The large number of Canadians who fear the Canada Pension Plan won’t be around when they retire reflects a misplaced belief, said Canada Pension Plan Investment Board president and chief executive officer Mark Machin on Tuesday.
Machin discussed the sustainability of the national pension plan during his keynote speech at a 2017 symposium held in Toronto by Advocis, the Financial Advisors Association of Canada.
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Investors are nervous about their futures for several reasons, said Machin. Not only do they “worry about their finances and their ability to save enough” but they also see that Canada, along with the rest of the world, is facing economic challenges.
Demographic shifts, and aging population and the impact of technological change are among the factors making Canadians uneasy. “We tend to think of such forces in terms of their impact on institutions, corporations and economies,” said Machin.
However, those forces can also have day-to-day impacts. More people are caring for aging parents, for example, or they may work in industries where technological change is a disruptive force. It’s no surprise, then, that “many are deeply worried about their future,” said Machin.
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Machin said educating people as early as possible about their retirement income options is key. During his speech, he said such conversations help boost Canadians’ “awareness and understanding,” as well as their overall financial literacy.
But Canada’s chief actuary has found the CPP “is sustainable over 75 years,” assuming a real rate of return of 3.9 per cent. The CPPIB’s 10-year annualized real rate of return is 5.3 per cent, Machin noted.
When asking about people’s post-work worries, one thing to consider is whether or not there’s a gap between their fears and real expectations. For example, the CPPIB found in a survey that while six in 10 respondents questioned the CPP’s longevity, 42 per cent of working-age Canadians still expected to rely heavily on it. That figure was up 13 per cent from 15 years ago.
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This article first appeared on the website of Benefits Canada‘s companion publication, Advisor.ca.