Why CPP skepticism might be unfounded

Why CPP skepticism might be unfounded

Why CPP skepticism might be unfounded For decades now, Canadians have displayed cynical attitudes toward the Canada Pension Plan (CPP) and doubted its long-term feasibility.

However, industry expert Dale Jackson told BNN that a poll commissioned by the Canada Pension Plan Investment Board (CPPIB) points to a different story.

While only 27% of Canadians believe that CPP will be around when they retire, a surprising 42% of working-age Canadians said they expect to rely heavily on the plan for retirement. This was a huge leap from 13% of Canadians giving the same answer in a 2002 poll.

Also Read: Personal finances causing major stress for Canadians

"But contrary to the results, the Canada Pension Plan has never looked better, even as we become increasingly reliant on something we believe is doomed to failure," Jackson said.

Citing Canada's Chief Actuary, he added that the CPP is actually sustainable over the next 75 years, with an assumption of a 3.9% real rate of return. In the past five years, the annualized rate of return hit 10.3%.

"Skeptics might focus on the latest quarter, which produced a 2.5% return from the previous year. That will pull the average down, but investing for the retirement of a country is much different than investing for the retirement of an individual," Jackson said.

He furthered that the CPPIB aims to invest $330 billion in assets that produce long-term stable income. These include investments in stocks, real estate, bonds, and infrastructure.

Jackson explained that some confusion over CPP could stem from individual expectations, as Canadians who are expected to rely heavily on CPP might be disappointed to note that the maximum benefit annually is currently $13,370.

"Even with increases indexed to inflation, that’s hardly enough for the average Canadian to live on. Think of CPP as a retirement supplement to the money that you are — or should be — saving for retirement," Jackson said.

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