TILTING TOWARD MARKETIZATION: Reform of the Canadian Pension Plan

Abstract

ABSTRACTPublic concern about the earnings‐related Canada Pension Plan has forced the Canadian government to move toward fuller funding, a new investment policy, and changes to benefits and administration. Together, the three initiatives, and particularly the first two, amount to a modest degree of marketization. The assumption behind the reform is that the Canada Pension Plan will remain public and mandatory but the change will create a board and an investment policy which are more sensitive to market pressures and less amendable to government interference. The Canada Pension Plan is one of three tiers of support for the elderly in retirement. It is a contributory social insurance scheme which protects against loss of income. The other two are a social allowance (Old Age Security) as well as an income tested benefit (Guaranteed Income Supplement) which provide basic income support and employment based retirement pension plans as well as group and individual registered retirement savings plans which supplement the other two tiers on a voluntary basis. This article examines the reform of the Canada Pension Plan. After a brief examination of Canada's retirement benefits in an international context, the article summarizes recent debates in Canada, government policies to develop fuller funding and new investment strategies, and reflections on possible developments in the future.