•

PAIC is responsible for recommending the investment policy to the HCOB, for appointing and monitoring investment managers, and for reviewing auditor and actuary reports. PAIC also monitors the administration of member pension benefits. PAIC has independent member representation on the committee.

•

The Scotiabank Master Trust Committee (MTC) invests assets in accordance with the investment policy and all applicable legislation. The MTC assigns specific mandates to investment managers.

•

The Capital Accumulation Plans (CAP) Committee is responsible for the administration and investment of the DC component of the SPP including the selection and monitoring of investment options available to DC participants.

Actuarial valuations for funding purposes for the SPP are conducted on an annual basis. The most recent funding valuation was conducted as of November 1, 2020. Contributions are being made to the SPP in accordance with this valuation and are shown in the table in b) below. The assumptions used for the funding valuation are set by independent plan actuaries on the basis of the requirements of the Canadian Institute of Actuaries and applicable regulation.

Other benefit plans

The principal other benefit plans include plans in Canada, the US, Mexico, Uruguay, the UK, Jamaica, Trinidad & Tobago, Colombia and other countries in the Caribbean in which the Bank operates. The most significant other benefit plans provided by the Bank are in Canada.

Key assumptions

The financial information reported below in respect of pension and other benefit plans is based on a number of assumptions. The most significant assumption is the discount rate used to determine the defined benefit obligation, which is set by reference to the yields on high quality corporate bonds that have durations that match the terms of the Bank’s obligations. Separate discount rates are used to determine the annual benefit expense in Canada and the US. These rates are determined with reference to the yields on high quality corporate bonds with durations that match the various components of the annual benefit expense. The discount rate used to determine the annual benefit expense for all other plans continues to be the same as the rate used to determine the defined benefit obligation. Other assumptions set by management are determined in reference to market conditions, plan-level experience, best practices and future expectations. The key weighted-average assumptions used by the Bank for the measurement of the benefit obligation and benefit expense for all of the Bank’s principal plans are summarized in the table in f) below.

Risk management

The Bank’s defined benefit pension plans and other benefit plans expose the Bank to a number of risks. Some of the more significant risks include interest rate risk, investment risk, longevity risk and health care cost increases, among others. These risks could result in higher defined benefit expense and a higher defined benefit obligation to the extent that:

•

there is a decline in discount rates; and/or

•

plan assets returns are less than expected; and/or

•

plan members live longer than expected; and/or

•

health care costs are higher than assumed.

In addition to the governance structure and policies in place, the Bank manages risks by regularly monitoring market developments and asset investment performance. The Bank also monitors regulatory and legislative changes along with demographic trends and revisits the investment strategy and/or plan design as warranted.

a)	Relative size of plan obligations and assets


	Pension plans									Other benefit plans
	Canada
For the year ended October 31, 2021	SPP			Other			International			Canada			International
Percentage of total benefit obligations		72	%		15	%		13	%		56	%		44	%
Percentage of total plan assets		75	%		10	%		15	%		0	%		100	%
Percentage of total benefit expense (1)		78	%		21	%		1	%		31	%		69	%


	Pension plans									Other benefit plans
	Canada
For the year ended October 31, 2020	SPP			Other			International			Canada			International
Percentage of total benefit obligations		72	%		15	%		13	%		56	%		44	%
Percentage of total plan assets		72	%		10	%		18	%		0	%		100	%
Percentage of total benefit expense (1)		78	%		20	%		2	%		36	%		64	%

(1)	Excludes non-routine benefit expense items such as past service costs, curtailment charges and settlement charges.

b)	Cash contributions and payments

The table below shows the cash contributions and payments made by the Bank to its principal plans in 2021, and the two prior years.


Contributions to the principal plans for the year ended October 31 ($ millions)	2021		2020		2019
Defined benefit pension plans (cash contributions to fund the plans, including paying beneficiaries under the unfunded pension arrangements)
SPP (excluding DC provision)	$	320	$	218	$	196
All other plans		85		158		53
Other benefit plans (cash contributions mainly in the form of benefit payments to beneficiaries)		73		53		78
Defined contribution pension and other benefit plans (cash contributions)		103		90		69
Total contributions (1)	$	581	$	519	$	396

(1)	Based on preliminary estimates, the Bank expects to make contributions of $295 to the SPP (excluding the DC provision), $76 to all other defined benefit pension plans, $65 to other benefit plans and $114 to all defined contribution plans for the year ending October 31, 2022.

c)	Funded and unfunded plans

The excess (deficit) of the fair value of assets over the benefit obligation at the end of the year includes the following amounts for plans that are wholly unfunded and plans that are wholly or partly funded.


	Pension plans									Other benefit plans
As at October 31 ($ millions)	2021			2020			2019			2021			2020			2019
Benefit obligation
Benefit obligation of plans that are wholly unfunded	$	438		$	476		$	459		$	1,058		$	1,139		$	1,157
Benefit obligation of plans that are wholly or partly funded		9,146			9,873			9,248			244			281			300

Funded status
Benefit obligation of plans that are wholly or partly funded	$	9,146		$	9,873		$	9,248		$	244		$	281		$	300
Fair value of assets		9,464			8,541			8,439			143			158			193
Excess (deficit) of fair value of assets over benefit obligation of wholly or partly funded plans	$	318		$	(1,332	)	$	(809	)	$	(101	)	$	(123	)	$	(107	)
Benefit obligation of plans that are wholly unfunded		438			476			459			1,058			1,139			1,157
Excess (deficit) of fair value of assets over total benefit obligation	$	(120	)	$	(1,808	)	$	(1,268	)	$	(1,159	)	$	(1,262	)	$	(1,264	)
Effect of asset limitation and minimum funding requirement		(85	)		(134	)		(2	)		–			–			–
Net asset (liability) at end of year	$	(205	)	$	(1,942	)	$	(1,270	)	$	(1,159	)	$	(1,262	)	$	(1,264	)

d)	Financial information

The following tables present financial information related to the Bank’s principal plans.


	Pension plans									Other benefit plans
For the year ended October 31 ($ millions)	2021			2020			2019			2021			2020			2019
Change in benefit obligation
Benefit obligation at beginning of year	$	10,349		$	9,707		$	8,268		$	1,420		$	1,457		$	1,374
Current service cost		339			369			291			24			28			26
Interest cost on benefit obligation		269			290			331			56			62			72
Employee contributions		24			26			25			–			–			–
Benefits paid		(450	)		(467	)		(770	)		(81	)		(75	)		(96	)
Actuarial loss (gain)		(857	)		531			1,590			(63	)		(17	)		120
Past service cost		37			–			7			(1	)		(7	)		(9	)
Business acquisition		2			–			(4	)		(2	)		(6	)		1
Settlements		(34	)		(115	)		(2	)		(14	)		–			(45	)
Foreign exchange		(95	)		8			(29	)		(37	)		(22	)		14
Benefit obligation at end of year	$	9,584		$	10,349		$	9,707		$	1,302		$	1,420		$	1,457

Change in fair value of assets
Fair value of assets at beginning of year		8,541			8,439			8,037			158			193			240
Interest income on fair value of assets		257			268			331			13			15			23
Return on plan assets in excess of (less than) interest income on fair value of assets		854			46			634			–			(13	)		(16	)
Employer contributions		405			376			249			73			53			78
Employee contributions		24			26			25			–			–			–
Benefits paid		(450	)		(467	)		(770	)		(81	)		(75	)		(96	)
Administrative expenses		(16	)		(14	)		(17	)		–			–			–
Business acquisition		–			–			–			–			–			–
Settlements		(34	)		(105	)		(2	)		(14	)		–			(46	)
Foreign exchange		(117	)		(28	)		(48	)		(6	)		(15	)		10
Fair value of assets at end of year	$	9,464		$	8,541		$	8,439		$	143		$	158		$	193

Funded status
Excess (deficit) of fair value of assets over benefit obligation at end of year		(120	)		(1,808	)		(1,268	)		(1,159	)		(1,262	)		(1,264	)
Effect of asset limitation and minimum funding requirement (1)		(85	)		(134	)		(2	)		–			–			–
Net asset (liability) at end of year	$	(205	)	$	(1,942	)	$	(1,270	)	$	(1,159	)	$	(1,262	)	$	(1,264	)
Recorded in:
Other assets in the Bank’s Consolidated Statement of Financial Position		456			260			422			–			–			–
Other liabilities in the Bank’s Consolidated Statement of Financial Position		(661	)		(2,202	)		(1,692	)		(1,159	)		(1,262	)		(1,264	)
Net asset (liability) at end of year	$	(205	)	$	(1,942	)		$ (1,270	)		$ (1,159)			$ (1,262	)		$ (1,264	)

Annual benefit expense
Current service cost		339			369			291			24			28			26
Net interest expense (income)		23			22			–			43			47			49
Administrative expenses		14			17			14			–			–			–
Past service costs		37			–			7			(1	)		(7	)		(9	)
Amount of settlement (gain) loss recognized		–			(10	)		–			–			–			1
Remeasurement of other long-term benefits		–			–			–			(6	)		–			(5	)
Benefit expense (income) recorded in the Consolidated Statement of Income	$	413		$	398		$	312		$	60		$	68		$	62
Defined contribution benefit expense	$	102		$	89		$	66		$	1		$	1		$	3

Remeasurements
(Return) on plan assets in excess of interest income on fair value of assets		(854	)		(46	)		(634	)		–			13			17
Actuarial loss (gain) on benefit obligation		(857	)		531			1,590			(57	)		(17	)		124
Change in the asset limitation		(47	)		139			–			–			–			–
Remeasurements recorded in OCI	$	(1,758	)	$	624		$	956		$	(57	)	$	(4	)	$	141
Total benefit cost	$	(1,243	)	$	1,111		$	1,334		$	4		$	65		$	206
Additional details on actual return on assets and actuarial (gains) and losses
Actual return on assets (net of administrative expenses)	$	1,095		$	300		$	948		$	13		$	2		$	7
Actuarial (gains) and losses from changes in demographic assumptions		8			(65	)		(5	)		8			(53	)		(35	)
Actuarial (gains) and losses from changes in financial assumptions		(973	)		524			1,496			(63	)		49			150
Actuarial (gains) and losses from changes in experience		108			72			99			(8	)		(13	)		5

Additional details on fair value of pension plan assets invested
In Scotiabank securities (stock, bonds)		60			293			392			–			21			–
In property occupied by Scotiabank		4			4			4			–			–			–

Change in asset ceiling/onerous liability
Asset ceiling /onerous liability at end of prior year		134			2			2			–			–			–
Interest expense		11			–			–			–			–			–
Remeasurements		(47	)		139			–			–			–			–
Foreign exchange		(13	)		(7	)		–			–			–			–
Asset ceiling /onerous liability at end of year	$	85		$	134		$	2		$	–		$	–		$	–

(1)	The recognized asset is limited by the present value of economic benefits available from a reduction in future contributions to a plan and from the ability to pay plan expenses from the fund.

e)	Maturity profile of the defined benefit obligation

The weighted average duration of the total benefit obligation at October 31, 2021 is 15.0 years (2020 – 15.9 years, 2019 – 15.7 years).


	Pension plans									Other benefit plans
For the year ended October 31	2021			2020			2019			2021			2020			2019
Disaggregation of the benefit obligation (%)
Canada
Active members		53	%		55	%		53	%		4	%		6	%		6	%
Inactive and retired members		47	%		45	%		47	%		96	%		94	%		94	%
Total		100	%		100	%		100	%		100	%		100	%		100	%
Mexico
Active members		21	%		25	%		25	%		43	%		49	%		49	%
Inactive and retired members		79	%		75	%		75	%		57	%		51	%		51	%
Total		100	%		100	%		100	%		100	%		100	%		100	%
United States
Active members		45	%		40	%		42	%		40	%		34	%		38	%
Inactive and retired members		55	%		60	%		58	%		60	%		66	%		62	%
Total		100	%		100	%		100	%		100	%		100	%		100	%

f)	Key assumptions (%)

The key weighted-average assumptions used by the Bank for the measurement of the benefit obligation and benefit expense for all of the Bank’s principal plans are summarized as follows:


	Pension plans									Other benefit plans
For the year ended October 31	2021			2020			2019			2021			2020			2019
Benefit obligation at end of year
Discount rate – all plans		3.73	%		3.08	%		3.32	%		4.94	%		4.44	%		4.71	%
Discount rate – Canadian plans only		3.50	%		2.80	%		3.10	%		3.28	%		2.57	%		2.98	%
Rate of increase in future compensation (1)		2.97	%		2.74	%		2.70	%		4.30	%		4.31	%		3.86	%
Benefit expense (income) for the year
Discount rate – All plans
Discount rate for defined benefit obligations		3.30	%		3.32	%		4.35	%		4.44	%		4.71	%		5.54	%
Discount rate for net interest cost		2.78	%		3.06	%		4.09	%		4.13	%		4.54	%		5.37	%
Discount rate for service cost		3.45	%		3.38	%		4.41	%		4.71	%		4.83	%		5.78	%
Discount rate for interest on service cost		2.96	%		3.20	%		4.14	%		4.54	%		4.72	%		5.67	%
Discount rate – Canadian plans only
Discount rate for defined benefit obligations		3.05	%		3.10	%		4.10	%		2.57	%		2.98	%		3.96	%
Discount rate for net interest cost		2.47	%		2.80	%		3.80	%		2.11	%		2.71	%		3.70	%
Discount rate for service cost		3.16	%		3.10	%		4.10	%		2.94	%		3.08	%		4.07	%
Discount rate for interest on service cost		2.65	%		2.90	%		3.80	%		2.66	%		2.89	%		3.88	%
Rate of increase in future compensation (1)		2.74	%		2.70	%		2.80	%		4.31	%		3.86	%		3.83	%
Health care cost trend rates at end of year
Initial rate		n/a			n/a			n/a			5.68	%		5.75	%		5.80	%
Ultimate rate		n/a			n/a			n/a			4.75	%		4.72	%		4.69	%
Year ultimate rate reached		n/a			n/a			n/a			2040			2040			2040
Assumed life expectancy in Canada (years)
Life expectancy at 65 for current pensioners – male		23.5			23.4			23.4			23.5			23.4			23.4
Life expectancy at 65 for current pensioners – female		24.6			24.5			24.5			24.6			24.5			24.5
Life expectancy at 65, for future pensioners currently aged 45 – male		24.4			24.4			24.3			24.4			24.4			24.3
Life expectancy at 65, for future pensioners currently aged 45 – female		25.5			25.4			25.3			25.5			25.4			25.3
Assumed life expectancy in Mexico (years)
Life expectancy at 65 for current pensioners – male		21.5			21.3			21.3			21.5			21.3			21.3
Life expectancy at 65 for current pensioners – female		23.9			23.8			23.8			23.9			23.8			23.8
Life expectancy at 65, for future pensioners currently aged 45 – male		21.6			21.7			21.7			21.6			21.7			21.7
Life expectancy at 65, for future pensioners currently aged 45 – female		24.0			24.0			24.0			24.0			24.0			24.0
Assumed life expectancy in United States (years)
Life expectancy at 65 for current pensioners – male		21.8			21.7			21.9			21.8			21.7			21.9
Life expectancy at 65 for current pensioners – female		23.3			23.1			23.3			23.3			23.1			23.3
Life expectancy at 65, for future pensioners currently aged 45 – male		23.2			23.1			23.4			23.2			23.1			23.4
Life expectancy at 65, for future pensioners currently aged 45 – female		24.6			24.5			24.9			24.6			24.5			24.9

(1)	The weighted-average rates of increase in future compensation shown for other benefit plans do not include Canadian flexible post-retirement benefits plans established in fiscal 2005, as they are not impacted by future compensation increases.

g)	Sensitivity analysis

The sensitivity analysis presented represents the impact of a change in a single assumption with other assumptions left unchanged. For purposes of the sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation recognized in the statement of financial position.


	Pension plans				Other benefit plans
For the year ended October 31, 2021 ($ millions)	Benefit obligation		Benefit expense		Benefit obligation			Benefit expense
Impact of the following changes:
1% decrease in discount rate	$	1,626	$	90	$	177		$	4
0.25% increase in rate of increase in future compensation		82		5		1			–
1% increase in health care cost trend rate		n/a		n/a		120			12
1% decrease in health care cost trend rate		n/a		n/a		(98	)		(9	)
1 year increase in Canadian life expectancy		182		10		22			1
1 year increase in Mexican life expectancy		3		–		4			–
1 year increase in the United States life expectancy		4		–		4			–

Assets

The Bank’s principal pension plans’ assets are generally invested with the long-term objective of maximizing overall expected returns, at an acceptable level of risk relative to the benefit obligation. A key factor in managing long-term investment risk is asset mix. Investing the pension assets across different asset classes and geographic regions helps to mitigate risk and to minimize the impact of declines in any single asset class, particular region or type of investment. Investment managers – including related-party managers – are typically hired and assigned specific mandates within each asset class.

Pension plan asset mix guidelines are set for the long term, and are documented in each plan’s investment policy. Asset mix policy typically also reflects the nature of the plan’s benefit obligations. Legislation places certain restrictions on asset mix – for example, there are usually limits on concentration in any one investment. Other concentration and quality limits are also set forth in the investment policies. Derivatives are not a significant component of the investment strategy and cannot be used without specific authorization; currently, the main use of derivatives is for currency hedging. Asset mix guidelines are reviewed at least once each year, and adjusted, where appropriate, based on market conditions and opportunities. However, large asset class shifts are not common, and typically reflect a change in the pension plan’s situation (e.g. plan amendments) and/or in the investment strategy. Actual asset mix is reviewed regularly, and rebalancing back to target asset mix is considered – as needed – generally on a semi-annual basis. The Bank’s other benefit plans are generally not funded, with the exception of certain programs in Mexico.

The tables below show the weighted-average actual and target asset allocations for the Bank’s principal plans at October 31, by asset category.


	Pension plans									Other benefit plans
Asset category %	Actual 2021			Actual 2020			Actual 2019			Actual 2021			Actual 2020			Actual 2019
Cash and cash equivalents		4	%		2	%		3	%		–	%		1	%		1	%
Equity investments
Quoted in an active market		34	%		29	%		33	%		42	%		40	%		42	%
Non quoted		11	%		10	%		10	%		–	%		–	%		–	%
		45	%		39	%		43	%		42	%		40	%		42	%
Fixed income investments
Quoted in an active market		6	%		5	%		13	%		58	%		59	%		57	%
Non quoted		35	%		41	%		30	%		–	%		–	%		–	%
		41	%		46	%		43	%		58	%		59	%		57	%
Property
Quoted in an active market		–	%		–	%		–	%		–	%		–	%		–	%
Non quoted		1	%		1	%		1	%		–	%		–	%		–	%
		1	%		1	%		1	%		–	%		–	%		–	%
Other
Quoted in an active market		–	%		3	%		–	%		–	%		–	%		–	%
Non quoted		9	%		9	%		10	%		–	%		–	%		–	%
		9	%		12	%		10	%		–	%		–	%		–	%
Total		100	%		100	%		100	%		100	%		100	%		100	%


Target asset allocation at October 31, 2021 Asset category %	Pension plans			Other benefit plans
Cash and cash equivalents		–	%		–	%
Equity investments		42	%		44	%
Fixed income investments		44	%		56	%
Property		1	%		–	%
Other		13	%		–	%
Total		100	%		100	%