Dale Jackson

Personal Finance Columnist, Payback Time

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Maybe it’s a Canadian thing, but have you ever noticed how we love to slag the Canada Pension Plan? It’s been that way for decades. Bring it up in conversation and the typical response is, “if it’s still around when I retire."

A new survey compiled by the Canada Pension Plan Investment Board (CPPIB) finds only 27 per cent of people believe that the national nest egg will be there for them when they retire. In an odd twist, it also found 42 per cent of working-age Canadians said they expect to rely heavily on CPP for retirement, compared with 13 per cent in 2002.

But contrary to the results, the Canada Pension Plan has never looked better, even as we become increasingly reliant on something we believe is doomed to failure.  

Canada’s Chief Actuary has certified that the plan is sustainable over the next 75 years, assuming a 3.9 per cent real rate of return. Over the past five years, the annualized rate of return has been 10.3 per cent.

Skeptics might focus on the latest quarter, which produced a 2.5 per cent return from the previous year. That will pull the average down, but investing for the retirement of a country is much different than investing for the retirement of an individual. The investment arm of CPP, the Canada Pension Plan Investment Board, targets the $330 billion in investable assets toward long-range, stable assets that produce long-term stable income. Those investments circle the globe and include stocks, bonds, real estate, and infrastructure such as toll roads and airports.  

Perhaps some of the confusion over CPP comes from individual expectations. Canadians who plan to “rely heavily” on it for retirement might be disappointed to learn that the maximum annual benefit is currently $13,370. Even with increases indexed to inflation, that’s hardly enough for the average Canadian to live on.

Think of CPP as a retirement supplement to the money that you are — or should be — saving for retirement.