Importance of investment returns

A significant advantage of defined benefit pension plans like TRAF is the long-term compounding of investment returns on contributions. The contributions that are automatically deducted from active members’ pay cheques are deposited in Account A (the member account), where they are systematically invested in a globally diversified portfolio on a cost-effective basis. Over time, this provides meaningful benefits.

As illustrated in the diagram below, approximately 70% of the increase in Account A assets is attributable to investment earnings. The other 30% comes from member contributions. When combined with the 50% match from the Province (Account B), this means that members generally contribute only about $15 for every $100 that they draw out of the plan during retirement.

Source of funds

Source of funds diagram