June 23, 2008
Chief Actuary of Canada says plan is sustainable throughout 75-year forecast period CALGARY, AB (June 23, 2008) Ten years after the fact, two-thirds of western Canadians are still unaware that the Canada Pension Plan (CPP) has been successfully reformed and is supported by a $123 billion fund designed to help sustain the plan for the long term. In a recent Ipsos Reid survey, 66% of Albertans said they were unaware of the successful reform of the CPP by the federal and provincial finance ministers. Further, the survey shows more than a third of Albertans and slightly more than 40% of the rest of western Canada felt the CPP would be out of money when they retired. In remarks to the Institute of Corporate Directors in Calgary today, David Denison, President and CEO of the CPP Investment Board, emphasized that the plan is sustainable throughout the 75-year period of the Chief Actuary of Canada’s forecast. CPP contributions are expected to exceed annual benefits paid through to the end of 2019, providing a 12-year period before a portion of the investment income is needed to help pay CPP benefits. In his remarks, Mr. Denison identified the five most common questions Canadians have regarding the CPP:
• Will my pension be there for me when I retire?
• Can the Canada Pension Plan Investment Board really make investment decisions independently from government?
• Why invest so much internationally, especially when the Canadian economy is doing better than many other countries?
• Why don’t you just invest in passive, indexed investments, rather than pursue programs such as infrastructure, real estate and private equity?
• What are you doing in the area of responsible investing?
Mr. Denison dispelled the myths some western Canadians hold to be true about the CPP. He said that Canadians would rest easier about the health of the CPP if they were more aware of its success story, again pointing to the Chief Actuary of Canada who estimates the CPP Fund will grow to approximately $310 billion at the end of 2019. Canadians are also unaware that the CPP Investment Board is protected by strong legal safeguards. The safeguards are so strong they require the agreement of two-thirds of the provinces with two-thirds of the population and the federal government to amend legislation or regulations governing the CPP Investment Board. This formula is more stringent than the amending formula of the Constitution of Canada and reflects a high standard of required consensus. Mr. Denison stressed how the CPP Investment Board was created with a unique governance model that strikes an effective balance between independence and accountability. He explained that the investment-only mandate and arm’s-length status from governments allow the CPP Investment Board to make decisions that are truly independent. Also, as a global investor helping to secure the future pensions of 17 million Canadians for generations and decades, Mr. Denison added the CPP Investment Board will be increasing investments globally over time as a key part of its diversification and risk management strategy. However investments in Canada are a large part of the Fund, with approximately $65 billion invested at home. Another question some Canadians have posed is whether passive investing is more prudent and effective than active investing. Active management strategies by investment professionals at the CPP Investment Board have delivered more than $5.3 billion in added value above the market-based benchmark over the past two fiscal years. Mr. Denison noted that the objective is to be a more active, value-added investor seeking opportunities in global markets, which plays to the inherent strengths of size and a long investment horizon of the CPP Investment Board. A final point made by Mr. Denison reflected the steps being taken by the CPP Investment Board in the area of responsible investing. The CPP Investment Board’s Policy on Responsible Investing is the roadmap by which it assesses environmental, social and governance (ESG) factors as they affect the risk and return parameters of underlying investments. This is guided by the belief that responsible corporate behaviour with respect to ESG factors can generally have a positive influence on long-term financial performance. The approach is consistent with the United Nations Principles for Responsible Investment which the CPP Investment Board helped formulate, Mr. Denison added. Mr. Denison is in Calgary today to begin the first leg of a series of public meetings across western Canada in June.
About the CPP Investment Board The CPP Investment Board is a professional investment management organization that invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, the CPP Investment Board is investing in public equities, private equities, real estate, inflation-linked bonds, infrastructure and fixed income instruments. Headquartered in Toronto, the CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At March 31, 2008 the CPP Fund totaled C$122.7 billion. For more information about the CPP Investment Board, visit www.cppib.ca.
For further information contact:
CPP Investment Board