Question Period Note: CANADA PENSION PLAN: SUSTAINABILITY

Is the Canada Pension Plan (CPP) sustainable over the long-term given an aging population and the uncertainty regarding the economy and the financial markets.

• The Canada Pension Plan fund has a long investment horizon that is designed to absorb periodic downturns in financial markets.
• Despite occasional downturns, such as the one in March 2020 and the first half of 2022, the Canada Pension Plan Fund is posting an enviable long-term performance which is among the strongest in the pension fund world. Indeed, Canada Pension Plan Investments has averaged a 10-year annualized rate of return (net nominal) of 10.3% and has generated $305 billion in cumulative investment income over ten years for the Fund.

The CPP is a social insurance plan that is funded by the contributions of employees, employers and self-employed persons, and by the revenue earned on CPP investments. The CPP benefits consist of retirement pensions, along with disability, death, survivor, post retirement and children’s benefits. Quebec has a separate but comparable plan, the Quebec Pension Plan.
The CPPIB invests the funds not needed by the CPP to pay current benefits and operating expenses. As of June 30, 2022, the CPPIB held $523.1 billion in net assets, an increase of $357.3 billion (+$215%) over ten years. Despite global markets experiencing their worse first half in 40 years between January and June 2022, CPPIB has averaged a 10-year annualized rate of return (net nominal) of 10.3% and has generated $305 billion in cumulative investment income over ten years for the Fund.
Since it was created in 1997, the CPPIB has yielded higher than expected rates of returns on investments. The CPP Fund is invested for the long term, has a broadly diversified portfolio and steady cash inflows, and is structured to withstand stock market cycles. The CPP portfolio was designed to be resilient, enabling it to weather severe market events – such as the current situation.

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