Did you know that part of every Canadian worker’s retirement income is invested in countries around the world? Canadians are invested in developed economies such as the United States, the United Kingdom, Europe, and Australia, as well as in developing economies such as China, India, Brazil and Chile. Since it’s your money, do you feel this is something you should know more about? That information is available but first, some background.
The global investments made by Canadians are made through your Canada Pension Plan (CPP) contributions. These funds are invested by a professional investment organization called the CPP Investment Board, or CPPIB. Currently, over 75% of CPPIB investments are invested in countries other than Canada to reduce risk and develop stronger returns through geographic diversification.
CPPIB manages the approximately $280 billion fund at an arm’s-length from government, with the investment gains held in a separate account so governments can’t use the funding for their own purposes. CPPIB’s mandate is to invest the CPP contributions that both you and your employer make to maximize returns without taking excessive risk to help ensure the long-term viability of the CPP.
To ensure the sustainability of the CPP portion of your retirement, the Chief Actuary of Canada projects that CPPIB needs to maintain a 4% investment return after inflation. The annualized rate of return achieved by CPPIB over a period of 10 years is comfortably above this mark. This level of investment return means that the CPP will be sustainable, at the current contribution rate, for at least the next 75 years.
CPPIB’s strategy for delivering investment returns is to focus on the long-term value of the fund over decades, while accepting short-term volatility. That may mean the fund will lose money in the occasional year, but because CPPIB is investing not only for today’s generations, but for generations to come, any losses will be dwarfed by the longer-term gains made by the organization.
All CPP contributors and recipients have a stake in the success of CPPIB – it is, after all, your money they manage. On Monday June 6th, Canadians across the country, including in our region, will have the opportunity to hear from, and ask questions of, the senior executives in charge of investing the funds of the CPP. For those unable to join the meeting in-person, CPPIB also holds an interactive webcast.
Anyone interested in participating in the meeting or live webcast can find more information at www.cppib.com.