Letter from the President and CEO
2023 was another particularly demanding year that required us to deliver on numerous initiatives while navigating an increased demand for services and significant planning for the future. Our staff maintained their strong focus on service excellence while also advancing our initiatives, including our pension modernization program, which will improve our client experience and business efficiencies moving forward.
We also continued with consolidation, welcoming Legal Aid Ontario and close to 6,000 other new members into the Plan. Growth in our active plan membership helps support the long-term financial health of the PSPP.
While our investment returns were positive this year at 3.1%, the volatility of the markets and high inflation continued to be a challenge and placed additional funding pressures on the Plan. As part of our regular due diligence, we will be undergoing both a long-term funding study and a Strategic Asset Allocation (SAA) review to ensure the Plan is well positioned for the future.
Investment Performance
Continued market volatility and high inflation placed funding pressures on the Plan and negatively impacted its funded status. The portfolio generated a one-year net return of 3.1% compared to a loss of 7.8% in 2022. While our return was positive, the results were below our portfolio benchmark of 5.2%.
Our Real Estate portfolio, which served us so well over the previous 25 years, was a significant drag on our performance for the second year in a row. Hybrid work arrangements and rising interest rates adversely impacted the valuations of our office properties, and the growth in online shopping driven by COVID-19, again combined with rising interest rates, impacted our retail shopping centre properties. The 3.1% net return was below the discount rate of 6.1% assumed in our Plan valuation. This, combined with losses due to continued high inflation, led to the funded status of the Plan dropping to 85% from 89% on a financial statement basis. We expect the value of our real estate holdings to recover over time.
In the coming year, we will initiate an asset/liability (A/L) study to review our SAA to determine if adjustments to our asset mix are necessary.
In addition to reviewing our SAA over the next year, we plan to conduct a long-term funding study. We conduct these reviews periodically to ensure that the Plan’s funding structure is robust and capable of withstanding challenges over the long term. The Plan Sponsor is making additional contributions to the Plan to support returning it to a fully funded status.
Environmental, Social & Governance (ESG) and Diversity, Equity and Inclusion (DEI)
As discussed in last year’s report, OPB built upon our ESG Communications Strategy in 2023 with the production of our first ESG Report, which was released this spring. Our report covers both OPB and IMCO’s progress on addressing ESG within our portfolio, as well as the work our organization has undertaken to advance DEI initiatives. If you haven’t yet had the opportunity to read our first report, please visit OPB.ca/esg to learn more.
People and Culture
A strong culture and a clear purpose have been defining strengths of OPB for many years. To build on that foundation and to ensure we are ready for the challenges of the future, in 2023 OPB developed a new purpose statement and defined an employee value proposition (EVP) for our employees.
I am pleased with the dedication and commitment of our staff this year to deliver the pension promise for our members, in an increasingly demanding service environment with many competing projects and priorities. In addition, the shift to a three-days-per-week in the office work model towards the end of 2023 has supported our people to connect, bond, collaborate and better serve our clients.
Pension Modernization
2023 was a pivotal point in our multi-year pension modernization program. In 2023, we achieved a key milestone by issuing a request for proposals (RFP) for a new pension administration system. We received eight qualified vendor responses, and following product demonstrations and evaluations by a cross-section of our subject matter experts within the organization, a final vendor will be selected in the spring. We will then immediately begin planning for implementation.
Our current pension administration systems were built in the mid-1990s. We expect a modernized system to provide features and functionality that will support more responsive and efficient service to our clients. This is a major program that will require significant investment and will be implemented over several years. The program is being closely monitored by our Board of Directors with the support of an external, expert consultant.
We also envision this pension administration system to lay the groundwork for more client experience improvements, including our communications and engagement capabilities with members, and the ability for us to provide more personalized and tailored services and decision-making support as they navigate their life and financial circumstances within their unique pension journeys.
This important initiative will be the focus of our business plan for the years ahead and has the full support of our leadership team, staff and Board.
Client Service
I’m very proud of the work accomplished by our Client Services team in 2023, balancing the operational demand of members with a record year of handling nearly 19,000 transactions and over 58,000 calls from our clients requesting service.
A large portion of this service increase was due to the continued growth in our membership. We enrolled close to 7,000 new members through organic membership growth and the addition of the Legal Aid Ontario plan into the PSPP. This is the second year in a row in which we’ve enrolled close to 7,000 members. Continued growth in the active membership of the Plan improves the ratio of contributing members to pensioners, which supports the long-term financial health of the PSPP. A further reason for the increased service demand was a substantial 26% increase of buyback transactions from new members looking to purchase prior service periods in the Plan.
In the CEM Benchmarking survey for 2022, reported in mid-2023, OPB was ranked second for client service amongst 10 national peers and eighth globally among the 61 plans that participate in the CEM Benchmarking survey. While our client satisfaction survey scores continued to be strong, they did drop slightly in 2023 due to high service demands and sustained higher employee turnover due to a competitive talent market, which resulted in inconsistent staffing availability, particularly in our Client Care Centre.
Cost Effectiveness
We closely manage and monitor our expenses. In 2023, our expense ratio, including all internal and external pension administration and investment expenses including IMCO was 0.62% (or 62 cents per $100 of average net assets available for benefits). This compares to an expense ratio of 0.53% in 2022.
Succession and My Retirement
2023 was also marked by a carefully orchestrated succession plan to ensure strong leadership and accountability into the future. This culminated in the hiring of Darwin Bozek, who joined OPB early in 2024. Darwin will spend most of 2024 in the transitional role of President & Chief Pension Officer, before his eventual appointment as my successor as CEO later in the year. As our Board Chair, Geri Markvoort, speaks to in her letter this year, I’m very pleased with the rigour and process that went into this executive recruitment and I believe that Darwin will be an excellent leader for OPB and the Plan. He has all the skills and experience necessary for the role and values that make him a great fit with OPB and our culture.
Darwin has spent most of the first part of this year working with Peter Shena to transition the pension administration function and learn about our organization and operations.
I look forward to working closely with Darwin to support his transition to President and CEO.
I would like to take the opportunity to thank Peter, our Chief Pension Officer, for his substantial contributions to OPB over the last 20 years. Peter’s pension expertise and his dedication to outstanding client service and stakeholder relations are second to none.
I also want to thank our staff for their excellent work and dedication as well as our Board of Directors for their continued support.
Mark Fuller
President and CEO