The CPP is meant to provide about 25 per cent of retirement income. The thing you have to remember is that CPP is indexed to inflation, whereas your investment is at the will of what the markets do," he said.Ī man and his dog are silhouetted against an early evening landscape against the Pacific Ocean. "The return on the investment has to be quite high to match CPP. They opt out of paying into CPP at age 65, even if they're still working. Some people do think they can do better, Hughes said. Wouldn't I do better investing it myself? They project over the next 75 years at the very least, there will be no shortfall," Hughes said. The chief actuary looks at the plan every three years. "From a practicality standpoint, CPP is segregated and not part of general government revenues. That investment fund is operated at arms length from the federal government, not at the behest of whatever party is in power. That's what will cover the additional cost of benefits for the baby boomers, who will be retiring in large numbers until about 2030 and could live years beyond that. That's because the contribution rates have been set at a level where there is extra to set aside in an investment fund. That year's benefits come out of what the working population pays and any additional money - and there is additional money - goes to CPPIB. And in 1997, the federal government created a rule that pension benefits must be covered each year by the cash that comes in from Canadian employers and workers. Your CPP contribution is kept entirely separate from government general accounts. People see the money coming out of their paycheque and are confused about where it goes, hence the worry that the government will spend it, Hughes said. The professionally managed investment group has earned an average of 10 per cent a year on that money for the past 10 years. The CPPIB manages a huge pot of cash - $392 billion as of the end of March 2019 - with a mandate to invest on behalf of Canadians and keep the CPP sustainable over many generations.
"The thing we see the most is 'What am I going to get out of it?' People don't understand the mechanics and, at the end of the day, what am I going to get when I retire," he told CBC News. People also don't know when to take CPP and what benefit they might receive, says Craig Hughes, director, advanced financial planning, at IG Wealth Management. As the Canada Pension Plan Investment Board releases its annual report this week on the billions of dollars it has under management, many Canadians remain unsure about where their own CPP money is and how secure it might be.įinancial advisers say there's a misconception that the government can dip into the money, as well as unfounded concern about whether it might run out as baby boomers all retire and start drawing their pensions.
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