Supplement to CPP pension best solution: Denison

President and CEO of CPP Investment Board also touts hybrid model

When it comes to the debate about a retirement savings system in Canada that is sustainable and sufficient, one of the best solutions is adding a pure supplemental pension benefit on top of the existing Canada Pension Plan (CPP), according to the president and CEO of the CPP Investment Board.

“This approach would maintain the CPP’s core benefits just as they are today but target the supplemental layer solely for pension benefits,” said David Denison, speaking at the 16th International Conference of Social Security Actuaries and Statisticians in Ottawa on Sept. 16.

“Consequently, any additional contributions would provide proportionately greater pension coverage than the existing core CPP.”

This approach would take advantage of administrative and investment capabilities already in place, provide the pooling of risks inherent in a defined benefit system and preserve the risk-sharing arrangement within the CPP, he said.

A supplement to the CPP would also be a very cost-effective way to provide a relatively predictable stream of retirement income, said Denison in his speech, titled “The Canadian Model: Moving from Sustainability to Sufficiency.”

Another possibility is a hybrid approach that would combine the CPP supplemental plan with two other options. One would make employment-based pension plans more cost-effective for plan sponsors and more attractive for plan participants through uniformity of federal and provincial pension regulation. The other would involve the creation of regional or national defined contribution plans, with mandatory enrolment for all workers without workplace pensions.

“There would still be flexibility for individual companies to create pension arrangements tailored to their specific objectives as well as for individuals to make choices according to their own goals and preferences,” said Denison.

“There is also ample opportunity for both the public and the private sector to provide the administrative servicing and investment components for the various elements of Canada’s retirement system.”

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