The Office of the Chief Actuary has released Actuarial Study No. 10, Measuring the Financial Sustainability of the Canada Pension Plan. The study concludes that the actuarial obligations of the CPP should be measured by using an approach that reflects the partially funded nature of the plan—that is, its reliance on both future contributions and invested assets as a means of financing future expenditures.
This study was undertaken on the recommendation of the CPP independent peer review panel, which recommended in May 2011 that only an actuarial balance sheet on an open-group basis appear in the actuarial report, rather than the results of both the open and closed methods.
The partially funded CPP represents a social contract where every year current contributors allow the use of their contributions to pay current beneficiaries’ benefits. In recognition of this, the open group approach to the CPP balance sheet was introduced for the first time in the most recent actuarial report on the CPP. This approach takes into consideration all current and future participants of the plan by including their contributions and associated benefits in determining whether current assets and future contributions will be sufficient to pay future expenditures.
“The actuarial balance sheet, based on future contributions and associated benefits, confirms that the plan will continue to meet its financial obligations and is sustainable over the long term,” said Jean-Claude Ménard, chief actuary.