by Scott Ronalds

The Canada Pension Plan (CPP) is our nation’s collective retirement plan. All working Canadians contribute to it (with a few exceptions), yet many know little about it. And a fair amount like to groan about the Plan, thinking it will dry up by the time they retire. In fact, the CPP’s website states that a majority of Canadians believe the CPP won’t be there for them.

Well, groan no more. As the website bluntly puts it, “people’s perceptions remain 20 years behind the times.” The public’s view still appears to be framed by the state of the CPP in the mid 1990’s, when it was reported that the fund was in danger of being depleted by 2015. Following a series of reforms, however, the CPP is now well funded and remains on track to provide a steady source of income to retired Canadians today and well into the future.

The Plan is monitored by the Office of the Chief Actuary, an independent federal body that gauges its long-term financial sustainability. Every three years, the Chief Actuary issues a report on the financial health of the CPP, which takes into consideration future changes in demographics, the economy, and the investment environment. The latest assessment, published at the end of 2022, confirmed that the pension plan is financially sustainable for the next 75 years.

There have been rumblings recently around Alberta’s talk of leaving the CPP and creating its own provincial pension plan, but the idea is still in the early stages. It would involve a referendum (to let the people of Alberta decide whether they want to leave the plan or not) and would require the federal government to agree on a transfer sum. An early figure proposed by Alberta is being hotly debated. Moreover, the process could face a years-long battle in the courts. But I digress. Regardless of Alberta’s decision, the CPP is on solid footing.

You might be surprised at some of the investments the fund holds. Along with publicly-traded stocks, it owns private equity, real estate, commodities, bonds, private debt, farmland, and infrastructure (toll roads, ports and airports), among other assets. Fun fact: the Plan owns 50% of Highway 407, the electronic toll highway that traverses the Greater Toronto Area.

If you’re interested in how the CPP invests, we offered a look under the hood the other year that highlighted some of its holdings and general features.

Currently, the Plan’s assets total $575 billion (as of June 30). A huge number, and all the more impressive considering its size was $36 billion just over 20 years ago. By 2050, the fund is projected to exceed $3.5 trillion.

The investment team has done an excellent job managing the fund’s assets. Over the past 10 years, it has achieved an annualized return of 9.8% (as of June 30), and earlier this year, the CPP was named one of the top-ranked global pension funds by Global SWF (an industry specialist focused on sovereign wealth funds and public pension funds).

I know what you’re thinking at this point: how much will I receive in retirement?

For 2023, the maximum payment is $15,679 ($1,306 a month) for a new recipient who starts collecting the pension at age 65. Your specific payments depend on your lifetime contributions and your average annual earnings. Our CPP & OAS Benefits Calculator shows the maximum and average annual payments, as well as projected benefits. The payments are indexed to inflation, so they increase every year.

A valuable feature of the Plan is that you can elect to take benefits earlier (60 is the earliest age) or defer them until you’re older (until age 70), in which case your payments will be lower or higher, respectively. Once you start taking CPP, however, you can’t reverse your decision (the one caveat is that you can cancel your CPP pension up to 12 months after you start receiving it, but you have to pay back all of the payments you've received). We have a tool on our website, CPP Benefits — Take Early or Later?, that can help you decide the best option for you.

The CPP isn’t going to make you rich, but it can provide a nice supplement to your RRSP/RRIF income or company pension plan — and you can be sure it will be there for you when you retire.