Our rate of return in 2007 once again ranked the Fund in the top quartile of Canadian pension funds. Our total rate of return for 2007 was 8.7 per cent, beating our benchmark of 5.6 per cent, and was the direct result of the expertise of our investment professionals. The incremental value of return above the benchmark was more than $1.4 billion, a total of $4.2 billion for the last four years.
Our strategy includes cross-organizational, active management of our investments. An important element of this strategy is our asset mix initiative, designed to increase our private market investment holdings, reduce volatility, and secure long-term stable investment returns. This creates a better balance between our private market investments and the more volatile public market investments, and between our long-term liabilities and long-term returns.
Contributions to the Plan in 2007 were $1,875 million compared with $1,780 million in 2006. The increase reflects a larger number of active members and increased members’ salaries.
Annual Rate of Return and Benchmark
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Plan Funding Status
In 2007, the Plan returned to an actuarial surplus position primarily due to investment returns that have exceeded the assumed nominal rate of return since 2003.
Each year an independent actuary determines the Plan’s funded status by comparing the actuarial value of invested assets to the estimated present value of all pension benefits that members have earned to date. On December 31, 2007, the estimated actuarial accrued pension obligation for all members (including survivors) of the Plan was $46,830 million, compared with $44,167 million a year earlier. The increase of $2,663 million is primarily due to interest accrued on the pension benefit obligation, plus new benefits accrued during the year, partially offset by benefits paid in 2007 and experience gains and losses and changes in actuarial methods and assumptions. The Plan had an actuarial value of net assets of $46,912 million at the end of 2007, compared with $41,785 million in the prior year. The resulting funding surplus was $82 million as at December 31, 2007, an increase of $2,464 million compared with a funding deficit of $2,382 million as at December 31, 2006.