Every three years, the UBC Staff Pension Plan (SPP) is required to undergo an actuarial valuation, which is conducted by the Plan’s actuary.
The actuarial valuation is one of the ways that the SPP Board proactively manages risks by monitoring the Plan’s financial status. The information from the actuarial valuation helps the SPP Board keep your pension plan sustainable for the future.
What is an Actuarial Valuation?
An actuarial valuation is essentially a financial check-up for the Plan. During the valuation, the Plan’s actuary estimates the cost of future SPP benefits by making assumptions about future conditions. The actuary compares these estimated costs (such as current and future pension payments) with the estimated funding (the SPP’s assets and expected contributions) – money going out versus money coming in.
The four main purposes of the actuarial valuation are to:
- Evaluate the present financial status of the SPP;
- Assess the ability of the SPP to pay pension benefits over the long term;
- Comply with regulatory requirements for actuarial valuations and filings with pension authorities; and
- Determine the level of indexing (also known as cost-of-living adjustments) the SPP can afford to pay for the next three years.
The SPP’s Target Benefit Plan design and Funding Policy are key in respect to the actuarial valuation. If the actuarial valuation determines that plan funding is insufficient or more than sufficient, the SPP Board must follow certain steps to restore the balance, the details of which are outlined in the Plan’s Funding Policy. For more information, visit the About the Plan page.
Learn More
- Listen to the Pension Airwaves Podcast episode on “What is an Actuarial Valuation?” In this episode, we cover what an actuarial valuation is, why it is important, and important key takeaways for members.
- Watch the SPP Lunch & Learn: Actuarial Valuation Results 101 presentation for a more in-depth overview about the actuarial valuation results and key takeaways for members.
Current Actuarial Valuation: December 31, 2022.
The most recent actuarial valuation occurred as at December 31, 2022 and showed that the SPP, at present, is in a healthy, well-funded position and sustainable for the long term.
The Benefits/Funding Test indicated that when cost-of-living adjustments are provided at 70% of inflation, or the Consumer Price Index (CPI), the SPP is well-funded with a healthy safety margin. The safety margin allows the Plan to not only support the basic pension benefit (both current and future benefits earned), but also provide indexing of all benefits at 70% of inflation for the next three years (2024 to 2026).
For more details on the actuarial valuation as at December 31, 2022, please refer to the article in the October 2023 issue of the SPP Update newsletter.
Next Actuarial Valuation: December 31, 2025
Regularly scheduled actuarial valuations are important for keeping an eye on the financial health of the Plan. The next valuation for the SPP will occur in 2026, and data at December 31, 2025 will be used to make projections for that valuation. At that time, there will be new results available.
The level of cost-of-living adjustment will be evaluated again in 2026. Depending on the Plan’s financial situation at that time, the level of cost-of-living adjustments that the Plan can afford to pay may stay the same, decrease or increase.