Canada Pension Plan Fund takes hit

Net assets down nearly $1 billion in latest quarter

In a sign that turmoil in the global economy is taking a toll on Canadians’ retirement savings, the Canada Pension Plan Fund indicated in a statement on Thursday that its net assets were down by nearly $1 billion at the end of the third quarter. The fund had $152.3 billion in net assets at the end of September, down from $153.2 billion at the end of the second quarter, the Globe and Mail reports.

The Globe and Mail




Browse

Canada Pension Plan Fund takes hit

  1. Oh no! You mean I might not get a pension even though I’ve been paying into it all these years? Why heavens to betsy, whoever would have suspected that?

    Other than pretty much everybody under the age of 45 with half a brain that is?

    • Have you read the Chief Actuary’s report? The CPP is sustainable.

      • Actually, I hadn’t.  Some interesting reading there.  Unfortunately, I strongly disagree with a couple of the primary assumptions they’re making for it.

        First, that life expectancy is going to rise more slowly than it has in the past. With the increased focus on aging that *will* come about as the baby boomers start to grow old, I expect that the rate of change in our life expectancies will be going up rather dramatically in the next 10-15 years.

        They’re also projecting gradual decreases in the unemployment rate. Something which, as indicated both by our current recession, and by technological trends, may not be happening all that soon without significant legislative action.

        • There is certainly some tail risk involved in life expectancies. The sustainability of the plan is revisited every three years and changes in benefit and contribution rates can be made to ensure the plan is sustainable over the 75 year planning horizon. Given the long planning horizon, course corrections can be small even if the long term outlook changes substantially. I think if life expectancies rise substantially, it shouldn’t be a surprise to see increases in retirement ages. We might be well served by laying this out explicitly, such as setting the retirement age so that expected lifespan is an additional 18 years, as is roughly the case currently.

          I actually don’t think that current unemployment is a significant risk. I think a bigger concern is that the fund has yet to really meet the 4.4% real rate of return they use in their projections. 

          I wouldn’t say that the CPP is without risk, but it is among the soundest public pension schemes on the planet. Many Canadians hear the noise emanating from the US about the bankrupt Social Security program and worry needlessly about CPP.

        • Agreed. Depending on a rate of return 4.4% over and above inflation entails HUGE risks that simply aren’t accounted for in actuarian models. And even if they meet their target of an average 4.4%, when the peaks and valleys occur is just as important – if not more important – than what they average out to be. If the value drops substantially in a period when redemptions are higher than contributions, then the remaining pool of equity may not be large enough to gain back the losses when markets recover. Even with an average return above the 4.4% target. This is a systemic flaw in every financial projection extant. What to do about it? I don’t know. Lower expectations would be my very uncreative solution. 

    • Take it for what it’s worth, but wiki actually has a pretty good summary of the history of the CPP….talks about ‘pay as you go’ plans and fully funded plans and so on.

  2. The total assets are in excess of 150 billion dollars.  This means they are down 1% in a market that is down over 11%.  CCP investment board is beating the market by 10%.  While one is loath to loose money & the numbers are large, given the investment conditions, shouldn’t this result reflect favourably upon the management of the CPP fund? 

    • CPP is not solely invested in equities. They have substantial bond holdings that have increased in value. To be fair, the CPP uses index strategies for much of its portfolio allocation.

  3. It is down about 0.6%  To me that is negligible when compared with the markets.

    • True. The headline is meant to grab our attention, not to inform us. 

  4. As others have pointed out, it is down less than 1%. Given how volatile markets have been, and how soft the economy has been, the CPP has performed quite well. Fortunately, they aren’t as top heavy in exchanged-traded equities as most funds are. They do a lot of private equity investments that seem to have better prospects than the casino we call the stock market. 

Your email address will not be published. Required fields are marked *