Given the recovery in the markets over the past little while (in 2009 when this was written) it is not surprising to hear Pension funds claiming they are on the road to recovery, and now CPP claims their assets are up $11B in the first quarter of this year (which is good news). This kind of growth is needed given the losses most pensions took during the great Apocalypse of ’08, however is the Canada Pension Plan going to be able to withstand the onslaught of retirees which will live much longer over the next 30 years?
“We are pleased with the $11.1 billion increase in the fund and the positive 7.1 per cent return for the first quarter,” CPP president David Denison said. “At the same time, the negative returns of our past fiscal year and the positive results of this first quarter both need to be viewed within the context of our long-term strategy. We continue to focus on delivering solid returns over the span of multiple years and indeed decades.”
Since the CPP folks have started investing they have managed about a 4.9% return on their assets (over 10 years) so that is a better thing, but the nagging questions are:
- Can the fund sustain and continue to pay out to the tidal wave of retirees coming in the next 10 years, or will the government be forced to change the system?
- What is the percentage of Canadians who will only be using the CPP for their retirement?
As I grow older this worries me more and more.
Addendum
Doesn’t worry me as much now. I think CPP will be fine, it will change and may not be as lucrative, but it will be fine. Private pensions and the Civil Service Pensions are much more worrying.
I’m not too concerned about CPP. What does concern me is that most baby boomers don’t realize how little it pays. Our parents’ generation knows how to make do with very little money. Many baby boomers have a very unrealistic view of retirement.