Measuring the Sustainability of National Social Insurance Plans: The Case of the Canada Pension Plan

10 Pages Posted: 6 Oct 2010

See all articles by Jean-Claude Menard

Jean-Claude Menard

Office of the Superintendent of Financial Institutions (OSFI)

Date Written: October 1, 2010

Abstract

As a component of the Canadian retirement income system, the Canada Pension Plan (CPP or the Plan) plays a key role in the retirement income security of Canadians. Historically, the assets and liabilities of the CPP have been measured and reported on a closed group basis, with no allowance made for future benefit accruals. However, the partial funding nature of the CPP warrants the use of other methodologies in the analysis of its financial status, which produce important new insights. In particular, evaluating the Plan on an open group basis, whereby future contributions and expenditures for current and future participants are taken into account, emphasizes the largely pay-as-you-go nature of the Plan. Under an open group valuation, the Plan is shown to be fully funded and sustainable over the long term. Assessment of the long-term sustainability of any broad social insurance plan should be conducted on an open group basis.

Keywords: Canada Pension Plan, Financial Sustainability, Funded Ratio, Open Group, Unfunded Liability

Suggested Citation

Menard, Jean-Claude, Measuring the Sustainability of National Social Insurance Plans: The Case of the Canada Pension Plan (October 1, 2010). Rotman International Journal of Pension Management, Vol. 3, No. 2, 2010, Available at SSRN: https://ssrn.com/abstract=1687785

Jean-Claude Menard (Contact Author)

Office of the Superintendent of Financial Institutions (OSFI) ( email )

255 Albert Street 16th Floor
Ottawa, Ontario K1A 0H2
Canada

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