Pension Plan Funding, Investments, Accounting and Reporting

The Government of Canada recognizes the importance of affordable and sustainable defined benefit pension plans for its employees. Public sector pension plans are a cost-effective means for the Government to attract and retain the talented and competent employees required to deliver services to Canadians.


The public service pension plan is a defined benefit plan, funded by regular contributions from members and the Government of Canada, which provides pension benefits for federal public service employees. A defined benefit plan is designed to provide a retirement income. In a defined benefit plan, benefits are based on a member's average salary and years of pensionable service, that is, complete or partial years credited to the member at retirement.

The President of the Treasury Board is responsible for ensuring that the pension plan is adequately funded to fully meet plan member benefits. To determine the plan's funding requirements, the President enlists the help of the Office of the Chief Actuary, an independent unit within the Office of the Superintendent of Financial Institutions Canada (OSFI), to conduct regular actuarial funding valuations. These valuations show the funded status of the plan, and indicate the contribution rates and investment returns needed to keep the plan whole. In addition to the public service pension plan, the Treasury Board approves the contribution rates for the Canadian Forces-Regular Force Pension Plan and the Royal Canadian Mounted Police Pension Plan.

The Government of Canada has a legal obligation to pay plan member pension benefits. This obligation is not dependent on the funded status of the plan. While the President's objective is to keep the pension plan since April 2000 fully funded, if, for example, higher administration costs or weaker investment results cause the plan to become underfunded, the Government of Canada is still solely responsible to pay out benefits. A funding shortfall would require the President to transfer additional government funds into the plan.


The Public Sector Pension Investment Board (PSPIB) was created in 1999 to manage the amounts transferred to it in the best interest of the contributors and beneficiaries of the public sector pension plans. PSPIB operates at arm's length from the Government.

Since the year 2000, net employee and employer pension contributions have been transferred to PSP Investments for investment in financial markets. PSPIB invests these funds globally in public and private capital markets. The returns generated by these investments are necessary to keep the pension plan fully funded. The required actuarial investment return for the plan is 4.1% net of inflation over the long term. Over the last 10 years, these investments have achieved an average real rate of return higher than what is used by the Chief Actuary of Canada to evaluate the Government's pension obligation.


The Government of Canada places great importance on the financial integrity of its public sector pension plans, and uses generally accepted accounting principles in determining its net liability related to pension obligations.

The Government's accounting standards are set through the Canadian Institute of Chartered Accountants. Given the long-term nature of public sector pension plans, these standards are the most appropriate basis for determining the public sector pension obligations as they reflect the unique environment in which governments operate. These standards recognize the appropriateness of using a combination of long-term plan asset earnings and costs of borrowing to value the Government's pension obligations.

Sustainable management

The Government is committed to ensuring that employee compensation is affordable and fair to both taxpayers and public servants, and has taken concrete steps to help improve the affordability and sustainability of public sector pension plans. As a result of measures introduced in the Jobs and Growth Act, 2012, plan members will soon pay 50% of their pension costs and the normal age of retirement for new members has been raised from 60 to 65. These changes are expected to provide $2.6 billion in savings by 2017–18 and about $900 million annually thereafter.

Please refer to Contribution Rates for more information about the annual rate of contributions for the public service pension plan.


The Government's financial statements, presented each year in the Public Accounts of Canada, include amounts and disclosures related to federal public service pensions. These statements are subject to annual audit by the Auditor General of Canada and have received unqualified audit opinions for over a decade. Further, the Auditor General's spring 2014 report noted that the Government performed its mandated responsibilities properly, and confirmed that plan administrators "complied with the process established for selecting actuarial assumptions for calculating the pension obligations."

Report a problem or mistake on this page
Please select all that apply:

Thank you for your help!

You will not receive a reply. For enquiries, contact us.

Date modified: