Risk-Based Monitoring of Pension Investments

To improve the regulatory process and make the most effective use of its resources, the Financial Services Commission of Ontario (FSCO) is committed to adopting a risk-based approach for the supervision of pension plans.  The goal is to ensure that the interests of pension plan members are duly protected.  As an extension of its existing monitoring of pension plan funding, FSCO implemented the risk-based monitoring of pension fund investments in 2006.


The investment of pension assets has a significant impact on pension solvency.  In view of the growing needs and similar regulatory practices in other jurisdictions in Canada and abroad, FSCO developed a risk-based pension investment monitoring program that includes an Investment Information Summary (IIS) form.  The risk-based investment monitoring model has proven to be a useful tool for identifying such irregularities as significant breaches of investment regulations, unusual investment under-performance and serious asset-liability mismatch.


The IIS form is supplementary to the financial statements required under section 76 of Regulation 909, and has been approved for use under section 113.2 of the Pension Benefits Act by the Superintendent of Financial Services.  The Investment Information Summary- Form 8 is required to be filed by all defined benefit pension plans registered with FSCO, except designated plans, within six months after each fiscal year end of the plan.


The information included in a pension plan’s IIS form is used in conjunction with information in the other filings made on behalf of the pension plan.  The fact that a plan has been flagged by the automated assessment process is not a judgment on FSCO’s part as to how well the investments of the plan’s assets are being managed or whether they are being invested prudently.  Rather, flagged plans will simply have been identified as warranting a further review, which may or may not result in any follow-up action being taken by FSCO.  If any non-compliance with investment regulations and proper standards is identified through the risk-based monitoring, FSCO will follow up on the non-compliance with the plan administrator.


FSCO believes that the implementation of the risk-based investment monitoring program progressively raises awareness of the effect of pension fund investments on pension plan solvency, brings investment management deficiencies to the attention of plan administrators and encourages adoption of prevailing industry best practices.  The continuous improvement in pension investment management resulting from this program will help enhance the long term financial health of pension plans in Ontario. 



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