Bell Pension Group – Ottawa ChapterMay 27, 2014

Bell Pension Plan and Post-Retirement Benefits

CONFIDENTIAL

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Pension Plan – Overview of risk control

PRB’s – Overview of plan evolution

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One of the largest and oldest pension plan in Canada, Bell’s plan is significant in relation to its core business and is an important benefit for employees

• Regulated by federal authorities

• Defined benefit assets total $13B as of December 31st, 2013

• Defined contribution assets total $500M as of Dec 31st, 2013

• 31,000 active employees, 10,000 deferred vested and 33,000 retirees participate in Bell pension plans

As early as 2005 Bell started to seek avenue to stabilize cost and secure pension promise

Although somewhat buffered, the 2008 financial crisis impacted Bell’s solvency ratio significantly

Elements of our pension strategy includes:• Better control on company funding and reduction of contribution volatility in a disciplined manner

• Recognize that circumstances change and economic environment is in constant evolution

• Look and investigate all the levers available: eg Investment policy

Pension has Bell senior management’s attention

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END POINT: Target Risk

Level

Plan design changes

Bond portfoliochanges

Funding strategy

adjustments

De-risking strategy

sophistication

Look out for innovations

Closed DB to new entrants

in 2005

Increased bond

portfolio duration from 6 to 11 over

several years

Increased bond

allocation: Fixed

income changed

from 40% of assets in

2008 to 60% of assets in

2013

Before each year end, assess if additional advance

contribution is desired

($2.7B made since 2009)

Establish guidelines on deficit funding

decision process

Daily tracking of financial situation

Split portfolio by Return

Generating (RG) and Low Risk (LR) to better

align investment strategy with

liability

Structure a plan to progressively shift to ultimate asset mix with acceptable risk

level (glide path)

Keep abreast of emerging

initiatives and legislation changes

STARTING POINT

Bel

l Ini

tiativ

es

Typical de-risking path

Bell is a market leader in pension risk management strategy

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Typical portfolio structure

Bonds Universe Canadian EquityUS Equity International EquityMoney Market

FRM investment framework

Return Generating Portfolio

Low Risk Portfolio

Indicative of Bell Fund prior to March 2009

Traditional pension fund managers seek returns in each asset category which are higher than the associated benchmark

Traditionally have higher weights in riskier asset categories as these categories have a greater risk premium and added value potential

FRM investment framework is built on the premise risk is taken by deviating from the liability proxy and that the fund return needs to outperform the liability proxy in order to maintain or improve the funded status of the plan

As we proceed with the FRM investment framework, we better align our portfolio with the liabilities

Moving to a Financial Risk Management (FRM) investment framework

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A new investment framework has been implemented to de-risk the pension plan over a period of time in a disciplined and systematic fashion

The framework is built around the solvency deficit/surplus in line with the objective to reduce contribution volatility

Assets are moved from the Return Generating Portfolio to the Low Risk Portfolio as the solvency position improves

Moving to a Financial Risk Management investment framework

75% 80% 85% 90% 95% 100% 105%

Solvency ratio

Return Generating Portfolio

Low Risk Portfolio

In 2013, more than $1B has been transferred from the Return Generating Portfolio to the Low Risk Portfolio

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Monitoring ensures the strategy responds to changes in the market and incorporates ongoing pension liability dynamics:

How we monitor?

• Asset has been split into two segment :Return generating and Low risk

• Liability has been allocated to each portfolio segment

What is monitored ?

• Solvency status for each segment

• Performance of the investment strategy of each segment

• Investment performance of the low risk against the asset-based liability benchmark

DAILY REPORT:

• Track the solvency ratio against our glide path

MONTHLY REPORT:

• Measure asset performance vs. liability performance

• Allow monitoring of our investment strategy vs. investment benchmark

• Allow to monitor our FRM strategy against interest rate risk

Monitoring to maintain discipline and ensures timely actions

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Post-retirement benefits

Retirement date Level of Coverage Limitations

Pre July 2000 Medical, Vision, Dental-Out-of-country medical-Lifetime maximum of

$50kTransition BenefitBasic Group Life

1988 dental fee guideVision of $75/ 2 years

2000 - 2011 Medical, Vision, Dental- Lifetime maximum of $75kLife insurance of $10,000Basic Group Life*

No out-of-country medicalNo Transition BenefitPremium to cover dependents

2012 - 2016 Medical- Lifetime maximum of $75kBasic Group Life*

Medical ends at age 65No Dental, VisionNo life insurance of $10,000Premium to cover dependents

2017 + Coverage fully paid by retireesBasic Group Life*

Plan Enhancements

- Health card- Online claims

reimbursement- Direct

payment to Dentist

* available to a closed group

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Conclusion

Solid governance, tight risk control, effective administration processes and high quality services are part of Bell’s priorities to ensure pension and benefits promises to

employees and retirees are honored.

QUESTIONS?