Federal Finance Minister Bill Morneau. Image credit: The Canadian Press

CPP reform to help boost plan’s assets above $15 trillion by 2090: analysis

Federal calculations follow deal last year to increase Canadians’ retirement benefits

OTTAWA — The upcoming enrichment of the Canada Pension Plan will help fuel a 48-fold boost to the public fund’s assets over the long haul — to more than $15.8 trillion by 2090, according to federal calculations.

In comparison, the public plan’s investment manager reported $326.5 billion in net assets at the end of the first quarter of 2017-18.

Long-term projections on the evolution of the CPP’s post-reform assets were included in an internal briefing note prepared for federal Finance Minister Bill Morneau earlier this year. The memo referred to numbers published last October by the Office of the Chief Actuary.

The figures accounted for the impact of a CPP deal reached last year between the federal government and the provinces. They agreed to changes that will increase Canadians’ retirement benefits through the public plan by raising contributions as of 2019.

READ MORE: Business pushing back on CPP expansion

READ MORE: B.C. MP says we can’t afford CPP increase

CPP reform was a key goal for Ottawa and provinces like Ontario as a way to provide more financial security for future generations of retirees.

But it has also faced significant criticism. For example, advocates for small businesses have warned it will be devastating for employers and drive up costs in what they have described as a “payroll tax.”

The increase also means the Canada Pension Plan Investment Board, which manages the CPP contributions, will be responsible for far more money over the coming decades.

Without the enhancement, the total CPP assets would have totalled $6.7 trillion in 2090, the projections said.

“Additional CPP assets are projected to grow rapidly in the early years as a result of the high level of contributions compared to benefits paid, reaching $70 billion by 2025 and almost $1 trillion by 2045,” said the January briefing memo prepared for Morneau ahead of a scheduled meeting with CPPIB president and CEO Mark Machin.

The projections predicted the assets in the enhanced CPP portion to surpass those collected under base CPP program by 2055.

Machin has acknowledged CPPIB will have to adjust to its additional obligation of managing a much-larger envelope. The organization invests CPP assets not currently needed to pay pension, disability and survivor benefits.

“With or without reform, the CPP fund is projected to grow significantly in the future, and we’re well-prepared to manage a larger fund,” Machin told MPs during his appearance at a parliamentary committee last November.

“When we evaluate investment programs, new processes, and supporting technology, we always want to ensure that they can be scaled to take into account increased size. We are very confident that we’ll be ready to manage the additional funds.”

Machin has also stressed the importance of the arms-length CPPIB’s independence from government influence when it comes to its decisions around investments. He’s called that separation from potential political pressure one of the secrets to its success.

The briefing note to Morneau outlined several expected areas of focus for his meeting with Machin, including discussion about the Liberal government’s proposed infrastructure bank.

The government’s $35-billion infrastructure bank will seek to use public funds as leverage to attract billions more in private investment for major projects, such as new bridges, transit systems and rail lines. Ottawa has said it hopes the Canada Infrastructure Bank will entice institutional investors, such as pension plans, to participate.

The partially redacted memo to Morneau noted that Machin has emphasized the importance of CPPIB’s independence when it comes to infrastructure investments.

The document’s suggested speaking notes also featured an overview of the government’s infrastructure bank and a reference to CPPIB’s investment record when it came to infrastructure.

The document, obtained by The Canadian Press under the Access to Information Act, said CPPIB’s infrastructure assets accounted for 7.6 per cent of its global portfolio at the time and that it held only one infrastructure asset in Canada: a stake in the Toronto region’s 407 Express Toll Route.

The memo also noted the CPPIB has looked outside Canada due to a lack of investment opportunities big enough — Machin has said it seeks projects larger than $500 million — and its reluctance to invest in brand-new projects that often carry more risk.

When it comes to the projected size of the CPP’s assets in 2090, Jack Mintz, a tax-policy expert from the University of Calgary, said expected population increases and inflation should be taken into consideration.

He added that CPP reform will lift retirement benefits, but it will still be quite small when compared to Canadians’ total savings.

“It’s an increase, but it’s not an overwhelming increase — it’s kind of advertised as a bigger change than it really was.”

Andy Blatchford, The Canadian Press

Just Posted

5 family-friendly events happening in Ladysmith this weekend

Wounded Warriors run stops in Ladysmith Get ready to cheer on the… Continue reading

UPDATE: Stolen pickup truck recovered during arrest south of Nanaimo

Two suspects were arrested in connection with a stolen pickup truck in Cassidy on Thursday evening

Adopted pet pig gets killed and eaten

Animal was adopted out by SPCA staff in the Cowichan Valley

Driver charged in two-vehicle crash on highway north of Ladysmith

Passenger in Volkswagen Jetta transported to hospital with minor injuries

WATCH: Vancouver Island man catches dashcam video of near head-on crash

Video shows oncoming van cross over centre line

The way government learn someone has died is getting a digital overhaul

Governments in Canada turned to private consultants 2 years ago to offer blueprint

Bobsleigh team misses Olympic medal finish

Canadian team finishes four-man event 0.84 seconds behind first place, 0.31 seconds from podium

B.C. Games: Athletes talk Team Canada at PyeongChang 2018

From Andi Naudie to Evan McEachran there’s an Olympian for every athlete to look up to

Minor injuries after car veers into Courtenay dance studio

A driver and passenger were taken to hospital after their vehicle crashed… Continue reading

Snowboarders sliding into fresh territory at B.C. Games

Athletes hit the slopes for first appearance as an event at the B.C. Winter Games in Kamloops

Looking back at the 1979 B.C. Games: Good memories, even better jackets

39 years later, Kamloops is hosting the Winter Games again, with some volunteers returning

OLYMPICS 101: Oldest and youngest Canadians to reach the podium

This year, Canada sent its most athletes in Winter Games history, here’s a look at record breakers

Snowboarding debuts at B.C. Games

Merren deBellefeuille was lone Vancouver Island (Zone 6) athlete in ladies’ snowboard cross

Most Read