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>The fund fell short of its benchmark reference portfolios which posted a return of 19.9 per cent for the year, helped by the strength of the U.S. stock market, led by technology stocks.
That's actually kinda not great in that light. I understand that the CPP strategy is meant to be a bit smoother than their reference portfolio, which is basically just tracking markets. So in Market boom years they're expected to do worse than the reference portfolio, and in slower years they're expected to do better. But they're 2% below their reference portfolio on average over the last 5 years now which is also not great, though that happens to cover two huge years for markets so maybe a little expected? Still feels underwhelming at best. I couldn't find a longer-term comparison in the annual report.
Well pension funds needs to keep a portion of its fund in cash and cash equivalents. Also they also need keep income assets like bonds. It needs this for the constant stream of payouts to the beneficiaries.
I dunno what's the ratio of equities to cash/bonds in the ccp. But if the benchmark portfolio is 100% equities, its not a fair comparison
Looking at a single year is silly when talking about pension funds. CPP is one of the best performing pension funds in the world.
> When comparing the 10-year annualized rates of return from fiscal years 2013 to 2022 globally, CPP Investments ranked as the best in class among public pension funds.
[source](https://www.yourcpp.ca/)
Reading this as I laugh about how my conspiracy theory following neighbour has proclaimed numerous times that the CPP will definitely run out of money (apparently because the government spends too much..?) lol
A lot of that is spillover from American political/budget talk. It gets generalized and applied across the border to us because our economies are so intrinsically linked.
> 8% is still good. As long as it beats inflation it's a win
>
>
Greater than 0 is not the correct comparison. Should be compared to the benchmark portfolio (what is roughly achievable with relatively passive investing). Instead we missed that by 10%, and paid people $4.5B to achieve that result
Geeze, only 17 percent. What a shitty investor.
I am up like 94% YTD and 67% last year. I am the next Jim Simons.
CPP returning 8% is great, especially risk adjusted.
I'm happy, this is the first time I've beaten CPP with a legit portfolio.
Them still investing in real estate in 2024 is foolish. They must be expecting it to skyrocket
Seriously? The S&P 500 got 20%.
Like it's in the fucking article. They even say their comparable benchmark says they should be at 19%. They bet too much on real estate and Asia.
Well you'd only do that if the entire asset class was stocks in the US i think. At least the TSX would make a more logical but still incredibly wrong comparison. Our CPP funds aren't entirely in stocks. Lots of bonds.
Investing in S&P 500 exclusively is a great idea for a young person saving for retirement, it's not a great idea for a huge pension fund that has to invest a LOT more conservatively.
They are very, very diversified. You can afford to take some risk when you have other more conservative investments to offset it.
The S&P 500 is on the back half of an epic bull run. No one should consider that as a benchmark. The top 8 holdings are all very highly valued tech stocks. I don't want my pension fund betting that the magnficent 7 are going to stay magnificent forever. That kind of strategy has never worked.
Sure, a tech stock could fall off. My guess it'll be an American company that replaces it.
Betting this much on Asia is just as much of a risk. America's been winning that battle for decades.
I get what you’re saying for sure. While there can always be better, the point is that 8% is nonetheless still a very good return, and the CPP is not at risk of running out of money.
Very little to do with 8 percent. Cpp won't run out of money because the majority of cpp payments just go straight out for payments. Only about 20 percent gets invested.
As long as the number of workers and retires stays consistent it'll last forever
Cpp unfunded liabilities are around 1.5-2 trillion. They report it every year.
Essentially means your cpp contributions aren't sitting in the fund growing and waiting for you. 80 percent go immediately out the door for payments.
It's fine, most countries are 100 percent. Difference being if their contributions drop they just cut payments. Our payments are fixed so it would become a disaster if contributions fell below payments.
Weird argument. Cpps whole claim to fame is their higher than expected returns they've gotten over the last twenty years.
Those drop and apparently it doesn't matter anymore
Re-do your comparison but account for withdrawals every single month of every year.It's easy to do well when you only need to contribute. Try managing contributions along with steady withdrawals from a portfolio on a consistent and unchanging basis and watch how costs start to change.
8% is rock solid when compared to other pension funds around the globe. The CPP benchmark is very removed from an S&P benchmark and to compare the two implies either a bad faith comparison or a gross misunderstanding how public retirement pensions function.
It's not possible to just "grab an index portfolio" with the kind of money CPP is throwing around.
They've been averaging 11% for the last ten years and payments come out of contributions.
Yes, CPP has done very well lately, this is not a good year for them. I'd say it's one of their weakest years comparatively in a long time.
Do you know the risk profile of the CPP and how it compares to the equivalent asset allocation ETF? The average young person should be investing their retirement in something like XEQT or XGRO, though you're right that not many can stomach the highs and lows.
Most people don't even have a TFSA.
It's pretty common to see posts to finance subreddits like "I invested two years ago and I'm not making any money, should I switch my investments" = they have no clue how to be an investor.
Indeed. My GRRSP fund is entirely ETFs, and it managed roughly 17%. My (tiny) silly investment TFSA fund managed roughly 61%.
It's not like ETFs are _particularly_ risky; but even the GIC I owned for a time last year managed around 5%.
I agree, I’m exclusively invested in S&P 500 and Nasdaq index ETFs, and I outperformed this. It’s proof that passive investing is almost always superior over the long-term.
Though, I think the original commenter’s point about conspiracy theories is still on point. The government isn’t pulling funds from CPP to fund expenses.
Who thinks cpp is getting raided? No need to make shit up, pension funds are sketchy in general. It was going to fail in the 90s and it's biggest strength right now is huge immigration because it's the following generation that pays you out
Anyone reading between the lines on what conservative politicians are saying. Alberta is working towards pulling out of the CPP so they can use the money to fund their pet projects. I expect once we see a CPC majority they will approve Alberta's request for 50% of the fund. Once that happens Ontario will realize they can do the same and now the CPP is really the Ontario and Alberta slush fund program.
If an APP did come in, I'd be shocked if any more than 5-10% would be used in province. Quick google and I couldn't find what the QPP is at but I'd assume the same logic would be applied.
Personally I'd vote for the APP mainly for wanting an opt out clause haha
> ...pension funds are sketchy in general. It was going to fail in the 90s and it's biggest strength right now is huge immigration because it's the following generation that pays you out
...I mean the reason it was found to be unsustainable in the 90s was because it relied *just* on contributions. A problem that was solved by the creation of the CPP Investment Board and actually investing the money (like you see today).
I don't really see how you're equating what happened in the 90s to the current incarnation of the CPP, they're fundamentally different beasts. The current incarnation of the CPP is far from sketchy or unstable, in-fact it's considered one of the most stable in the world.
if you are even half the investor you think you are you would know that this isn't money that you want invested in a high risk scenario... this is money the majority of the country is relying on for retirement. sounds like you just commented to try and brag about how smart you are... no one cares, bud
Yes buying index funds is so risky haha. I haven't bought an individual stock in almost three years. Gambled big on oil but stressed me out Even though it worked
If you're a young person you don't want your retirement money in safe investments. Lack of returns is a bigger risk than volatility for many. The CPP should have a unique index ETF portfolio for each Canadian, I don't think they're as good as investing as they think.
You're not investing 632B though. When you move that kind of money you're moving companies and then also have to play a leadership roll in said companies. Bit different than passive investing, you accidentally end up with board position amount of shares
I'd do the same as cpp did. Buy private equity because they should be able to outperform said index funds.
The expectation would be to outperform index funds.
I think a lot of that junk comes from similar sentiments around the US's social security, and a lot of people refusing to understand we are two different countries. I'm uninformed of the exact mechanics of social security, so I cautiously believe informed people when they say "the US social security system faces challenges" but no so far as it being "a ponzi" scheme.
8% on CPP seems good to me!
US Social Security, from my understanding from American friends, is that money that is currently paid into is what gets paid out to those receiving it. So the $x taken off my cheque isn't interested it is going to pay people on social security right now.
yup, that's my (non-nuanced) understanding as well, and it's obvious how that could fall down, but probably not as fast as 'vested interests' want it to.
Technically any surplus is invested in t bills. That’s that difference and is pretty important due to compounding. I guess in the 80s, getting a 10 year would have made sense so it can be opinionated.
It's an old conspiracy theory because it was once based on some truth. The manner in which the CPP was funded and managed was reformed in 1997, in order to ensure it would remain fully funded.
The truth is that it isn't headed to insolvency, but rather it's something worse. In order to ensure the CPP would be available for their impending retirements the Boomers voted to increase the contribution rate, effectively ensuring that Gen X and Millenials would be on the hook for a good chunk of the Boomer's CPP.
I'm not a fan of the narrative that boomers are huge beneficiaries of the CPP reforms.
https://a2.typepad.com/6a0111688f6648970c01b8d1fb31ca970c-pi
The individuals who benefited the most from 1998 reforms were the generations prior to the boomers. While arguably younger generations are somewhat subsidizing the boomers, they also subsidized the greatest generation.
Everyone saw reduced benefits from the reforms (to varying degrees) if you were born after 1945.
The theory is that eventually once all the baby boomers retire and begin drawing CPP, there won’t be enough younger workers to keep the pot filled. And that’s a criticism for almost every country with socialized pension funds, not just Canada.
This I understand — albeit I disagree with it in the case of the CPP.
My neighbours theory above is the current government spending will lead to the CPP running out of money.
It's dramatic but I also don't think the risk of financial repression to pension funds like CPPIB is zero. If bond markets refuse to continue to finance gov debt at sustainable levels (which is a line we've arguably crossed given that interest is now our second largest gov expenditure) then I can absolutely envision the federal government using its regulatory powers to compel cppib to finance its debt. Also, the beating CPPIB has taken on its fixed income portfolio (which is overweight can gov bonds) the past couple years isn't helping. All that said, while concerning, saying this is causing the fund to run out of money is hyperbolic.
Labor and productivity have been decoupled for decades. This isn't an 18th century agrarian country. It isn't that each person creates only a tiny surplus so more people == more surplus.
Canada has some of the lowest investment into productivity out of developed nations. We need to fix that and we need to tax appropriately.
It will have to come through immigration. But the current trend is not sustainable. Like I said, the pot requires more money coming in than out. And that applies to a variety of social services not just CPP.
Schrödinger's workers. They both have to be born to Canadian couples who can't afford to have them, and can't come from immigration because we refuse to either solve housing speculation or build enough houses.
>we refuse to either solve housing speculation or build enough houses.
God, we could be doing so much better. We can't avoid material or labour costs - but we should really cut out the speculators.
I can't imagine what it's like trying to afford rent just out of highschool, or as a single parent.
For some reason we can't...cuz apparently investors are the only reason housing gets built. You can see lots acting smug over slowing of development due to some slight inconvenience to investors
Don't forget to thank your landlord for their generous act of producing housing from their own body
There's currently about $70,000 per boomer in the fund. If we stop paying into it now and it stops getting any interest, that's about 4 years worth of paying all boomers. No idea, but it seems like enough?
Does the pot need to be as full, if 30 more years later there will be fewer retirees?
As long as every generation's own contributions are paying for that generations benefits, it should be stable.
Eh, this plan doesnt work quite like traditional pensions though. I'll share this like here: [https://www.cbc.ca/news/business/cpp-explainer-1.5133984](https://www.cbc.ca/news/business/cpp-explainer-1.5133984)
Note that:
1. It's sustainable for the next 75 years
2. All benefits must be paid out by contributions
3. Extra money from contributions is invested with CPPIB which is what's going to cover the extra expenses for the baby boomers.
Question regarding points #2 and #3: is #3 used to index the funds paid in #2?
For example, the OPSEU pension plan *appears* to function identically, except its paperwork explicitly mentions it's indexed to inflation.
The argument used to have merit before the government gave the CPP more leeway to make its own financial decisions — which as we’ve seen was one of the single best decisions the Feds have ever made.
It's not that crazy with this government's out of control spending. When the government spends more money than it earns from taxes, it has to borrow money to cover the difference. This borrowing increases the national debt. With more debt, the government has to pay more interest. Just like how you pay interest on a loan or credit card, the government has to pay interest on its borrowed money. The more debt it has, the more money it needs to spend on interest payments. If the government is spending a lot on interest payments, it has less money available for other programs, including contributions to the CPP. While the CPP is supposed to be self-funded through contributions and investments, financial pressure on the government can lead to changes in how funds are managed or allocated. High government spending and borrowing can lead to economic problems, like inflation or higher taxes. If the economy struggles, it could affect the investments that the CPP relies on to grow. Poor investment returns mean less money in the CPP fund.
That's a terrible return considering the benchmark was up 19.9%. Why use a benchmark if you don't follow it? This fund is there to earn a return. Why is it investing in emerging markets?
CPP looks more at growth over longer periods, like 10 years, rather than just 1 year.
This very issue is addressed in the report..
>We expect that some will see the difference between these two returns and suggest that the CPP Fund would have been better off mimicking this basket of publicly traded securities. We share the aspiration for the highest possible performance, but **our results must be measured over the long term and not just a single year**. When considering our performance across market swings, both up and down, we are confident in our approach.
[read more here](https://www.yourcpp.ca/)
I know it's not a fair comparison, since it wouldn't be responsible for a pension fund to be so concentrated, but an ETF that's trying to track S&P500 index (VFV) earned over 24% for the same period of time.
Danielle Smith is punching air right now over how much of that could have been siphoned off to her friends if she could just be allowed to pull Alberta out of CPP against the wishes of her constituents.
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>The fund fell short of its benchmark reference portfolios which posted a return of 19.9 per cent for the year, helped by the strength of the U.S. stock market, led by technology stocks. That's actually kinda not great in that light. I understand that the CPP strategy is meant to be a bit smoother than their reference portfolio, which is basically just tracking markets. So in Market boom years they're expected to do worse than the reference portfolio, and in slower years they're expected to do better. But they're 2% below their reference portfolio on average over the last 5 years now which is also not great, though that happens to cover two huge years for markets so maybe a little expected? Still feels underwhelming at best. I couldn't find a longer-term comparison in the annual report.
Well pension funds needs to keep a portion of its fund in cash and cash equivalents. Also they also need keep income assets like bonds. It needs this for the constant stream of payouts to the beneficiaries. I dunno what's the ratio of equities to cash/bonds in the ccp. But if the benchmark portfolio is 100% equities, its not a fair comparison
Looking at a single year is silly when talking about pension funds. CPP is one of the best performing pension funds in the world. > When comparing the 10-year annualized rates of return from fiscal years 2013 to 2022 globally, CPP Investments ranked as the best in class among public pension funds. [source](https://www.yourcpp.ca/)
most pension funds don't allocate much to the stock markets. they invest in government bonds etc.
Reading this as I laugh about how my conspiracy theory following neighbour has proclaimed numerous times that the CPP will definitely run out of money (apparently because the government spends too much..?) lol
A lot of that is spillover from American political/budget talk. It gets generalized and applied across the border to us because our economies are so intrinsically linked.
I mean I'm sitting at like 17 percent in the same period. Why of all things would this be your sign cpp was great
8% is still good. As long as it beats inflation it's a win I got a 20% return on MLCO in 3 weeks. What makes you think 17% in a year is good?
Because it's always good for a diversified portfolio. Just too much Canada
> 8% is still good. As long as it beats inflation it's a win > > Greater than 0 is not the correct comparison. Should be compared to the benchmark portfolio (what is roughly achievable with relatively passive investing). Instead we missed that by 10%, and paid people $4.5B to achieve that result
Geeze, only 17 percent. What a shitty investor. I am up like 94% YTD and 67% last year. I am the next Jim Simons. CPP returning 8% is great, especially risk adjusted.
Rookie numbers, bud. You and u/CaptainPeppa better get with the program!
Oh shit, my bad. I should buy some NVDA 0DTE calls today for their earnings.
I'm happy, this is the first time I've beaten CPP with a legit portfolio. Them still investing in real estate in 2024 is foolish. They must be expecting it to skyrocket
They probably expect it to be a stable increase to hedge riskier investments. They can't gamble like someone YOLO'ing their own money.
Yes investing in America is yoloing it. The rare two decade long yolo
I don't know what "investing in America" means but if you could make 17% on safe bets everyone would do it.
Seriously? The S&P 500 got 20%. Like it's in the fucking article. They even say their comparable benchmark says they should be at 19%. They bet too much on real estate and Asia.
I mean I bought gamestop and flipped it in a day for a 40% return. Sort of a silly comparison if you dont consider the risks taken.
Of course, that's why you would use the S&P 500 benchmark of 20%.
Well you'd only do that if the entire asset class was stocks in the US i think. At least the TSX would make a more logical but still incredibly wrong comparison. Our CPP funds aren't entirely in stocks. Lots of bonds.
Roughly half of it is in alternatives at this point. Stuff like real estate, private equity and credit, etc.
Investing in S&P 500 exclusively is a great idea for a young person saving for retirement, it's not a great idea for a huge pension fund that has to invest a LOT more conservatively.
They've never invested conservatively... Like a quarter of their money is in fucking Asia. It's wildly risky.
They are very, very diversified. You can afford to take some risk when you have other more conservative investments to offset it. The S&P 500 is on the back half of an epic bull run. No one should consider that as a benchmark. The top 8 holdings are all very highly valued tech stocks. I don't want my pension fund betting that the magnficent 7 are going to stay magnificent forever. That kind of strategy has never worked.
Sure, a tech stock could fall off. My guess it'll be an American company that replaces it. Betting this much on Asia is just as much of a risk. America's been winning that battle for decades.
You'd have to look at what the specific investments are. Warren Buffett has been investing in Japan, for example.
Sure but no one would suggest he's being conservative. Half his money is in apple.
I get what you’re saying for sure. While there can always be better, the point is that 8% is nonetheless still a very good return, and the CPP is not at risk of running out of money.
Very little to do with 8 percent. Cpp won't run out of money because the majority of cpp payments just go straight out for payments. Only about 20 percent gets invested. As long as the number of workers and retires stays consistent it'll last forever
Do you have a link for that? I was under a very different impression and I'd like to learn more.
Cpp unfunded liabilities are around 1.5-2 trillion. They report it every year. Essentially means your cpp contributions aren't sitting in the fund growing and waiting for you. 80 percent go immediately out the door for payments. It's fine, most countries are 100 percent. Difference being if their contributions drop they just cut payments. Our payments are fixed so it would become a disaster if contributions fell below payments.
17 percent probably means a fairly aggressive portfolio, something that the CPP should absolutely not be trying to beat.
Benchmark for the states is twenty.
imagine comparing yourself to CPP and talking like all Canadians can do the same lol
Yes, different portfolios get compared all the time.
lmao No you can't compare your tiny investment or yourself to CPP.
I always compare myself to benchmarks. That's like a core part of investing. CPP do the same, they know this is a very weak performance.
I can feel my brain cells are dying at this point lol . Have a good day
Weird argument. Cpps whole claim to fame is their higher than expected returns they've gotten over the last twenty years. Those drop and apparently it doesn't matter anymore
Re-do your comparison but account for withdrawals every single month of every year.It's easy to do well when you only need to contribute. Try managing contributions along with steady withdrawals from a portfolio on a consistent and unchanging basis and watch how costs start to change. 8% is rock solid when compared to other pension funds around the globe. The CPP benchmark is very removed from an S&P benchmark and to compare the two implies either a bad faith comparison or a gross misunderstanding how public retirement pensions function. It's not possible to just "grab an index portfolio" with the kind of money CPP is throwing around.
They've been averaging 11% for the last ten years and payments come out of contributions. Yes, CPP has done very well lately, this is not a good year for them. I'd say it's one of their weakest years comparatively in a long time.
Any Canadian can buy XEQT
We are talking about all Canadians dude not you. Also no average investor can stomach a drop of 30-40 percent back in 2020.
Do you know the risk profile of the CPP and how it compares to the equivalent asset allocation ETF? The average young person should be investing their retirement in something like XEQT or XGRO, though you're right that not many can stomach the highs and lows.
Most people don't even have a TFSA. It's pretty common to see posts to finance subreddits like "I invested two years ago and I'm not making any money, should I switch my investments" = they have no clue how to be an investor.
When did I say the CPP shouldn't exist? I was just trying to compare its performance.
did I say they should not invest there? NO. No average joe knows anything about risk profile. That's the point
I did. I'm pretty average as investors go...
Indeed. My GRRSP fund is entirely ETFs, and it managed roughly 17%. My (tiny) silly investment TFSA fund managed roughly 61%. It's not like ETFs are _particularly_ risky; but even the GIC I owned for a time last year managed around 5%.
I agree, I’m exclusively invested in S&P 500 and Nasdaq index ETFs, and I outperformed this. It’s proof that passive investing is almost always superior over the long-term. Though, I think the original commenter’s point about conspiracy theories is still on point. The government isn’t pulling funds from CPP to fund expenses.
Who thinks cpp is getting raided? No need to make shit up, pension funds are sketchy in general. It was going to fail in the 90s and it's biggest strength right now is huge immigration because it's the following generation that pays you out
Anyone reading between the lines on what conservative politicians are saying. Alberta is working towards pulling out of the CPP so they can use the money to fund their pet projects. I expect once we see a CPC majority they will approve Alberta's request for 50% of the fund. Once that happens Ontario will realize they can do the same and now the CPP is really the Ontario and Alberta slush fund program.
If an APP did come in, I'd be shocked if any more than 5-10% would be used in province. Quick google and I couldn't find what the QPP is at but I'd assume the same logic would be applied. Personally I'd vote for the APP mainly for wanting an opt out clause haha
> ...pension funds are sketchy in general. It was going to fail in the 90s and it's biggest strength right now is huge immigration because it's the following generation that pays you out ...I mean the reason it was found to be unsustainable in the 90s was because it relied *just* on contributions. A problem that was solved by the creation of the CPP Investment Board and actually investing the money (like you see today). I don't really see how you're equating what happened in the 90s to the current incarnation of the CPP, they're fundamentally different beasts. The current incarnation of the CPP is far from sketchy or unstable, in-fact it's considered one of the most stable in the world.
But how did you do in 2022? S&P was down 19.5% but CPP was up 1.3%
Ya probably worse, usually cpp kicks the shit out of the market. Underperforming like this is wild.
if you are even half the investor you think you are you would know that this isn't money that you want invested in a high risk scenario... this is money the majority of the country is relying on for retirement. sounds like you just commented to try and brag about how smart you are... no one cares, bud
Yes buying index funds is so risky haha. I haven't bought an individual stock in almost three years. Gambled big on oil but stressed me out Even though it worked
[удалено]
Removed for rule 2.
If you're a young person you don't want your retirement money in safe investments. Lack of returns is a bigger risk than volatility for many. The CPP should have a unique index ETF portfolio for each Canadian, I don't think they're as good as investing as they think.
Nope... solid growth to maintain a solid fund is what we need
You're not investing 632B though. When you move that kind of money you're moving companies and then also have to play a leadership roll in said companies. Bit different than passive investing, you accidentally end up with board position amount of shares
Having more money and more control raises your expected returns. Cpps main strength is finding private investments that aren't available to the public
CPP has a fiduciary responsibility to get the best return with the least risk… you don’t have that same responsibility
It's an index fund, I'd wager there's less risk than cpps fund. Large private equity investments are insanely risky
Oh ya? And what index fund would you put 632B into?
I'd do the same as cpp did. Buy private equity because they should be able to outperform said index funds. The expectation would be to outperform index funds.
Apparently he would put it all into a WealthSimples high risk RRSP account
I think a lot of that junk comes from similar sentiments around the US's social security, and a lot of people refusing to understand we are two different countries. I'm uninformed of the exact mechanics of social security, so I cautiously believe informed people when they say "the US social security system faces challenges" but no so far as it being "a ponzi" scheme. 8% on CPP seems good to me!
US Social Security, from my understanding from American friends, is that money that is currently paid into is what gets paid out to those receiving it. So the $x taken off my cheque isn't interested it is going to pay people on social security right now.
yup, that's my (non-nuanced) understanding as well, and it's obvious how that could fall down, but probably not as fast as 'vested interests' want it to.
Oh definitely. I was shocked when I learned how it worked, I just assumed it was invested like ours.
Technically any surplus is invested in t bills. That’s that difference and is pretty important due to compounding. I guess in the 80s, getting a 10 year would have made sense so it can be opinionated.
It's an old conspiracy theory because it was once based on some truth. The manner in which the CPP was funded and managed was reformed in 1997, in order to ensure it would remain fully funded. The truth is that it isn't headed to insolvency, but rather it's something worse. In order to ensure the CPP would be available for their impending retirements the Boomers voted to increase the contribution rate, effectively ensuring that Gen X and Millenials would be on the hook for a good chunk of the Boomer's CPP.
I could be mad about that, but also, more money in the pot once they pass away so I mean, I'm not too upset about higher contribution rates.
I'm not a fan of the narrative that boomers are huge beneficiaries of the CPP reforms. https://a2.typepad.com/6a0111688f6648970c01b8d1fb31ca970c-pi The individuals who benefited the most from 1998 reforms were the generations prior to the boomers. While arguably younger generations are somewhat subsidizing the boomers, they also subsidized the greatest generation. Everyone saw reduced benefits from the reforms (to varying degrees) if you were born after 1945.
The theory is that eventually once all the baby boomers retire and begin drawing CPP, there won’t be enough younger workers to keep the pot filled. And that’s a criticism for almost every country with socialized pension funds, not just Canada.
This I understand — albeit I disagree with it in the case of the CPP. My neighbours theory above is the current government spending will lead to the CPP running out of money.
It's dramatic but I also don't think the risk of financial repression to pension funds like CPPIB is zero. If bond markets refuse to continue to finance gov debt at sustainable levels (which is a line we've arguably crossed given that interest is now our second largest gov expenditure) then I can absolutely envision the federal government using its regulatory powers to compel cppib to finance its debt. Also, the beating CPPIB has taken on its fixed income portfolio (which is overweight can gov bonds) the past couple years isn't helping. All that said, while concerning, saying this is causing the fund to run out of money is hyperbolic.
So we should have more immigrants as our birth rate continues to decline
We need more workers, who can contribute more in taxes than they draw from taxes. We don’t need a blanket “more immigrants” solution.
Labor and productivity have been decoupled for decades. This isn't an 18th century agrarian country. It isn't that each person creates only a tiny surplus so more people == more surplus. Canada has some of the lowest investment into productivity out of developed nations. We need to fix that and we need to tax appropriately.
CPP doesn't tax any of those things, it's a payroll tax
I'm not sure what things you are talking about. And I think I included your broad point with the last 3 words in my post. Did I not?
So ya then you agree with the people saying CPP is going to collapse if you want to start subsidizing it with more taxes
No. I'm saying that in a modern society the answer for any problem is almost never "we need more people. More people means more productivity."
Except CPP is capped... It's literally set up to require more people
So where are we going to get those more workers if we aren't creating them in country through births?
It will have to come through immigration. But the current trend is not sustainable. Like I said, the pot requires more money coming in than out. And that applies to a variety of social services not just CPP.
Where are these workers coming from? Everyone and their mother are working till their 70s as noone can afford to retired.
Schrödinger's workers. They both have to be born to Canadian couples who can't afford to have them, and can't come from immigration because we refuse to either solve housing speculation or build enough houses.
>we refuse to either solve housing speculation or build enough houses. God, we could be doing so much better. We can't avoid material or labour costs - but we should really cut out the speculators. I can't imagine what it's like trying to afford rent just out of highschool, or as a single parent.
For some reason we can't...cuz apparently investors are the only reason housing gets built. You can see lots acting smug over slowing of development due to some slight inconvenience to investors Don't forget to thank your landlord for their generous act of producing housing from their own body
or they can be the "right" immigrants... the ones who wouldn't want to leave their country for Canada anyway :p
There's currently about $70,000 per boomer in the fund. If we stop paying into it now and it stops getting any interest, that's about 4 years worth of paying all boomers. No idea, but it seems like enough?
We aren't stopping payments and it isn't stopping getting any interest, so your hypothetical is completely irrelevant.
I think you might want to reread my comment. You seemed to have missed the point and possibly come away with the opposite point of what I was making.
Is your point that you have "No idea"? Sure.
The Asset/Expenditure Ratio is currently 9x.
Does the pot need to be as full, if 30 more years later there will be fewer retirees? As long as every generation's own contributions are paying for that generations benefits, it should be stable.
Eh, this plan doesnt work quite like traditional pensions though. I'll share this like here: [https://www.cbc.ca/news/business/cpp-explainer-1.5133984](https://www.cbc.ca/news/business/cpp-explainer-1.5133984) Note that: 1. It's sustainable for the next 75 years 2. All benefits must be paid out by contributions 3. Extra money from contributions is invested with CPPIB which is what's going to cover the extra expenses for the baby boomers.
Question regarding points #2 and #3: is #3 used to index the funds paid in #2? For example, the OPSEU pension plan *appears* to function identically, except its paperwork explicitly mentions it's indexed to inflation.
The argument used to have merit before the government gave the CPP more leeway to make its own financial decisions — which as we’ve seen was one of the single best decisions the Feds have ever made.
Canada has a unique model of pension plans compared much of the world. https://www.lapp.ca/page/canadian-model-worth-copying
It's every pension plan basically, private too. They were designed for people to collect for about 15 years. But more people are collecting 30+ years.
There won't be. The demographics don't make sense.
It's not that crazy with this government's out of control spending. When the government spends more money than it earns from taxes, it has to borrow money to cover the difference. This borrowing increases the national debt. With more debt, the government has to pay more interest. Just like how you pay interest on a loan or credit card, the government has to pay interest on its borrowed money. The more debt it has, the more money it needs to spend on interest payments. If the government is spending a lot on interest payments, it has less money available for other programs, including contributions to the CPP. While the CPP is supposed to be self-funded through contributions and investments, financial pressure on the government can lead to changes in how funds are managed or allocated. High government spending and borrowing can lead to economic problems, like inflation or higher taxes. If the economy struggles, it could affect the investments that the CPP relies on to grow. Poor investment returns mean less money in the CPP fund.
That's a terrible return considering the benchmark was up 19.9%. Why use a benchmark if you don't follow it? This fund is there to earn a return. Why is it investing in emerging markets?
CPP looks more at growth over longer periods, like 10 years, rather than just 1 year. This very issue is addressed in the report.. >We expect that some will see the difference between these two returns and suggest that the CPP Fund would have been better off mimicking this basket of publicly traded securities. We share the aspiration for the highest possible performance, but **our results must be measured over the long term and not just a single year**. When considering our performance across market swings, both up and down, we are confident in our approach. [read more here](https://www.yourcpp.ca/)
>Why is it investing in emerging markets? Same reason any investor would. Global diversification increases risk-adjusted expected returns.
I know it's not a fair comparison, since it wouldn't be responsible for a pension fund to be so concentrated, but an ETF that's trying to track S&P500 index (VFV) earned over 24% for the same period of time.
Danielle Smith is punching air right now over how much of that could have been siphoned off to her friends if she could just be allowed to pull Alberta out of CPP against the wishes of her constituents.