Study reveals what the DB pension plan contributes to its provincial economy, what lessons does that hold nationwide?
A recent study by the Canadian Centre for Economic Analysis (CANCEA) found that OMERS contributes $13.7 billion annually to the GDP of Ontario. That contribution comes in the form of OMERS retirees spending their pension payments, the pension fund’s investment activity, and operations which the study found support more than 143,000 jobs in the province. Of the $13.7 billion GDP contribution, $8.7 billion comes from retirees spending their pension payments, while an additional $5 billion in GDP contribution comes from OMERS investments and operations.
While the study focused exclusively on OMERS’ province of Ontario, the economic impacts of defined benefit pension plans that it highlights are worth noting across the country. Celine Chiovitti, Chief Pensions Officer at OMERS, explained some of why the study is worth noting and what it implies about the role DB Pension Plans play in the wider Canadian economy.
“The survey shows the ripple effect of pensions on local economies across Ontario. Our commitment to delivering on our pension promise is more important than ever, as an increasing proportion of the population is over the age of 65. OMERS isn't just providing stable retirement benefits to our members – we are significantly contributing to hundreds of thousands of households across Ontario,” Chiovitti says. “When this economic impact is combined with the social and health benefits, for both members and the broader community, outlined in prior research conducted for OMERS, we start to see the broader role defined benefit pension plans can play in society and why it is important to think of them as social infrastructure.”
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Chiovitti noted that the research functions as a refresh from a previous study, and was gratified to see that OMERS’ economic impact has continued to grow. What most stood out to her, she says, is that the survey found one in eleven Ontario households are impacted by OMERS in some way. She emphasized the geographic reach of that impact, too. While the pension plan’s impact was largest in the GTA, it reached across Ontario’s regions, contributing significantly to the GDP per capita of each major region in Ontario, including Northern Ontario.
The $13.7 billion contribution OMERS makes to the GDP of Ontario comprises 1.5 per cent of Ontario’s total GDP. While that number may appear somewhat smaller, in the context of the contributions of a single DB pension plan, it’s massive. OMERS got to that point, according to Chiovitti, in large part because of what the plan enables pension recipients to do: spend. However, she highlights the other impacts that OMERS has beyond individual member payments. Chiovitti notes that around one quarter of OMERS’ total portfolio is invested in Canada. Those investments include innovative businesses, infrastructure, and even sports teams and shopping malls. The impact of all of those investments is significant.
There are now more Canadians aged over 65 than there are Canadians aged under 14. As demographics change and more eligible Canadians begin to receive benefits from their pension plans, Chiovitti believes it’s important to continue to highlight the importance of DB pension plans. Plans like OMERS provide secure retirement income that members can rely on as they age, meaning they may rely less on government sponsored programs. She says that OMERS pensioners have been found to live healthier than average lives in retirement, placing less strain on stretched healthcare resources too.
On a fundamental level, Chiovitti sees the results of this study as driving home the importance of defined benefit pension plans, in Ontario and across Canada, as economic contributors and as tools enabling the health and wellbeing of members.
“Pensions have never been more important or meaningful and are a powerful tool for attracting and retaining employees. This research and CANCEA’s previous study for OMERS into the economic and social value of the plan found that facilitating access to a secure and stable pension provides a stronger bond between employees and employers that enhances employees’ sense of belonging, increases productivity and improves retention,” Chiovitti says. “It’s important for us to share the broader impact of their OMERS pension with our members and our plan sponsors including that we contribute a significant amount to Ontario’s GDP each year ($13.7 billion) and provide positive outcomes for our members, as well as to employers, communities and Ontarians. We make a broad impact on society and believe it is important to start thinking of pensions as social infrastructure and the role they can play in society, especially given the aging demographic taking place across Canada and globally.”
