CPP is sound, says investment chief

(January 20, 2004) Despite the commonly held fear that the CPP will not be able to meet its obligations to those working today, it is in pretty good shape, according to the man in charge of private-sector investments for the CPP.

“Many Canadians are unaware that we are now building the CPP’s reserve assets,” said John MacNaughton, president and CEO of the CPP Investment Board. “Given the high-profile news of the CPP’s crisis back in 1996, perhaps it isn’t surprising that many Canadians are still concerned that the CPP won’t be there when they retire.”

In a speech to the Calgary Chamber of Commerce, he called on financial institutions across the country to help dispel what he called “the unsettling myth that the CPP won’t be there for Canadians.”

“As financial planners and investment advisors to millions of Canadians, they’re ideally positioned to deliver this important message,” he said.

MacNaughton pointed to a 2000 report about the status of the CPP, in which the chief actuary predicted the current funding levels will be sufficient to ensure the plan’s solvency for the next 75 years.

MacNaughton said inflows are expected to surpass payouts from the plan for the next 17 to 18 years, allowing the CPP to restructure over that period to brace for the anticipated reversal in net contributions.

He then told the chamber the CPP reserve fund has grown from $36.4 billion in 1997 to $64.4 billion today, due to increased contributions and returns on investments. He predicted that within a decade the reserve will reach $160 billion.

“The question I am asked most frequently is, ‘Will the money be there when I retire?'” MacNaughton said. “The answer is yes, the money will be there.”

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com