Capital's Retirement Annuity Fund was established in 1986 to provide lifetime pension annuities to members of the Capital Pension Plan. Members wishing to purchase a life annuity at retirement may do so through the Retirement Annuity Fund or from a life insurance company.

When a member chooses to purchase a life annuity from the Retirement Annuity Fund, his/her equity from the Contributory Fund (i.e. the Diversified Fund and/or the Pre-Retirement Fund) is transferred to the Retirement Annuity Fund and a life annuity contract is established. The lifetime pension annuity payment is determined by:

• the amount of equity used to purchase the life annuity;
• the member's age at the time the life annuity is purchased;
• the annuity rate in effect at the time of the annuity purchase; and
• the age of the member's spouse at the time the life annuity is purchased (if a Joint & Last Survivor life annuity is purchased).

Participation in the Retirement Annuity Fund

Participation in Capital's Retirement Annuity Fund is voluntary. Participation is restricted to Plan members that choose to purchase a life annuity from the Capital Pension Plan to provide retirement income.

Application for Life Annuity Form (pdf)

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Fund Performance Objectives

The mandate of the Retirement Annuity Fund is to provide lifetime retirement benefits to members that purchase a life annuity from the Fund. The perform objectives of the Fund are:

• to be immune to changes in the level of interest rates;
• to provide sufficient liquidity to ensure payments to annuitants can be made when due; and
• to ensure long-term Fund solvency.

The Fund contains a substantial "fixed income" component. Once these objectives have been met, any excess assets (i.e. assets in excess of those required meet the duration matching strategy) may be invested in high quality equities to enhance the long-term solvency of the Fund.

The performance objective of the equity component is to exceed the return of the following market indices:

• S&P/TSX Index, for Canadian equities;
• S&P 500 Index (in Canadian dollars) for U.S. equities; and
• EAFE Index (in Canadian dollars) for Non-North American equities.

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Investment Managers

Greystone Capital Management Inc. is the sole investment manager of the Retirement Annuity Fund.

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Risk Strategy

The risk tolerance of the Fund is considerd low as the Fund cannot tolerate loss of principal. Risk is mitigated through an investment approach utilizing high quality fixed income investments. Interest rate risk is addressed by matching estimated future cash payments with interest and principal payments from the portfolio (i.e. duration matching strategy). As such, the Fund is immunized against changes in interest rates.

Assets in excess of those required to implement the duration matching strategy are invested in a well diversified portfolio of Canadian and foreign equities to support the long-term solvency of the Fund.

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