OMERS AVCs gaining momentum

November 08, 2011
Additional Voluntary Contributions (AVCs) are an exciting new feature of the plan, and with them an OMERS pension "just got even better." That's according to the following article on the Toronto Star's Moneyville blog, in which OMERS Chief Pension Officer Jennifer Brown and Ottawa firefighter Erik Leicht discuss their views on AVCs with reporter and pension expert Sheryl Smolkin.

An OMERS pension just got even better

Toronto Star
January 24, 2011
Byline: Sheryl Smolkin

The 400,000 members of one of Canada's largest pension funds now have an even better way to fund their retirement. Not only will OMERS members receive a top drawer pension, they can also add cash they've saved in their RRSPs into the mix.

The Ontario Municipal Employees Retirement System is one of Canada's largest pension plans with about $48 billion assets and represents 928 local government employers including police, firefighters and transit and hydro workers.

Since the beginning of this year, all plan members have been allowed to transfer the contents of their RRSPs into an additional voluntary contribution account. These extra savings will not increase the value of the OMERS pension, but can be used to supplement it in retirement.

OMERS Chief Pension Officer Jennifer Brown says the idea came from members who want to invest their money in the OMERS fund and get the OMERS rate of return. They also want to pay lower investment management fees. "This is all on a cost recovery basis. There is no profit built into the fee structure," she explains.

Towers Watson actuary Ian Markham thinks there really isn't a downside to member participation in the new program. He says it offers a balanced investment portfolio with access to private markets at a pretty low expense ratio. Nevertheless, he says they need to do their homework and make sure the OMERS fund is the best investment vehicle for them.

Brown says members must also understand that withdrawal options from the fund are more restrictive than those permitted by RRSPs.

Plan members cannot take advantage of the Homebuyer's Plan or the Life Long Learner's Plan. Active members are also generally limited annual to withdrawals of 20% in the window from March 1 to April 30th.

Funds in the account must be fully withdrawn if an individual terminates membership in the DB provision of the OMERS plan and transfers out the commuted value of the pension, or by October of the year the member turns 71.

Ottawa firefighter Erik Leicht plans to move his RRSP portfolio into an OMERS account. "I've chaired the Ontario Professional Firefighter's Association Pension Committee for years and I've got a lot of trust in the way the plan is managed. The well-rounded OMERS portfolio kind of gives me a secure sense about investing in the fund."

OMERS, Teachers to manage other funds?

The pool of people benefitting from OMERS investment expertise is likely to be further expanded in future as a result of 2009 Ontario legislation allowing OMERS and the Ontario Teachers' Pension Plan to provide third-party investment management services to other pension plans.

"Efforts to date have been focused on developing the offerings, but preliminary feedback to date from other pension plans has been positive," says Wendy Forsythe, President of OMERS Investment Management.