Facing market volatility and evolving demographic pressures, the $25.0B (C$34.1B) Ontario Pension Board (OPB) has rolled out a new Strategic Asset Allocation plan aimed at bolstering the long-term sustainability of the Public Service Pension Plan (PSPP).
The Canadian pension administrator, which is the custodian of the PSPP — a plan that is more than 100 years old — approved the new SAA in December of last year as part of its broader Funding Response Plan. The strategy employs a proactive approach to preserving the plan’s strong funding status, ensuring it can meet its pension commitments to members both now and in the future.
“To ultimately serve our clients, today and into the future, we needed to continually focus on understanding how a multitude of factors are impacting the PSPP and how we are ensuring our prudent and fiscal responsibility for it,” said Darwin Bozek, the OPB’s president and chief executive officer, in an email to Markets Group.
The Funding Response Plan included a Contribution Rate Adequacy study, an Experience Study, and an Asset/Liability (A/L) study, which helped the pension administrator develop its new SAA. According to Bozek, the CRA Study reinforced what his team already knew: members are living longer.
“Our members are now receiving a pension for an average of five years more than they were 20 years ago, which means we are paying pensions for longer,” he said. “This longevity assumption plays a significant role in our liabilities, and in essence, confirmed that the cost of providing pension benefits to members had increased.”
Despite longevity changes, the plan managed to see a modest increase to its funded ratio — ending the year at 86% from 85% in 2023. The cost-of-living adjustment for PSPP beneficiaries in 2024 was 4.8%, which increased a further 2.7% in 2025.
Data from the adequacy study highlighted that a modest increase to both member and employer contributions was needed to fund future plan benefits, said the CEO. As a result, the plan sponsor announced that contributions would be increasing over three phases between July 1, 2025, and April 1, 2026, with the average increase set at roughly 1.4%.
Balancing growth, liability
In addition to shifting demographics, the post-pandemic investment environment has presented challenges for pension funds worldwide; like its peers, the OPB has shifted toward growth assets to meet long-term return needs.
Bozek noted the SAA aims to navigate episodes of short-term volatility in markets by ensuring it has both sufficient liquidity to meet pension obligations, as well as increased diversification. “The plan’s A/L study reinforced the importance of considering a sizeable allocation to growth assets, which are expected to generate higher returns over time than liability-matching assets, such as bonds.”
At the same time, higher allocations to growth assets come with greater short-term volatility, which led the OPB to use stress testing and scenario modelling to evaluate trade-offs and align its strategy with member obligations. In evaluating potential asset mixes, Bozek noted that the plan tested a range of scenarios to assess how the portfolio would perform under various conditions, including periods of high inflation, weak equity markets, and stagflation.
As part of its SAA changes adopted last year, the OPB increased targets for its public equities mix and government bonds and wound down its allocation to public market alternatives (including hedge funds), on the recommendation of its investment manager, the Investment Management Corp. of Ontario.
It also slightly decreased the target to global credit and to enhance its risk/return profile, the OPB reduced the target from its real estate portfolio to increase private equity.
“From a total portfolio modelling perspective, our previous and current SAA maintained a similar level of expected return and risk, liquidity, with a goal of fully leveraging the asset class strategies that IMCO offers to its clients; OPB being a founding client.”
Given the shifting market landscape, Bozek noted that the OPB and IMCO are taking a forward-looking stance, continually reviewing and refining the investment strategy as economic and geopolitical conditions evolve.
In 2024, OPB’s investment portfolio returned 8.1%, up from 3.1% in 2023. While the return underperformed the PSPP’s benchmark (11.0%), it was well above the 6.25% discount rate required to fund the plan.
OPB’s equities allocations were key contributors to the fund’s return, with global (26.9%), Canadian (24.6%) and emerging market equities (15.2%) all posting substantial returns. Private equity (14.6%), global credit (8.9%), infrastructure (8.8%), and public market alternatives (6.5%) followed with healthy gains. Notably real estate posted a modest return of 1.1%.
Gateway to retirement planning
Alongside portfolio adjustments, the OPB is modernizing its pension administration system to better serve its members, employers, and staff.
According to the OPB’s latest annual report, active membership in the plan grew 11% over the past two years, with roughly 2,300 new members joining in 2024. More than half of members (58%) were registered for e-services by the end of 2024, up from 52% in 2023. Among retirees, registration rose to 44% from 39% the previous year. The pension administrator expects these rates to climb further as new tools and features are rolled out.
The modernization is designed to give members expanded self-service options, faster processing, and digital communication tools, said Bozek, noting staff will benefit from automation that reduces manual tasks and frees up time for advisory support. It will also improve data validation and operational efficiency for plan sponsors.
The OPB is also updating its Retirement Planner tool with new features and capabilities, including allowing non-retired members to model “what-if” scenarios, factoring in income from sources like the Canada Pension Plan, Old Age Security benefits, savings, and partner pensions. Retirees will be able to use it to manage drawdowns and budget more effectively.
“We’re building a future-ready pension administration system that enhances client service, operational agility, and efficiency,” said Bozek. “Each of these funding, investment, and modernization initiatives are designed to strengthen and grow the PSPP and deliver OPB’s pension promise to its members and stakeholders.”
Additionally, the organization is in the final stages of developing a new long-term strategic plan, which is set to be released in 2026.
