Report on the Public Service Pension Plan for the Fiscal Year Ended March 31, 2024

Opinion

We have audited the financial statements of the public service pension plan (the pension plan), which comprise the statement of financial position as at 31 March 2024, and the statement of changes in net assets available for benefits and statement of changes in pension obligations for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the pension plan as at 31 March 2024, and the changes in its net assets available for benefits and changes in its pension obligations for the year then ended in accordance with Canadian accounting standards for pension plans.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the pension plan in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the stated accounting policies set out in Note 2 of the financial statements, which are based on Canadian accounting standards for pension plans, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the pension plan’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the pension plan or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the pension plan’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the pension plan’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the pension plan’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the pension plan to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the pension plan to express an opinion on the financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Opinion

In conjunction with the audit of the financial statements, we have audited transactions of the public service pension plan coming to our notice for compliance with specified authorities. The specified authorities against which compliance was audited are the Public Service Superannuation Act and regulations, the Public Sector Pension Investment Board Act and regulations, and the by-laws of the Public Sector Pension Investment Board.

In our opinion, the transactions of the public service pension plan that came to our notice during the audit of the financial statements have complied, in all material respects, with the specified authorities referred to above.

Responsibilities of Management for Compliance with Specified Authorities

Management is responsible for the public service pension plan’s compliance with the specified authorities named above, and for such internal control as management determines is necessary to enable the public service pension plan to comply with the specified authorities.

Auditor’s Responsibilities for the Audit of Compliance with Specified Authorities

Our audit responsibilities include planning and performing procedures to provide an audit opinion and reporting on whether the transactions coming to our notice during the audit of the financial statements are in compliance with the specified authorities referred to above.

Original signed by

Mimma Venema, CPA, CA, CGA
Principal
for the Auditor General of Canada

Ottawa, Canada
12 February 2025

(A) General

The pension plan is a contributory defined benefit plan covering substantially all of the full‑time and part‑time employees of the federal public service, as well as certain public service corporations as defined in the PSSA, and territorial governments. Membership in the pension plan is compulsory for all eligible employees.

The Government of Canada (the government) is the sole sponsor of the pension plan. The President of the Treasury Board is the Minister responsible for the PSSA. The Treasury Board of Canada Secretariat (the Secretariat) is responsible for the management of the pension plan, while Public Services and Procurement Canada (PSPC) provides the day‑to‑day administration of the pension plan and maintains the books of accounts. The Office of the Chief Actuary (OCA), an independent unit within the Office of the Superintendent of Financial Institutions (OSFI), performs periodic actuarial valuations of the pension plan.

Until April 1, 2000, separate invested funds were not set aside to provide for payment of pension benefits. Instead, transactions relating to the pension plan were recorded in the Public Service Superannuation Account (superannuation account) created by legislation in the accounts of Canada. Pursuant to the PSSA, as amended by the Public Sector Pension Investment Board Act, transactions relating to service since April 1, 2000, are now recorded in the Public Service Pension Fund (pension fund). While the pension plan matures, an amount equal to contributions in excess of benefit payments and administrative costs is transferred regularly to the Public Sector Pension Investment Board (the PSPIB) for investment. The PSPIB is a Crown corporation whose statutory objectives are to manage the funds transferred to it for investment and to maximize investment returns without undue risk of loss, having regard to the funding, policies and requirements of the three main public sector pension plans (public service, Royal Canadian Mounted Police (RCMP) and Canadian Forces). When the pension plan is mature to a state where benefit payments are greater than incoming contributions, which is the normal state for any mature pension plan, the PSPIB will transfer amounts to the Consolidated Revenue Fund (CRF) for benefit payments and administrative costs, or as required under the circumstance of a non-permitted surplus (refer to PSSA subsection 44.4(5) for the definition of non-permitted surplus).

(B) Funding policy

The pension plan is funded from plan member and employer contributions, and from investment earnings. For the fiscal year, public service employees who were members of the pension plan on or before December 31, 2012 (Group 1) contributed 9.35% (9.36% in 2023) for the first 9 months and 9.35% (9.35% in 2023) for the last 3 months of pensionable earnings, up to the maximum covered by the Canada Pension Plan (CPP) or Québec Pension Plan (QPP), and 12.37% (12.48% in 2023) for the first 9 months and 12.25% (12.37% in 2023) for the last 3 months of pensionable earnings above that maximum.

The contribution rates for public service employees joining the pension plan on or after January 1, 2013 (Group 2) were set at 7.93% (7.95% in 2023) for the first 9 months and 7.94% (7.93% in 2023) for the last 3 months of pensionable earnings, up to the maximum covered by the CPP and QPP, and 11.72% (11.82% in 2023) for the first 9 months and 11.54% (11.72% in 2023) for the last 3 months of pensionable earnings above that maximum. The government’s contribution is made monthly to provide for the cost (net of plan member contributions) of the benefits that have accrued in respect of that month at a rate determined by the President of the Treasury Board. The contribution rates are determined based on actuarial valuations for funding purposes, which are normally performed triennially.

The PSSA provides that all pension obligations arising from the pension plan be met by the government. The PSSA requires that any actuarial deficit in the pension fund be dealt with by the government, through transferring equal instalments to the pension fund over a period of up to 15 years by means of special employer contributions based on triennial actuarial valuations for funding purposes, starting in the fiscal year in which the actuarial report is tabled in Parliament. The PSSA also allows any surplus to be lowered by reducing employer and pension plan member contributions. In addition, if there is an amount considered to be a non‑permitted surplus related to the pension fund, no further government pension contributions are permitted, while pension plan member contributions under the pension fund may be reduced and amounts managed by the PSPIB may be transferred to the government’s CRF.

(C) Benefits

The pension plan provides pension benefits based on the number of years of pensionable service up to a maximum of 35 years. Benefits are determined by a formula set out in the legislation; they are not based on the financial status of the pension plan. The basic benefit formula is 2% per year of pensionable service multiplied by the average salary of the 5 consecutive years of highest‑paid service. To reflect the Income Tax Act restrictions on registered pension plan benefits, separate retirement compensation arrangements (RCAs) have been implemented to provide benefits that exceed the limits established in the Income Tax Act. Since the RCAs are covered by separate legislation, their account balances in the accounts of Canada are not consolidated in these financial statements; however, condensed information is presented in Note 21.

Pension benefits are coordinated with the CPP and QPP and are reduced when the plan member reaches age 65 or earlier if the member receives a disability benefit from the CPP or QPP. The pension reduction factor is 0.7% for members born before 1943, declining gradually for members born from 1943 to 1946 until it reaches 0.625% for members born after 1946. Also, benefits are fully indexed to the increase in the Consumer Price Index.

Other benefits include survivor pensions, minimum benefits in the event of death, unreduced early retirement pensions, and disability pensions.

(A) Basis of presentation

These financial statements present information on the pension plan on a going‑concern basis. They are prepared to assist plan members and others in reviewing the activities of the pension plan for the year, not to portray the funding requirements of the pension plan.

These financial statements are prepared in Canadian dollars, the pension plan’s functional currency, in accordance with the accounting policies stated below, which are based on Canadian accounting standards for pension plans in Part IV of the Chartered Professional Accountants (CPA) Canada Handbook (Section 4600). Section 4600 provides specific accounting guidance on investments and pension obligations. For accounting policies that do not relate to either investments or pension obligations, the pension plan complies with International Financial Reporting Standards (IFRS) in Part I of the CPA Canada Handbook. To the extent that IFRS in Part I are inconsistent with Section 4600, Section 4600 takes precedence. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian accounting standards for pension plans.

The PSPIB is a Crown corporation whose statutory objectives are to manage the funds transferred to it for investment and to maximize investment returns without undue risk of loss. The PSPIB qualifies as an investment entity as defined under IFRS 10 Consolidated Financial Statements and forms part of the pension plan reporting entity. Pursuant to Section 4600, the PSPIB’s subsidiaries that are formed to hold investments or those that provide the PSPIB with services that relate to its investment activities are consolidated since these entities are not considered investment assets. The PSPIB’s investment in subsidiaries, associates, and joint ventures that are considered investment assets are measured at fair value in accordance with Section 4600. Financial liabilities are also measured at fair value in accordance with Section 4600.

The financial statements for the year ended March 31, 2024, were authorized for issue by the signatories on February 12, 2025.

(B) Interests in other entities

Management, through the activities of the PSPIB, assesses control, joint control and significant influence with respect to the investees disclosed in Note 6 as follows:

(C) Financial instruments

(D) Determination of fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

At initial recognition, the PSPIB evaluates the facts and circumstances related to a transaction to confirm that the transaction price represents the fair value of an asset or a liability. At each subsequent reporting date, market prices are used to determine fair value where an active market exists (such as a recognized securities exchange), as they reflect actual and regularly occurring market transactions on an arm’s length basis. If quoted market prices are not available, then fair value is estimated using valuation techniques based on inputs existing at the end of the reporting period that are derived from observable market data.

Valuation techniques are generally applied to investments in private markets, alternative investments, over‑the‑counter (OTC) derivatives and certain fixed income securities. The values derived from applying these techniques are impacted by the choice of valuation model and the underlying assumptions made concerning factors such as the amounts and timing of future cash flows, discount rates, volatility and credit risk. In certain cases, such assumptions are not supported by market observable data.

The determination of fair value of all financial assets and financial liabilities is described in Note 5.

(E) Foreign currency translation

Foreign currency transactions during the period, including purchases and sales of securities, income and expenses, are translated at the rate of exchange prevailing on the date of the transaction.

Monetary assets and liabilities that are denominated in foreign currencies are translated at the functional currency rate of exchange prevailing at the end of the reporting period.

Foreign currency transaction gains and losses on all monetary assets and liabilities are included in investment income.

(F) Securities lending and securities borrowing and related collateral

The PSPIB participates in securities lending and borrowing programs whereby it lends and borrows securities in order to enhance portfolio returns. Lending and borrowing transactions including related collateral under such programs do not transfer the risks or rewards of ownership of the securities to the counterparty. Consequently, the PSPIB does not derecognize securities lent or pledged as collateral, or recognize securities borrowed or received as collateral. Cash amounts received are recognized as described in Note 5(A)(IX).

The securities lending and borrowing programs require collateral in cash, high‑quality debt instruments or securities. Collateral transactions are conducted under terms that are usual and customary in standard securities lending and borrowing programs. The PSPIB and its counterparties are authorized to sell, repledge or otherwise use collateral held. The same securities or equivalent securities must be returned to the counterparty at the end of the contract, unless an event of default occurs.

(G) Securities sold under repurchase agreements and purchased under reverse repurchase agreements and related collateral

The PSPIB is party to repurchase and reverse repurchase agreements. Such agreements involve the sale of securities by one counterparty with a simultaneous agreement to repurchase such securities at a specified price and at a specified future date.

Securities sold or purchased under the repurchase and reverse repurchase agreements respectively, including related collateral, are not derecognized or recognized as all risks and rewards of ownership related to such securities are not transferred. As such, in the case where the PSPIB is the counterparty selling securities under such agreements, all income (loss) related to such securities continues to be reported in investment income, and obligations to repurchase the securities sold are accounted for as investment‑related liabilities.

The difference between the fair value of the securities sold and the repurchase price is recorded as interest expense within investment‑related expenses. In the case where the PSPIB is the counterparty purchasing securities under such agreements, no income (loss) related to such securities is recognized, and obligations to resell the securities are accounted for as investment‑related receivables. The difference between the fair value of the securities purchased and resale price is recorded in investment income.

Transactions under repurchase and reverse repurchase agreements involve pledging collateral consisting of cash or securities deemed acceptable by the counterparties. Collateral transactions are conducted under terms that are usual and customary in standard repurchase arrangements. Such terms require the relevant counterparty to pledge additional collateral based on the changes in the fair value of the existing collateral pledged, as well as the related securities sold or purchased. The counterparties are authorized to sell, repledge or otherwise use collateral held. The securities pledged as collateral must be returned to the relevant counterparty at the end of the contract, unless an event of default occurs.

(H) Offsetting of financial instruments

Financial assets and financial liabilities are offset with the net amount reported in the statement of financial position only if the PSPIB has a current legally enforceable right to offset the recognized amounts and the intent to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

(I) Pension obligations

The present value of accrued pension benefits is calculated by the OCA on behalf of the plan sponsor, the government, using the projected benefit method prorated on service, based on management’s best estimate of streamed expected rates of return on invested funds for funded pension benefits, and the government’s cost of borrowing derived from the yields on the actual zero‑coupon yield curve for Government of Canada bonds, which reflect the timing of the expected future cash flows for unfunded pension benefits.

(J) Investment income

Investment income is made up of interest, dividends, gains (losses) on the disposal of financial assets and financial liabilities, as well as gains (losses) which reflect the change in unrealized appreciation (depreciation) of financial assets held and financial liabilities outstanding at the end of the reporting period. Interest is recognized, on a consistent basis, using the prescribed rates until maturity. Dividends are recognized when the right to receive them has been obtained, generally on the ex‑dividend date.

(K) Contributions

Contributions for current service are recorded in the year in which the related payroll costs are incurred. Contributions for past service that are receivable over a period in excess of 1 year are recorded at the estimated net present value of the contributions to be received.

(L) Benefits earned, benefits paid, and refunds and transfers

Benefits earned are accrued as employees render pensionable services.

The funded and unfunded benefits paid are recognized as a reduction of pension obligations when the payments are made. The funded benefits paid are recognized as a reduction of net assets available for benefits when the payments are made.

Benefit payments, refunds to former members and transfer payments to other plans are recorded in the period in which they are paid.

(M) Investment-related expenses

Investment‑related expenses are made up of interest expense, transaction costs, external investment management fees and other (net).

Transaction costs are incremental costs directly attributable to the acquisition, due diligence, issue, or disposal of a financial asset or financial liability, and they are expensed as incurred.

External investment management fees are directly attributable to the external management of assets on behalf of the PSPIB. These fees are paid directly by the PSPIB and comprise base fees accrued as a percentage of the fair value of the assets managed externally and performance fees accrued as a function of various performance indicators. This excludes amounts not paid directly by the PSPIB for certain pooled fund investments classified under alternative investments and for investments in private markets as outlined in Note 18.

(N) Significant accounting judgments, estimates and assumptions

In preparing the financial statements, management makes certain judgments, estimates and assumptions that can affect the amounts reported therein. Significant judgments include those related to the determination of the investment entity status of the PSPIB as described in Note 2(A), and the measurement of the pension obligations as described in Note 12.

Management also makes estimates and assumptions in the measurement, risk assessment and related disclosures surrounding investments in private markets, certain fixed income securities and the pension obligations.

The main assumptions made by management regarding measurement of financial instruments are outlined in Note 5(C)(III), and those regarding the assessment of risk are outlined in Note 7.

The pension obligations are actuarially determined, and the actual experience may differ significantly from the assumptions used in the calculation of the pension obligations. The significant actuarial assumptions used in measuring the pension obligations are found in Note 12.

The economic environment continues to be subject to global uncertainty and heightened geopolitical tensions, which could impact the actuarial assumptions used to measure the present value of the pension obligations and the market value of the PSPIB’s portfolio. The pension obligations and the investments held by the PSPIB, as at March 31, 2024, as well as the return on investments for the year, reflect the impacts resulting from these events to the extent known and estimable at the reporting date.

Although assumptions reflect management’s best estimates, actual results may differ from such estimates due to the uncertainties involved in using them.

(A) Classes of financial assets and financial liabilities

Financial assets and financial liabilities are aggregated in the following table in classes that reflect their respective exposure, as well as in investment sectors. Their fair values were as follows as at March 31 ($ millions):

(B) Derivative-related assets and liabilities

Derivative financial instruments are financial contracts that are settled at a future date. The value of such instruments is derived from changes in the value of the underlying assets, interest or exchange rates. Derivative financial instruments do not, typically, require an initial net investment. In certain cases, they require an initial net investment that is less than what would be required to hold the underlying position directly. Derivative financial instruments can be listed or traded OTC. OTC instruments consist of those that are bilaterally negotiated and settled, and those that are cleared (OTC‑cleared) by a central clearing party (CCP).

The PSPIB uses derivative financial instruments to enhance returns or to replicate investments synthetically. Derivatives are also used to reduce the risk associated with existing investments.

The PSPIB uses the following types of derivative financial instruments:

(C) Fair value hierarchy

(D) Collateral pledged and received

The PSPIB is party to agreements that involve pledging and holding collateral, as outlined in Notes 2(F), 2(G) and 7(B)(I). The following table illustrates the fair values of the pension plan’s allocated collateral, as well as the securities under the lending and borrowing programs and the securities under the repurchase and reverse repurchase agreements, as at March 31 ($ millions):

(A) Subsidiaries, joint ventures and associates

In the normal course of business, investments in private markets are commonly held through investment entity subsidiaries formed by the PSPIB. As at March 31, 2024, 145 investment entity subsidiaries were incorporated in North America, 28 in Europe, 19 in Oceania, 8 in Central and South America, 2 in Asia and 1 in Africa (128 in North America, 28 in Europe, 19 in Oceania, 8 in Central and South America, 2 in Asia and 1 in Africa as at March 31, 2023).

In addition, the PSPIB controlled 92 investees directly or through its investment entity subsidiaries as at March 31, 2024 (84 investees as at March 31, 2023).

The following tables present, in descending order, the most significant investees held directly or indirectly by the PSPIB where it has control, joint control or significant influence.

As at March 31, 2024:

As at March 31, 2023:

In addition to the above, the PSPIB consolidates wholly owned subsidiaries that solely provide it with services that relate to its investment activities. Such services consist of investment management and financing of private market investments within the context of the PSPIB’s capital market debt program described in Note 9(B).

(B) Structured entities

The PSPIB holds interests in partnerships and funds mainly in the context of its investments in private markets. Given their nature, such entities commonly have the characteristics of a structured entity, that is, an entity where contractual arrangements matter more than voting rights in determining control and directing relevant activities. These entities are held as investments and do not expose the PSPIB to additional risks or returns compared to interests held in non-structured entities.

Information regarding structured entities is included, as applicable, within disclosures of investment risk management under Note 7, guarantees and indemnities under Note 22 and commitments under Note 23.

(A) Market risk

Market risk is the risk that the value of an investment will fluctuate as a result of an adverse financial outcome due to changes in the factors that drive the value, such as changes in market prices, changes caused by factors specific to the individual investment, volatility in share and commodity prices, interest rate, foreign exchange or other factors affecting similar securities traded in the market.

(B) Credit risk

The PSPIB is exposed to credit risk, which is the risk of non‑performance of a debtor on whom the PSPIB relies to fulfill contractual or financial obligations. That is, the risk that the issuer of a debt security or that the counterparty to a derivative contract, to a securities lending and borrowing transaction or to securities purchased under reverse repurchase agreements, is unable to meet its financial obligations.

Credit risk encompasses the risk of a deterioration of creditworthiness and the relevant concentration risk. Credit risk monitoring entails an evaluation of the credit quality of each issuer and counterparty that transacts with the PSPIB. To perform this evaluation for public issuers and counterparties, the PSPIB relies on four recognized credit rating agencies. A minimum of two credit ratings are used to classify each security. If the agencies disagree as to a security’s credit quality, the PSPIB uses the lowest of the available ratings. For private issuers, the PSPIB assigns internal credit ratings to issuers and measures the combined risk profile against set targets. To assign risk ratings to issuers, the PSPIB uses methodologies comparable to those used by recognized rating agencies.

As at March 31, 2024, the pension plan’s maximum exposure to credit risk amounted to $66 billion ($61 billion as at March 31, 2023). This amount is presented before collateral held and netting arrangements that do not qualify for offsetting under IFRS. The maximum credit exposure excludes guarantees disclosed in Note 22, as well as investments in funds classified as alternative investments in Note 5(A). Such funds hold fixed income securities among other types of instruments.

To monitor the evolution of credit risk, the PSPIB periodically produces a concentration report by credit rating of credit‑sensitive securities. The concentration of credit risk by credit rating was as follows.

As at March 31, 2024 ($ millions):

As at March 31, 2023 ($ millions):

(C) Liquidity risk

Liquidity risk corresponds to the risk that the PSPIB will not be able to meet its financial obligations on a timely basis, with sufficient and readily available cash resources. The PSPIB’s cash position is monitored on a daily basis. In general, investments in cash, money market securities, floating rate notes, bonds and public equities are expected to be highly liquid as they will be invested in securities that are actively traded. The PSPIB utilizes appropriate measures and controls to monitor liquidity risk in order to ensure that there is sufficient liquidity to meet financial obligations as they come due. A liquidity report taking into consideration future forecasted cash flows is prepared and presented to the PSPIB’s senior management on a weekly basis. This ensures that sufficient cash reserves are available to meet forecasted cash outflows. Additionally, sufficient sources of liquidity are maintained for deployment in case of market disruption.

The PSPIB has the ability to raise additional capital through the use of its capital market debt program. This program allows the PSPIB to issue short-term promissory notes and medium-term notes. Note 9(B) provides additional information on the usage of the capital market debt program. Furthermore, the PSPIB maintains credit facilities for general corporate purposes. Note 9(A) provides additional information with respect to such credit facilities.

The terms to maturity of the notional amount of derivatives are disclosed in Note 5(B).

(A) Credit facilities

The PSPIB maintains a revolving credit facility in the amount of $2 billion and a demand line of credit in the amount of $1 billion (together “the credit facilities”).

The credit facilities are for general corporate purposes and are available in either Canadian or US currencies. Subject to customary terms and conditions, these credit facilities are available at variable interest rates such as the prime rate and the US base rate.

These credit facilities were not drawn upon as at March 31, 2024, and March 31, 2023.

(B) Capital market debt financing

The PSPIB’s capital market debt program consists of the private placement of short‑term promissory notes, as well as medium‑term notes issued by PSP Capital Inc., a wholly owned subsidiary of the PSPIB. The capital raised is primarily used to finance private market investments. It is unconditionally and irrevocably guaranteed by the PSPIB in accordance with its corporate leverage policy.

The maximum amount authorized by the PSPIB’s Board of Directors for the capital market debt program is limited to $12 billion for all aggregate short-term note programs, 6 billion Australian dollars for the Australian dollar-denominated medium-term note program and $20 billion for the medium-term note program.

The PSPIB’s capital market debt financing was in compliance with the limits authorized by the PSPIB’s Board of Directors during the years ended March 31, 2024, and March 31, 2023.

The following outlines the terms, as well as the fair value, of the short-term notes issued under the capital market debt program as at March 31 ($ millions):

The following outlines the terms, as well as the fair value, of the medium-term notes issued under the capital market debt program allocated to the pension plan as at March 31 ($ millions):

Unrealized losses in connection with borrowings amounted to $25 million for the year ended March 31, 2024 (unrealized losses of $184 million for the year ended March 31, 2023).

Interest expense, for the years ended March 31, was as follows ($ millions):

(C) Reconciliation of liabilities arising from financing activities

The following provides a reconciliation of liabilities arising from financing activities, including both changes arising from cash and non‑cash changes for the year ended March 31, 2024 ($ millions):

The following provides a reconciliation of liabilities arising from financing activities, including both changes arising from cash and non‑cash changes for the year ended March 31, 2023 ($ millions):

(A) Certain investees

Transactions between the PSPIB and its unconsolidated subsidiaries, jointly controlled investees and associates or subsidiaries of such entities are related party transactions. The PSPIB enters into investment transactions with such related parties in the normal course of its business, more specifically, as part of private markets and certain fixed income investments described under Note 5(A), as well as guarantees, indemnities and commitments described under Notes 22 and 23, respectively. Since balances in connection with all investment transactions are measured at FVTPL, those transactions undertaken with related parties have the same impact on net assets available for benefits as those with unrelated parties.

Transactions between the PSPIB and its consolidated subsidiaries, as well as related balances, are eliminated upon consolidation and, therefore, are not disclosed in this note.

(B) Government-related entities

Since the PSPIB is a Crown corporation, it is considered to be a government‑related entity. Other entities that are controlled, jointly controlled or significantly influenced by the government are also considered government‑related entities.

The PSPIB may enter into investment transactions with government‑related entities in the normal course of its business, more specifically, as part of private markets and certain fixed income investments described under Note 5(A). Such investment transactions are carried out on terms that are equivalent to those that may prevail in transactions with unrelated parties and are subject to the same internal processes. In this respect, transactions with such related parties have the same impact on the net assets available for benefits as those with unrelated parties. Consequently, management is availing itself of the exemption under IAS 24 Related Parties from making specific disclosures on transactions and balances with such government‑related entities.

(A) Funded pension benefits

The pension plan is financed from employee and employer contributions, as well as from investment earnings. Funded pension benefits relate to post‑March 2000 service that falls within the Income Tax Act limits. An amount equal to contributions less benefit payments and other charges is invested by the PSPIB. Funded pension benefits also include pre‑April 2000 service purchased since April 1, 2000.

(B) Unfunded pension benefits

Unfunded pension benefits related to pre‑April 2000 service are tracked in the pension plan superannuation account since there are no invested funds maintained for this account (see Note 20). Employee and employer contributions for unfunded pension benefits are part of the CRF.

(A) Benefit payments

The value of benefit payments for funded benefits, for the years ended March 31, is as follows ($ millions):

(B) Refunds and transfers

The value of refunds and transfers for funded benefits, for the years ended March 31, is as follows ($ millions):

Non-permitted surplus related to the pension fund

On November 25, 2024, the OCA triennial Actuarial Report on the Pension plan for the Public Service of Canada as at March 31, 2023, was tabled in Parliament. A Special Actuarial Report on the financial position of the Public Service Pension Fund as at March 31, 2024, was tabled alongside this report.

The plan sponsor estimated the pension plan’s March 31, 2024, pension obligations using the majority of the demographic assumptions underlying the triennial actuarial valuation of the pension plan as at March 31, 2020, as described in Note 12, which was the most recent valuation available at the time, where the calculation was performed by the OCA on behalf of the plan sponsor. As the new triennial actuarial report has been subsequently tabled, management considered this most recent actuarial valuation for funding purposes and exercised professional judgment not to adjust the March 31, 2024, pension obligations measurement that was already determined. Most of the demographic assumptions underlying this most recent triennial actuarial valuation for funding purposes will only be used starting with the plan sponsor’s measurement of the March 31, 2025, pension obligations. As a result, an estimate of the future financial effect of this event on the pension plan’s experience gains or losses, pension obligations and deficit to be financed by the Government of Canada cannot be reliably determined at this time.

Based on the Special Actuarial Report, and pursuant to PSSA subsection 44.4(1), the President of the Treasury Board formed an opinion that the pension fund (relating to service since April 1, 2000) is in a non-permitted surplus position in the amount of $1.9 billion. A non-permitted surplus position is defined within PSSA subsection 44.4(5), where the amount by which pension fund’s assets exceed liabilities is greater than 25 percent of the amount of liabilities in respect of contributors.

As the pension fund was determined to be in a non-permitted surplus position, as available under the PSSA paragraph 44.4(2)(b), the Treasury Board approved a transfer of funds in the amount of $1.9 billion from the public service pension fund to the CRF. This action will require funds to be returned from the PSPIB to be deposited in the CRF.

The transfer of funds will take place during fiscal year 2024–25. The President of the Treasury Board has formed the opinion that there is no longer a non-permitted surplus in the pension fund once the transfer is complete.

The financial effects of these measures are expected to have a future impact on several areas of the financial statements.

While an estimate of all financial effects cannot be made at this time, the following line items are expected to be directly impacted by the transfer of funds to the CRF:

• Reduction in the net investment assets in the amount of $1.9 billion and a subsequent reduction in investment income for the period.