“If there is discussion about enhancing CPP, which presumably means more benefits to retirees, I don’t see much discussion about any related costs of an increase in benefits. It raises the questions – if benefits are going to be increased, who is going to pay for them, and when,” says Ross Gascho, partner at Fasken Martineau.
He says that the Canadian Pension Investment Board – which invests its assets directly without the involvement of a third-party fund manager - may amp investment as contributions increase, but they won’t boost the asset managers industry. As well, the majority of the pension plan’s assets lie outside of the nation.
“CPP is not intended to be fully funded, it has a huge pool of assets, but it is not intended to have assets equal to its liabilities,” he says. “When you look at how CPP is invested, its investment breakdown between Canada and other markets, geographically, at the end of 2015, 19.1% of its assets were in Canada.”
He adds that a number of barriers still exist to an expanded CPP, as economically struggling provinces balk at implementing retirement reforms.
“The bigger worry is that a province that is facing significant headwinds right now to require higher CPP contributions, presumably would be a bigger drag on the economy, it increases payroll costs and decreases talk home pay,” he says.
ORPP to move ahead, with or without national agreement
CPP drive by insurers unrewarding
As federal and provincial ministers meet in Vancouver this month to discuss the potential expansion of CPP, one pension expert says the conversation must shift to whether increased investment by the pension plan will translate into benefits for capital markets players.