OPB 2023 Year in Review

Here for you.

Here for life.

As the administrator of one of the oldest pension plans in Canada, OPB is focused on the future of the PSPP. This means ensuring that our governance, leadership and strategies position us well for success not just today but for many years to come.”

Geri Markvoort, Chair

Total return

3.1%

versus -7.8% in 2022

Funded status

85%

* The 10-year funding plan we have in place means that the PSPP remains well funded

Net Assets

$31.7B

in assets

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Client Service

8.6/10

client service satisfaction

Total Membership

99,200

active, deferred, retired members and survivors

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Here for you.

Here for life.

Geri Markvoort

Board Chair

Read the 2023 Chair Letter

Mark Fuller

President & CEO

Read the 2023 CEO Letter

Welcome from our Chair and CEO

In 2023, we updated our purpose statement. In essence, we put into carefully chosen words what has always been true of OPB. We were created to help ensure that our members – public servants who had worked for the people and Government of Ontario – could plan for a retirement in which they can thrive and continue contributing to their communities. At the Ontario Pension Board, our vision is to be a premier pension delivery organization and a trusted advisor to all our stakeholders. Focusing on our Advise and Protect mission, which shapes our strategy, guides our steps and sets us apart from our peers, 2023 was a pivotal year for OPB. We advanced our critical pension modernization initiative, which, as it is implemented, will help enhance our service offering for years to come. We strengthened our embrace of environmental, social and governance (ESG) principles and increased our efforts to provide a diverse, inclusive and equitable workplace. We announced the coming retirement of two leaders who helped us manage critical challenges and reach crucial milestones. We chose a dynamic executive to lead us during our next stage of growth and evolution. The choices we made, the measures we executed and the goals we achieved will ensure that we continue to keep our promises and fulfil our purpose.

To all our stakeholders, we are here for you, here for life.

Our Purpose

Reassuring things happen when we look after each other and work together for a common cause. Over the course of their working lives, our public-servant clients support strong and sustainable communities across Ontario. We understand the importance of helping others build toward a strong and sustainable future.

Through our Advise and Protect mission, we assist our clients to effectively plan for a retirement with security and dignity – a retirement in which they can thrive and continue contributing to their communities. Our team of diverse professionals supports every stage of our clients’ careers, ensuring the pensions they have earned are protected along the way through strategic and prudent fiscal oversight.

Our commitment is to be there.

There for life.

Letter from the Chair

As the administrator of one of the oldest pension plans in Canada, OPB is focused on the long term. This means ensuring that our governance, leadership and strategies position us well for success not just today but for many years to come.

Over the last year, the Board focused on several key areas to position OPB well for the future – oversight of the multi-year pension modernization program, the implementation of our carefully planned leadership succession plan and the financial health of the Plan.

2023 proved to be another challenging year with continuing market volatility and high inflation, which placed additional funding pressure on the Plan. On the investment returns side, we had a better year than last year, with a positive return of 3.1%. However, our return still fell below the discount rate required to fund the Plan over the long term.

In 2024, the Board will be providing oversight of a long-term funding study and a review of our Strategic Asset Allocation (SAA). We conduct these studies every few years, as part of our regular due diligence and to help ensure the Plan is well positioned over the long term.

IMCO has continued to mature in terms of investment expertise and scale, enabling it to pursue and secure investment opportunities that would not have been previously possible for OPB to accomplish on its own. IMCO has also built strong in-house expertise and resources to provide clients with advisory services on how to structure and optimize their strategies to deliver strong results. OPB will be partnering with IMCO on our review of both our SAA and our funding study.

In 2023, we continued to make good progress on our pension modernization initiative which will improve the client experience and generate business efficiencies. Following a comprehensive research and review phase, we concluded that choosing a commercial off-the-shelf (COTS) system will be the most effective and efficient path to modernizing our systems. We passed a key milestone this year, issuing a request for proposals (RFP) for our new pension administration system. In 2024, we will focus on selecting the right vendor and system enabling us to move forward with this important initiative.

Given the current investment and funding environment and where OPB is in its pension modernization journey, it was particularly critical to develop a robust succession plan and take our time to find the right candidate to lead the organization.

Last year, I announced that two of our key executives – Peter Shena, our Chief Pension Officer (CPO) and Mark Fuller, our President and CEO – would be retiring. The Board developed an executive transition plan and retained the executive search firm LHH Knightsbridge to conduct a Canada-wide search for a transitional position of President & Chief Pension Officer, with the intention that the successful candidate would become OPB’s new President & CEO upon Mark Fuller’s retirement.

Last November, after a cross-Canada search process, we announced the appointment of Darwin Bozek to the transitional position of President & Chief Pension Officer. As an experienced executive leader with extensive public sector and pension experience, Darwin’s proven ability to deliver business results while supporting a positive, inclusive and values-based culture makes him the right candidate to lead OPB upon Mark’s retirement.

Darwin joined OPB in February and initially worked closely with Peter to become familiar with OPB’s pension team. He is now working closely with Mark in preparation for his transition to President & CEO upon Mark’s retirement in 2024. Darwin will lead the selection of a permanent Chief Pension Officer in the coming months.

I want to take this opportunity to thank Peter for his decades-long contributions to OPB, his focus on protecting the pension promise for our members and stakeholders, and his strong and effective working relationships with the Board, the Plan Sponsor and our Bargaining Agents. Peter will be available to Darwin and OPB as a Chief Transition Officer (CTO) over the remainder of this year to provide his advisory expertise on key initiatives and projects as we complete the succession plan.

Another key area of focus for the Board was overseeing the advancement of Environmental, Social and Governance (ESG) issues both within our organization and within our investments. In 2023, we had a focus on climate risk and diversity, equity and inclusion (DEI), ensuring that these important topics were embedded in risk and strategy discussions. In particular:

We launched our Diversity, Equity and Inclusion Advisory Council to support continuous improvement in building an inclusive culture.
We surveyed employees, enabling a current view of our data on socio-demographic information and the inclusion experiences of our employees.
Lastly, we continued the development of our ESG Communications Strategy and released OPB’s first ESG Report in early 2024. It reflects both our organizational activities as well as IMCO’s progress on ESG with our investment portfolio. I encourage you to read our inaugural report for more detailed information.

In a rapidly changing world, and as the oversight responsibilities of a board continue to grow, boards must be committed to continuous learning. In 2023, the Board focused on helping the organization advance its risk strategies and maturity, and participated in ongoing education sessions to further their knowledge and governance capability, including education on Responsible Investing, climate strategy and understanding the path to net-zero emissions, the post-pandemic outlook for real estate, and stewarding executive leadership change.

In 2023, we also experienced change at the Board level.

I would like to welcome Richard Nunn to the Board and as our new Chair of the Investment Committee. Richard brings not only deep expertise in finance, accounting and investments, but also significant experience in board oversight. I am confident that Richard will bring tremendous value to the Board.

I thank Rob Ritchie for his time on the Board. Rob joined the Board in 2020 and served as Chair of the Managed Plans Committee, Chair of the Investment Committee and member of the Investment and Audit committees. With his significant experience in pensions and investments, Rob brought great value to the Board during his time with us.

Lastly, I wish to thank Lynne Clark for her service on the Board. Lynne joined the Board in 2016 and, given her deep experience in finance and audit, served as Chair of the Audit Committee throughout her time. She made considerable additional contributions serving as a member of both the Investment and Pensions committees.

We are currently working closely with the Plan Sponsor to fill Board vacancies with candidates who bring the right experience and skillsets to the table in alignment with our skills matrix.

In closing, on behalf of the Board, I would like to express our thanks to management and staff for their hard work and continued dedication during another challenging year. The Board remains confident that OPB is well positioned to continue delivering on its mandate to protect the pension promise for years to come.

Geri Markvoort
Chair

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

State of the plan

In a demanding year, we moved forward on initiatives to support our people, enhance our service and strengthen our Plan.

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