When you look at your paycheque every month, you may notice a line item for the Canada Pension Plan (CPP) and wonder what that deduction is all about.
Both employees and employers pay into the CPP and the funds are used to provide a basis on which Canadians can build retirement security.
If you’re an average Canadian worker, you can expect to receive around $8,700 per year. Exactly how much you get depends on how long you’ve worked in Canada, because it’s based on how much you paid into CPP while you were working.
What’s more, CPP comes to you in addition to what you’ll get from Old Age Security and any personal savings or investments you’ve made to fund your retirement.
Years ago, CPP was set up as an in-and-out fund – with contributions from people working today paying retirement benefits to people who had already retired.
But, in the 1990s, studies of Canada’s population showed that at some point there would be too few workers to support the growing numbers of retirees. When that happened, it was feared there wouldn’t be enough money coming into CPP to pay benefits to those who had retired.
To fix this problem, Canada’s federal and provincial governments reformed CPP in 1997 and created an investment body (CPP Investments) to invest money not being used to pay benefits and to help ensure the CPP would be able to pay out to future generations.
That solution is working. Reviews of the CPP by Canada’s Chief Actuary project that, at current rates of return, the CPP will be able to pay benefits to retirees for at least 75 years.
CPP Investments earns those returns in a variety of ways. We invest in public markets (stocks and bonds) as well as private transactions that range from toll roads and student housing to clean energy providers and data centres worldwide.
All those investments have one thing in common: CPP Investments sees them as growth opportunities that will generate returns and help CPP to pay pensions to generations of Canadians.
CPP Investments, Investing Today for Your Tomorrow.