KPA Policy Papers

In an ageing world, the design and management of a country’s retirement income system is becoming an increasingly important determinant of its social and economic performance. Canada’s retirement income system is strong in its universal components (i.e., OAS and C/QPP) and in its provision of supplemental pensions to public sector workers. However, there is also an important weakness: the absence of a coherent approach to providing supplemental pensions to private sector workers. As a result, many of these workers are financially ill-prepared for life after work.

This KPA Policy Paper identifies three pathways to improving the design and management of occupational pension plans for private sector workers in Canada.

Possibly the most important issue Alberta’s Fair Deal Panel has been asked to address is whether Alberta should withdraw from the Canada Pension Plan (CPP), and go it alone with a new Alberta Pension Plan (APP). While Quebec sponsored a parallel Quebec Pension Plan (QPP) since CPP’s inception over 50 years ago, no province has ever withdrawn from the CPP since then. Given its importance and lack of precedence, this KPA Policy Paper assesses the pros and cons of such an action. We do so at the request and encouragement of prominent Canadians from coast to coast.

Is the CPP Investment Board Producing ‘Value for Money’?

National Post columnist Andrew Coyne last week described the CPP Investment Board, manager of Canadians’ collective CPP nest egg, as a “conspicuously bloated” organization that has “plunged into an increasingly esoteric risky range of private investments” for “no appreciable payoff”. According to Mr. Coyne, this “no appreciable payoff” result is not surprising as “active managers cannot consistently beat the market”. In my open letter to him, I show that CPPIB’s active strategies have in fact produced a material $16 Billion of value above market returns, net of all costs, over the course of the last five years. Further, it is this positive result that should not be surprising. Logic suggests, and research confirms, that the kind of long-term active strategies the CPPIB is pursuing, if carried out by best-in-class people, should generate material ‘value-for-money’ over time.     

Workplace pension plans are in short supply in Canada, and that is not a good thing. The Ontario Retirement Pension Plan (ORPP) initiative could be the catalyst to improve the current situation. A new paper by Keith Ambachtsheer and Ed Waitzer argues that is far more likely to be the case if Canadian financial institutions were to compete with alternative offerings deemed ‘comparable’ to the ORPP. The paper shows how such an outcome could be achieved, and why it would benefit employees, employers, as well as the financial institutions taking up the challenge.

The Fraser Institute recently published a paper titled “Comparing the Costs of the Canada Pension Plan with Public Pensions Plans in Ontario”. Based on a comparative cost analysis of six Canadian public sector pension organizations, the authors reached three conclusions that “should be sobering for the proponents of large public sector pension plans”.