Rate of Return Examples

The following examples show how the rate of return for the OMERS Primary Pension Plan (OMERS Plan) is applied to a member’s AVC account in six different scenarios.

Scenarios

The first five scenarios show how the rate of return is applied in the normal course, which is:

  • The rate of return for the OMERS Plan is established on or around March 1st each year – this is the rate determination date for AVC purposes.
  • After the rate determination date, the annual rate of return, less investment management expenses and the annual AVC administration fee, are applied to a member’s AVC account.
  • The rate of return is applied on a pro-rated basis to any amounts that are held in a member’s AVC account for part of the year.

The last two scenarios show differences in how the rate of return is applied when a member elects to withdraw his or her entire AVC account balance (e.g., on termination of employment or retirement). Specifically, these scenarios show differences in how the rate of return is applied depending on whether the member’s AVC withdrawal forms are received by OMERS before or after the rate determination date.

For more details, and for the definitions of the “annual rate of return,” the “five year average rate of return” and “rate determination date,” please see the Terms of Participation.

Scenario 1: No contributions or withdrawals

Scenario 2: Lump-sum transfer

Scenario 3: Partial withdrawal

Scenario 4: Year member opens an AVC account

Scenario 5: Negative rate of return

Scenario 6: Full withdrawal (documents received after the rate determination date)

Scenario 7: Full withdrawal (documents received before the rate determination date)

Note: All figures are for illustrative purposes only and do not reflect past or future returns or expenses. Results are rounded to the nearest dollar for illustrative purposes.

Scenario 1: No contributions or withdrawals

Bob did not make any contributions to or withdrawals from his AVC account during 2030. Once the 2030 rate of return is established on or around March 1, 2031, Bob’s account will be updated for 2030 as follows.

Assumptions
AVC account balance as at December 31, 2029 $100,000
2030 annual rate of return 7.5%
2030 investment management expenses 0.5%
Net rate of return applied to Bob’s AVC account 7%
How the rate of return is applied to Bob’s AVC account
AVC account balance as at December 31, 2029 $100,000
Plus net rate of return
(7% applied to $100,000)
+ $7,000
Less administration fee -$35
AVC account balance as at December 31, 2030 $106,965

Scenario 2: Lump-sum transfer

Bob makes a lump-sum transfer into his AVC account during 2030. Once the 2030 rate of return is established on or around March 1, 2031, Bob’s account will be updated for 2030 as follows.

Assumptions
AVC account balance as at December 31, 2029 $100,000
Lump-sum transfer on March 31, 2030 $25,000
2030 annual rate of return 7.5%
2030 investment management expenses 0.5%
Net rate of return applied to Bob’s AVC account 7%
How the rate of return is applied to Bob’s AVC account
AVC account balance as at December 31, 2029 $100,000
Plus non-pro-rated net rate of return
(7% applied to $100,000)
+$7,000
Plus lump-sum transfer on March 31 +$25,000
Plus pro-rated net rate of return
(7% applied to $25,000 for 9 months of the year)
+$1,312
Less administration fee -$35
AVC account balance as at December 31, 2030 $133,277

Scenario 3: Partial withdrawal

Bob makes a withdrawal from his AVC account during 2030. Once the 2030 rate of return is established on or around March 1, 2031, Bob’s account will be updated for 2030 as follows:

Assumptions
AVC account balance as at December 31, 2029 $100,000
Withdrawal on March 31, 2030 $10,000
2030 annual rate of return 7.5%
2030 investment management expenses 0.5%
Net rate of return applied to Bob’s AVC account 7%
How the rate of return is applied to Bob’s AVC account
AVC account balance as at December 31, 2029 $100,000
Less withdrawal on March 31 -$10,000
Plus non-pro-rated net rate of return
(7% applied to $90,000)
+$6,300
Plus pro-rated net rate of return
(7% applied to $10,000 for 3 months of the year)
+$175
Less administration fee -$35
AVC account balance as at December 31, 2030 $96,440

Scenario 4: Year member opens an AVC account

Bob opens an AVC account on September 30, 2030. Once the 2030 rate of return is established on or around March 1, 2031, Bob’s account will be updated for 2030 as follows.

Assumptions
AVC account balance as at December 31, 2029 $0
Lump-sum transfer-in on September 30, 2030 $2,000
2030 annual rate of return 7.5%
2030 investment management expenses 0.5%
Net rate of return applied to Bob’s AVC account 7%
How the rate of return is applied to Bob’s AVC account
Lump-sum transfer on September 30 +$2,000
Plus pro-rated net rate of return
(7% applied to $2,000 for 3 months of the year)
+$35
Less administration fee -$35
AVC account balance as at December 31, 2030 $2,000

Scenario 5: Negative rate of return

Bob did not make any contributions or withdrawals to his AVC account during 2030. Once the 2030 rate of return is established on or around March 1, 2031, Bob’s account will be updated for 2030 as follows:

Assumptions
AVC account balance as at December 31, 2029 $100,000
2030 annual rate of return -1.5%
2030 investment management expenses 0.5%
Net rate of return applied to Bob’s AVC account -2%
How the rate of return is applied to Bob’s AVC account
AVC account balance as at December 31, 2029 $100,000
Plus non-pro-rated net rate of return
(-2.0% applied to $100,000)
-$2,000
Less administration fee -$35
AVC account balance as at December 31, 2030 $97,965

Scenario 6: Full withdrawal (documents received after the rate determination date)

Bob is retiring from his OMERS employer and has decided to withdraw 100% of the funds in his AVC account upon retirement. OMERS receives his AVC withdrawal form in September 2030. The rate determination date for 2029 was March 1, 2030.

Since Bob returned his AVC withdrawal form after the rate determination date for 2029, Bob’s AVC account balance to December 31, 2029 has already been updated with the annual rate of return for 2029, less investment management expenses and the AVC administration fee for 2029.

For 2030, Bob’s AVC account balance as at December 31, 2029 is updated with the five-year average rate of return, less investment management expenses, and the AVC administration fee for 2030 – to the date his AVC account is paid out in 2030.

Assumptions
AVC account balance as at December 31, 2029 $100,000
Five-year average net rate of return for 2025, 2026, 2027, 2028 and 2029 7%
Date Bob’s account is paid out September 30, 2030
How the rate of return is applied to Bob’s AVC account
AVC account balance as at December 31, 2029 $100,000
Plus pro-rated five-year average net rate of return
(7% applied to $100,000 for 9 months of the year)
+$5,250
Less administration fee for 2030 -$35
AVC account balance on date account is paid out $105,215

Scenario 7: Full withdrawal (documents received before the rate determination date)

Bob terminates employment with his OMERS employer and has decided to withdraw 100% of the funds in his AVC account upon retirement. OMERS receives his AVC withdrawal form in January 2030. The rate determination date for 2029 will be on or around March 1, 2030.

Since Bob returned his AVC withdrawal form before the rate determination date, Bob’s AVC account balance to December 31, 2028 will first be updated to December 31, 2029 with the five-year average rate of return, less investment management expenses, and the AVC administration fee for 2029.

For 2030, Bob’s updated AVC account balance as at December 31, 2029 is updated using the same five-year average rate of return, less investment management expenses, and the AVC administration fee for 2030 – to the date his AVC account in paid out in 2030.

Assumptions
Account balance as at December 31, 2028 $100,000
Five-year average net rate of return for 2024, 2025, 2026, 2027 and 2028 7%
Date Bob’s account is paid out January 31, 2030
How the rate of return is applied to Bob’s AVC account
First, Bob’s account is updated to December 31, 2029  
AVC account balance as at December 31, 2028 $100,000
Plus five-year average net rate of return
(7% applied to $100,000)
+$7,000
Less administration fee for 2029 -$35
AVC account balance as at December 31, 2029 $106,965
Then, Bob’s account is updated to January 31, 2030 (date funds withdrawn)  
AVC account balance as at December 31, 2029 $106,965
Plus pro-rated five-year average net rate of return
(7% applied to $106,965 for one month of the year)
+$624
Less administration fee for 2030 -$35
AVC account balance on date account is paid out $107,554

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