Global diversification of investments is the key to ensuring Canadians 30 years from now receive an equivalent Canada Pension Plan benefit as recipients receive today, according to the head of the Canada Pension Plan Investment Board (CPPIB).
David Denison, president and CEO of the CPPIB, was in Vancouver Monday to launch a week-long, cross-Canada tour of meetings with the public. By law, the CPPIB must hold public meetings every two years to give Canadians the opportunity to speak directly to the investment board’s leadership.
Denison, along with CPPIB chair Bob Astley, tried to assure the handful of attendees that the CPP will still be around after baby boomers have gone through the system.
“Definitely, you can rely on your CPP benefits when you retire, and future generations of Canadians as well,” said Denison in an interview. “It’s unfortunate that one of the misconceptions many Canadians have about the Canada Pension Plan is that they are worried if it will be sustainable. The truth is, on a global basis, the CPP is just about the most secure national pension plan that exists anywhere.”
He noted the CPPIB was created in the mid-1990s to reform the CPP and prevent the reserve fund from being depleted by 2015.
Since taking over the fund in 1999 following changes to CPP contribution requirements, the fund has grown from $44 billion to nearly $130 billion as of June 30. The fund is estimated to grow to $465 billion over the next 20 years, due in part to investment returns and the accumulation of CPP contributions not being used to fund current benefits.
He noted the investment board’s growing asset pool will not be used to fund CPP benefits for another 11 years, giving it the opportunity to acquire key global assets at attractive prices that will benefit the fund for future beneficiaries.
“When you boil it down, diversification by geography, investing in both Canada and internationally helps us reduce risk and increase returns.”