Plan Expenses

Plan expenses increased in 2007, climbing to $48 million from $44 million in 2006, an increase of 9.1 per cent.  This increase was due largely to a concerted and final effort to bring HOOPP’s new pension administration system up to full functionality.

The new pension administration system is being leveraged to provide meaningful service enhancements that will ultimately lead to further efficiencies.

Cost per member

HOOPP uses cost per member (CPM) to measure the efficiency of delivering pension services.  Tracking and analyzing CPM allows HOOPP to continually monitor costs over time.  The chart below shows HOOPP’s CPM since 2003:

*calculated as Plan expenses divided by the total number of members at year end

The slight increase in CPM from 2006 was mainly due to costs incurred to for the pension administration system implementation, which was partially offset by the increase in membership.  HOOPP expects the CPM to level off over the next few years as the Plan realizes efficiencies from the new pension administration system and enhanced client service delivery.

Investment Expenses

On the investment side, expenses for the year were higher: $52 million compared to $47 million in 2006, an increase of 10.6 per cent.

Higher costs associated with managing a growing pool of assets, as well as ongoing expenditures related to the development of investment management systems, were offset somewhat by significantly lower external management fees (the result of a reduced reliance on external managers).

Investment operating costs

Investment operating costs (IOC) is a measure used by the investment industry to gauge the efficiency of investment processes.  The chart below shows HOOPP’s IOC since 2003, measured in basis points (bps):

*calculated as Investment expenses divided by the net investments at year end

The decrease in IOC from 2006 was mainly due to the increase in the Fund size which more than offset the increase in expenses.  HOOPP expects the IOC to increase slightly over the next few years as new investment systems are implemented.