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Ontario’s joint pension plan is growing, less than a year after its inception

The UPP is now looking to build an administrative platform and seeking input on responsible investing.

BY DIANE PETERS | MAR 11 2022

When the University Pension Plan (UPP) – which amalgamates pensions from the University of Toronto, Queen’s University and the University of Guelph – went live in July 2021, it boasted assets worth over $11 billion and 35,000 members.

And already, the newly minted pension has a new addition, which UPP CEO Barbara Zvan calls a “big milestone.” Trent University’s faculty association voted to transfer its pension last May and officially joined in January 2022. (The university hopes to gain approval to move its staff pension plan to the UPP in the future.)

Solvency deficits in pension funds have been an ongoing problem for Ontario universities. Trent has long been concerned about its own pensions, said president Leo Groarke. “When I came to Trent seven years ago, the number one item on the risk agenda was pension liabilities,” he said. When the idea of a jointly sponsored pension plan for the university sector was first proposed in 2014, Trent was one of the six universities that took part in initial negotiations, along with Wilfrid Laurier University and King’s University College (affiliated with Western University). “Our attitude is that our core business is not running a pension,” Dr. Groarke said.

Part of the UPP’s pitch is that it can take advantage of economies of scale, bring in top experts in pension plan management and investing, and put its considerable assets into a diverse and ambitious portfolio — think of the Ontario Teachers’ Pension Plan, which invests in real estate and has a controlling interest in numerous companies. And as the UPP grows, the idea is it will provide a seamless experience for people who are hired by different member universities in Ontario. “Their pension just moves with them,” said Herb Kunze, a professor of mathematics at the University of Guelph and a member of the UPP’s employee sponsor committee. Another upside: small groups of employees who don’t yet have pensions can apply to join. (The faculty association staffs of both U of Guelph and the U of T signed onto the UPP recently, and U of Guelph’s consists of just four people.)

Fifth potential member

Officials at Laurier have been keeping their eyes on the evolution of the UPP and they hope to port the university’s sole pension plan over to it. They have been educating the university’s community and expect to start serious talks with its six unions and other non-union employees in the coming months. “It’s a long-term sustainability goal for us,” said Pamela Cant, Laurier’s chief human resources and equity officer. “We’re interested in providing a competitive, comprehensive defined benefits plan and we want it to be financially sustainable and secure into the future.” While Laurier’s pension is well funded at the moment, the university is aware that could change if markets shift.

Officials at Laurier also said they appreciate the UPP’s governance model, which is highly transparent and shares risk between employers and plan members. But Ms. Cant admitted that the university would prefer to move to the UPP once it has established a central administrative system. “The founding universities are doing their own administration still, and we’d ideally like to join when all that has been set up.”

Indeed, the UPP is still working out its infrastructure and, is in the process of moving over the last of the assets from the three founding universities’ pension plans by the end of April. “There are a lot of things you have to build in the background and we’re doing that at speed,” said Ms. Zvan. “It takes a few years.” The UPP has a request for proposals out for a vendor to create and deliver an administrative platform. It is also seeking input from members on the issue of responsible investing.

Questions over green investing

While the UPP has a policy that says it is “committed to embedding responsible investment practices throughout our investment activities,” some remain skeptical. A group representing faculty members from the three founding universities has sent two signed research documents to the UPP asking for greater transparency around climate strategy and, among other things, a commitment to divest from fossil fuels by 2025 and to achieve a zero-emission portfolio by 2040.

One of the members of the group is Marcus Taylor, an associate professor in global development studies at Queen’s, who said he and his colleagues are concerned the plan will take a watered-down approach to divestment. “The initial statement on its policies could have been cut and pasted from the most mundane kind of mid-2010 policy,” said Dr. Taylor, who also penned an op-ed for the Globe and Mail on this topic last fall. “We’re in 2022 now and our concerns about climate change are at a very different point now. There’s a real opportunity here to set up something not bogged down by institutional baggage, but to do something really new,” he added.

Ms. Zvan has experience with sustainable investing in her previous role as chief risk and strategy officer for the Ontario Teachers’ Pension Plan, and she expects the input her team gets from members will influence investment priorities. “I’m confident we can come up with an effective approach,” she said. “We want to make sure we’re evaluating the risks related to climate change and investing in a more sustainable future.”

Once many of these foundational issues are worked out at the UPP, Ms. Zvan expects to ramp up outreach and education efforts. “The UPP was created to be a sector-wide plan. I see my job as making the UPP as attractive as possible for other universities to join.”

Since the process of gaining approval from employee groups takes time, Dr. Kunze estimates the UPP could see three or four new schools join on over the next five years. As for Dr. Groarke, he said officials at Trent have no regrets about the decision to sign on. “We’re very convinced that this is the right move for us, and I would expect that it’s the right move for many other universities.”

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