CPP Investment Board to Fraser Institute: you’re wrong about public pension
The Canada Pension Plan Investment Board isn’t mincing words. The crown corporation established in 1997 to invest the funds of the CPP says the Fraser Institute is just plain wrong about the health of the nationally administered pension plan. Or, more specifically, shows a “fundamental lack of understanding regarding the CPP.” The right-wing […]
These statements betray a fundamental lack of understanding regarding the CPP. The authors are mistakenly judging CPP as a “closed-group” pension fund, such as employer-sponsored defined benefit plans. These plans face the risk that the business could disappear and therefore need to have sufficient funds to pay out all accrued obligations if the company and its pension plan closed.
This is not the case for CPP, which is considered an “open-group” fund. This recognizes the plan’s ongoing ability to rely on future contributions from Canadians and fund returns to fund future liabilities. The Chief Actuary of Canada, who reviews the sustainability of the CPP every three years, explicitly states that the CPP’s sustainability should be judged on an “open group” basis. To do otherwise one would have to assume that there is a risk that the entire workforce of Canada could suddenly cease employment and be unable to make CPP contributions.
The authors also state that the CPP is based on demographic assumptions from half a century ago that turned out to be false, and that “bold reforms” are required. In fact, however, reforms in 1997 succeeded in putting the CPP on sound financial footing.
In his latest review released in December, the Chief Actuary of Canada reaffirmed the CPP is sustainable for at least 75 years.
Canadians can be assured that their CPP retirement benefits will be there for them.
This smack down follows another recent embarrassment for the Fraser Institute.
An United Nations agency blew the whistle on a flawed set of indicators produced by the conservative think tank and used by the International Monetary Fund to advance a faulty conclusion that less labour market regulation may help reduce unemployment.
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