When the BCI (the British Columbia Investment Management Corporation) invests our contributions to the College Pension Plan it considers more than quarterly dividends and interest rates. Consideration of ESG (Environment, Social, and Governance) factors are central to how investments are made and monitored. BCI does an annual public report on ESG issues. This is their 2020 report.

We all made contributions to our pension plan when we were working (and sometimes grumbled about them), but only 25% of the pensions we receive is from those contributions. The other 75% is from investment income.

Twenty years ago, public pension plans in B.C. changed from government-run plans to joint-trusteed plans, where employers and employees both appoint trustees to oversee plan operations, investments, etc.  This article about changes to the Newfoundland and Labrador Teachers’ Pension Plan is interesting for two reasons: First, at a time when defined benefit plans are often under political attack, the teachers and government of Newfoundland and Labrador chose preserve their DP plan.  Second, they followed British Columbia in moving to a joint-trusteed plan and used joint decision-making to restore the plan’s financial health.

It’s been a long time since pension plans just invested their assets in government bonds and clipped coupons to fund pensions. Most large public sector plans in Canada invest in equities—Canadian and global,–mortgages, real estate, infrastructure, private corporations, etc. The Ontario Teachers’ Pension Plan has been a leader in diversification of pension assets, and the results for their members have been very positive. Here’s an example of their leading-edge diversification. I’m not sure other pension plans are quite ready to partner with Google on “smart cities,” but they’ll be following this investment with interest.

One issue that trustees take seriously is responsible investing.  Trustees have a principal fiduciary responsibility to insure that their pension plans can meet their obligation to pay members’ pensions.  But most, if not all, trustees also want to see pension plan assets invested with attention to the governance, social, and environmental impacts of those investments.  For example, BCI (the British Columbia Investment Management Corporation), which is the College Pension Plan’s investment agent, has been pressing companies it invests in to diversify membership on their boards—so that they’re not all old white guys.  What happens if these goals conflict?  Here’s one view of what pension plans should do.

Tax rules in Canada for pension income are pretty straight forward, but it’s always good to remind ourselves of what they are.  Put simply, if you are required to file a Canadian income tax return, it doesn’t matter whether you get your pension income from Canadian sources or from elsewhere, it’s all taxable income to the Canada Revenue Agency.   And the CRA expects you to report it and pay taxes on it. Here’s an article on two recent attempts to get around that requirement: they both failed.