04/03/2012 12:13 EDT | Updated 04/03/2012 12:16 EDT

Ontario Teachers' Pension Plan Shortfall Hits $9.6 Billion; Teachers' Retirements At Stake


TORONTO -- The Ontario Teachers' Pension Plan says it had a $9.6-billion funding shortfall to start 2012, even though its net assets reached an all-time high in 2011.

The fund, which invests on behalf of and administers the pensions of 300,000 active and retired teachers in Ontario, said Tuesday the shortfall came despite a rise in contribution rates and lowered benefits as persistently low interest rates and changing demographic trends chipped away financially at the plan.

"Our liabilities, that is, the projected cost of providing future pensions, continue to outpace our projected asset growth,'' president and chief executive Jim Leech said in a statement.

"Accordingly, we are working with our sponsors, Ontario Teachers' Federation and the Ontario government, to advise them on the various options for closing this gap at a reasonable cost,''

The plan reported net assets of $117.1 billion as of Dec. 31, 2011, with $11.7 billion added to the fund thanks to an 11.2 per cent rate of return.

The improvement, the fund noted, came in the face of market uncertainty and volatility during the height of the European debt crisis.

That return beat its own internal goal of 9.8 per cent by 1.4 percentage points or about $1.4 billion.

"Our team's 2011 performance was especially impressive, given the market volatility and economic uncertainty that accompanied the Eurozone debt situation, and was compounded by the year's natural disasters,'' Leech said.

The combined value of the plan's public and private equities was $51.7 billion at year-end, compared to $47.5 billion at the same point a year earlier.

Private equity assets managed by Teachers' Private Capital totalled $12.2 billion, up slightly from a year-before $12 billion. return on the private investments was 16.8 per cent.

Fixed income assets rose to $55.8 billion from $45.9 billion, 19.9 per cent. Commodities investments rose to $5.7 billion in 2011 from $5.2 billion.

The value of real assets, including real estate, infrastructure and timberland, dropped to $25.8 billion from $26.2 billion.

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