Why Defined Contribution is Better for 
     Us
      Pays you (much) better at retirement
      DC is tax efficient
      If you leave you get all your money 
      DC is safe and secure even if the plan goes bust
      It’s fair
                                                                  2
     Why DC is Better for Us
      Pays you (much) better at retirement
      DC is tax efficient
      If you leave you get all your money 
      DC is safe and secure even if the plan goes bust
      It’s fair
                                                                  3
                                        Portfolio Value Jan 2008 - Jul 2014: 
                        60% Stocks (XIU and IWM), 40% Bonds (XCB and XGB)
                                  Rebalanced monthly, dividends reinvested 
  180       This 60/40 portfolio is simple,
            Requires no expertise to implement,
  160       Does not employ active mutual fund managers, 
            Fees and expenses that are the same or lower than the BC 
  140        College Plan. 
            If you can pay your bills online you can set up this portfolio.
  120
  100
                                                                       Average annual return, 
   80                                                                  including the financial 
                                                                       crisis = 
   60
   40               Portfolio value                                    7.15%
                    was below 
   20               previous peak 
                    for 27 months
    0
      8  8   8  8  8  8   9  9  9  9  9   9  0  0  0  0   0  0  1  1   1  1  1  1  2   2  2  2  2  2   3  3  3  3   3  3  4  4  4   4
      0  0  0  0  0   0  0  0  0   0  0  0  1  1   1  1  1  1   1  1  1  1  1   1  1  1  1  1   1  1  1  1  1   1  1  1  1  1   1  1
     -  -   -  -  -  -  -   -  -  -  -   -  -  -  -  -   -  -  -  -   - l-  -  -  -   -  -  -  -  -   -  -  -  -  -   -  -  -  -   -
    n   r  y   l p   v  n  r  y   l  p  v  n   r y   l  p  v  n   r  y  u  p   v  n  r  y   l p   v  n  r  y   l  p  v  n   r  y  l
    a  a  a  Ju  e  o  a   a a  Ju  e  o  a   a  a  Ju e  o   a  a  a  J   e  o  a  a  a  Ju  e  o  a   a  a  Ju e  o  a   a  a  Ju
   J  M M       S  N  J  M M       S  N   J  M M      S   N  J  M M       S  N  J  M M       S  N  J   M M      S  N   J  M M 4
                                           Tyical salary and pension contribution
                                  Start at step 1 for assitant, Grow at 1.3 steps a year
    160000
    140000
    120000
    100000
     80000
                                                                                                                   pay
     60000                                                                                                         contribution (SFU + 
                                                                                                                   member)
     40000
     20000
           0
            31    33   35    37   39    41   43    45   47    49   51    53   55    57   59   61    63   65
                                                     Age
                                                                                                                                   5
       DC and DB Annual Pension 
       (7% rate of return)
                              Contribute 20% of salary each year 
        300,000               Invest in the 60/40 portfolio
                              Use up all funds over 20 years
        250,000
       e                         Contribute 20% of salary each year 
       m
       o                         Invest in the 60/40 portfolio
       c200,000
       n
       I                         Use ONLY investment gains, do not 
       t
       n
       e                          touch the capital
       m150,000                                                                     DCincomefor20years
       e
       e                                                                            DCincomeforever
       R
       l
       a100,000
       u                                                                            DBformula
       n
       n
       A
         50,000
              0
                      30          40           50          55           60
                                           CurrentAge
       DB assumptions:
       2% * highest average salary * pensionable service      A switch to DB benefits only 
       5-year guarantee                                       people who are 60 or older!!!
       Retire at age 65
      Source: https://www.pensionsbc.ca/portal/page/portal/general_pension_estimator/cpp_general_estimator
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