Ontario Appoints Advisor To Lead Pension Investment Reforms
McGuinty Government Taking Further Steps to Make Public Sector Pensions More Sustainable, Affordable
Ontario is appointing Bill Morneau to lead public consultations and develop a framework to help put broader public sector pension plans on a more secure footing.
As outlined in the 2012 Ontario Budget, the government intends to introduce a legislative framework this fall that would pool investment management functions of smaller broader public sector pension plans.
Many of the smaller broader public sector defined benefit plans have a relatively small amount of assets and members (e.g., about 50 plans have assets of less than $1 billion) and each has its own investment management function. Not only does this duplicate costs and prevent economies of scale, it also means these plans cannot access higher-return investment opportunities available to larger investment pools.
Mr. Morneau has extensive experience in providing human resource consulting and outsourcing services and is the Chair of the Board of Directors at the C.D. Howe Institute. He will engage with stakeholders on investment pooling approaches, and will review actions taken in other places as well as academic research and commentary.
The McGuinty government is committed to building upon Ontario's internationally recognized pension plan model to make the management of public sector pensions even stronger.
- In April 2012, the government announced consultations on the first phase of public sector pension plan reform that will make them more sustainable for members and more affordable for taxpayers.
- Mr. Morneau will provide the Minister of Finance with final recommendations by early-fall 2012.
- Stakeholders will be consulted on the new approach and have input into structural and leadership issues. The government intends to provide an appropriate transition period, which is critical to effect these changes.
- A recent paper by Alexander Dyck and Lukasz Pomorski of the Rotman School of Management suggests the largest pension plans (those with average assets of $37 billion) outperform smaller plans (those with average assets of $1 billion), with up to half the difference due to lower cost of internal management.
“I am pleased to appoint Bill Morneau as the Pension Investment Advisor, to assist us in facilitating the pooling of public sector pension fund assets. This is just one of the steps the McGuinty government is taking to improve the sustainability and efficiency of pension plans in the broader public sector, while balancing the interests of pensioners, pension plan members and plan sponsors.”