)

Inflation:$1,095 (3.5%)

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Diversification

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Asset AllocationDefined: Asset allocation is an

investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, investment horizon and risk tolerance.

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Your Responsibilities

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Determine your investment objective(s) Take view consistent with your time horizon Take risk consistent with your tolerance Take a holistic view, consider your total assets Clearly document your strategy Asset allocation and rebalancing Seek professional advice if necessary Keep fees low

Key Strategies

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The right mix depends on your personal profile and objectives

Your profile reflects your age, time horizon, risk tolerance, investment knowledge and financial situation

Optimal mix also reflects market expectations

Consider the nature of the UBC Faculty Pension Plan investment options

Establish the right mix

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Establish the right mix

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Fund Info Sheets faculty.pensions.ubc.ca > Investments > Investment Options

mysunlife.ca/ubcfpp > my financial centre > Accounts > Investment performance

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Fund Performance faculty.pensions.ubc.ca > Investments > Investment Performance

mysunlife.ca/ubcfpp > my financial centre > Accounts > Investment performance

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Article: Asset Allocation Choices

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Age Asset Mix Equity %

20-40Balanced 50%Canadian Equity 25%Foreign Equity 25%

75%

40-50Balanced 70%Canadian Equity 15%Foreign Equity 15%

65%

50-60 Balanced 90%Bond Fund 10% 45%

Over 60Balanced 60%Bond 30%Short-Term 10%

30%

Sample Life Cycle Investing

FPP Article: Asset Allocation Choices, page 5

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Investment Risk Profiler Sign in to your account online Under Resource Centre: select my money tools Asset allocation

Eight questions Five Risk Profiles Asset Allocation recommendations

Asset Allocation Tool

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Investment Risk Profiler

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Investment Risk Profiler

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Your Results

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Your Results

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Asset Mix Recommendation

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My currentportfolio mix:

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Online by signing in to your FPP account at mysunlife.ca/ubcfpp

Contact the Sun Life Financial Customer Care Centre at 1-844-UBC-3131 (1-844-822-3131), select option 2

Daily valuation: Cut-off at 1:00pm Pacific Time

Asset Allocation Changes

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How often can I change my investment allocation?

Short-term Trading Fee = 2% Online warning message:

Asset Allocation Changes

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Resetting the proportions of each asset class back to their original percentage

Stay on track Keeping your portfolio’s risk in check How do I rebalance my portfolio? Move existing funds Change allocation of future contributions Auto rebalancing feature (end on January)

How often and when should I rebalance my portfolio?

Portfolio Rebalancing

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Changing your investments:

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Investment and Retirement Planning

Tax Planning, Estate Planning, Debt Management

Knowledge and experience with employee benefit plans

Assist you in pension decisions in the context of an overall financial plan

Resources: Financial Consumer Agency of Canada website:

Choosing a financial advisorwww.canada.ca/en/financial-consumer-agency/services/savings-investments/choose-financial-advisor

Financial Planning For Canadianswww.financialplanningforcanadians.ca

Get Smarter About Money website: Getting advicewww.getsmarteraboutmoney.ca/plan-manage/getting-advice

Seeking Professional Advice

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• Early retirement from age 55• Mandatory retirement age

abolished• Canada Revenue Agency

regulations allows you defer your decision to elect a retirement income option from the Plan until December 1st of the year in which you reach 71 years of age

Retirement…

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FacultyPension Plan

Options at Retirement

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Choice and Flexibility► You may use all or part of your account balance for any

of the retirement options

UBC Retirement Income Options:► Variable Payment Life Annuity (VPLA)► Non-locked funds: RRIF-Type Payment Account► Locked-in funds: LIF-Type Payment Account► Transfer out of the Plan

Purchase External Life Annuity Non-locked funds: Cash, RRSP, RRIF Locked-in funds: LIRA, LIF

Retirement Income Estimator: ► mysunlife.ca/ubcfpp

Retirement Income Options

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Old Age Security• OAS maximum benefit =

$613.53 per month at age 65*

• Residency requirements 40 years in Canada = maximum

• Indexed quarterly• Clawback on OAS income

Starting at $77,580** Ending at $126,058**

*OAS payment amounts – October to December 2019**Income year: 2019

Canada Pension Plan• CPP maximum benefit =

$1,154.58 per month at age 65*

• Indexed annually

• Available from age 60

• Split payment with your spouse

* CPP payment amounts – January to December 2019

www.servicecanada.gc.ca

Government Benefits

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• Member Services at the UBC Pension Administration Office

• FPP Website: faculty.pensions.ubc.ca

• E-mail fpp@hr.ubc.ca

Resources

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• mysunlife.ca/ubcfpp

Resources

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www.investright.org

www.getsmartaboutmoney.ca

www.theglobeandmail.com/globe-investor/personal-finance

External Resources

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