Halifax, NS – April 30, 2024 – Nova Scotia Teachers’ Pension Plan Trustee Inc. (TPPTI) announced today that the Teachers’ Pension Plan’s (Plan) funded status at the end of 2023 increased to 78.1% on a going-concern basis, compared to 75.1% at the end of 2022. The increase in the funded ratio year-over-year was due to the asset gains in 2023 and to the fact that the Plan’s discount rate was increased from 5.70% to 5.80%.
As at December 31, 2023, the Plan’s deficit was $1.617 billion, being the difference between the net assets available for payment of benefits of $5.759 billion and the actuarially calculated liabilities of $7.376 billion.
At year-end 2023, the Plan achieved an absolute one-year return of 7.38%, net of investment management fees (7.56%, gross of investment management fees). The Fund underperformed the policy benchmark of 10.14%. “Investment performance benchmarks for some asset classes, notably real assets (comprised of real estate, infrastructure, and agriculture/timber) have risen appreciably in the recent higher inflationary environment,” stated TPPTI Board Chair, John Rogers. “The benchmark for each of these asset classes is CPI + 4.5%, thus setting a very challenging target.”
The TPP’s participation in the surging public equity and fixed income markets in Q4 2023 was muted because of the Plan’s diversified asset mix – though its 2023 net return was better than many Canadian plans and its absolute performance in the combined period of 2022-2023 was extremely strong. “The TPP was very close to the top quartile of the peer group, illustrating the benefit of diversification across fluctuating market conditions,” added Rogers.
The Plan still maintains a significant ‘provision for adverse deviation (PfAD)’. The PfAD acts like a reserve fund – to be available for use to buttress the Plan’s financial situation in especially challenging times. The Plan’s 2023 PfAD stood at 0.68%
The 2014 Agreement between the Plan Sponsors, the Province of Nova Scotia (Province) and the Nova Scotia Teachers Union (NSTU), states an objective of achieving a Plan funded status at 80-90% on or before December 31, 2025. With the target date approaching, the TPPTI is cognizant of the need to carefully monitor the Plan’s funded ratio, with a view to achieving a funded ratio of at least 80% by December 31, 2025. “It will be important to continue striving to increase asset values, including exploring ways to enhance returns by introducing some innovation in a risk-controlled manner, as well as to maintain a healthy PfAD as the Plan’s discount rate is set for each of 2024 and 2025,” stated Rogers.
In October 2020, the Plan Sponsors agreed to jointly appoint an independent panel of pension experts (NSTPP Panel) to review the ongoing challenges facing the Plan. The NSTPP Panel’s mandate was to review and analyze the Plan, educate and consult with stakeholders, and make non-binding recommendations to fully fund the Plan within a reasonable period of time. In August 2022, the TPP Panel’s non-binding recommendations were submitted to the Province and the NSTU for review and consideration.
“The Board continues to be hopeful that the NSTPP Panel’s report and recommendations will catalyze meaningful steps by the Province and the NSTU to effect changes that will improve the Plan’s long-term financial sustainability,” added Rogers.
To read the full 2023 Teachers’ Pension Plan Annual Report, visit the Plan’s website at:
https://www.nstpp.ca/investments/plan-performance
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For more information, contact:
Gisèle March
Senior Communications Advisor
Nova Scotia Pension Services Corporation
C: 902-240-3244 | marchgd@nspension.ca | www.novascotiapension.ca