Since 2015, financial management and future planning of the Fund has evolved and Provident10 has been at the centre of that transformation. As the organization overseeing the management of the Public Service Pension Plan, Provident10 must continue to adapt to the changing financial landscape to ensure continued success and sustainability for members.
Though the Plan has been fully funded for the past three years, and the overall health of the Plan has improved over the past 10 years, there are important on-going considerations and uncertainties that can impact the Plan’s funded status, including, an aging Plan member profile, the global investment and economic environment, continued effects of the pandemic, and heightened global political tensions.
The PSPP Funding Policy is designed to guide the Plan towards full funding to ensure retirement security. It lays out defined thresholds that must be met before implementation of any Plan improvements are allowed and identifies whether changes are required to improve Plan funding. Growth of the Fund is generated through three main components: Member and Employer Contributions, investment earnings, and repayment of a promissory note from the Government of Newfoundland and Labrador.
The promissory note is currently 20% of the total net assets of the Fund, and provides steady cashflow and liquidity to the Fund, which is beneficial in providing stability to the funded status.The
Plan’s financial standing is shown through funding and financial statement valuations. Each of these funding valuations helps to ensure the Plan remains secure and continues to be on the path to full funding.
As of December 31, 2021, the Fund’s net assets available for benefits was $11.7 billion, an $805 million increase from 2020. The Plan’s net assets consist of investments of $9.3 billion and the promissory note balance of $2.4 billion. The Plan’s Accrued Benefit Obligation as of December 31, 2021, was $10.7 billion, As a result, the Plan had a surplus of $1.0 billion at the end of 2021 resulting in a funded ratio of 109.2%, compared to a funded ratio of 101% in 2020. The significant increase in funded ratio resulted from strong investment returns and changes to the actuarial assumptions – which decreased the accrued benefit obligation for the year. The discount rate was updated to reflect the current economic environment, resulting in an increase from 5.85% in 2020 to 6.00%. In addition, the assumptions relating to termination rates were updated to reflect recent experience, and the mortality rates were updated to reflect current life expectancies.