The Canada Pension Plan was established in 1966 to provide working Canadians with a foundation on which to build their retirement income. It was a joint creation of the federal government and the nine provinces who participate in the CPP.
By 1996, it was clear the CPP was unsustainable. For example, in that year $11 billion in contributions were collected, but $17 billion in benefits were paid out. As well, demographic projections indicated that there would be far fewer workers whose contributions would be supporting retirees in the coming decades. Federal and provincial finance ministers, who act as stewards of the CPP, took bold action to deal with this problem and to make the CPP sustainable.
Following extensive federal/provincial consultation and discussions with Canadians in all participating provinces, a solution was agreed upon. The reforms included:
- Commitment to raise CPP contribution rates in stages, reaching 9.9 per cent in 2003
- Commitment to create a large pool of assets to help partially pre-fund the CPP (the pool would be created from the higher contribution rates and other measures), and
- The creation of the CPP Investment Board as a Crown corporation operating at arm’s length from governments to manage and invest the CPP fund to help ensure the long-term sustainability of the CPP.