More than half of Canadians (64%) fear the Canada Pension Plan, or CPP, won’t be around when they retire. But this is a “misplaced belief,” said Canada Pension Plan Investment Board (CPPIB) president and CEO Mark Machin on Tuesday at Advocis’ Symposium 2017, citing the results of a CPPIB 2016 survey.
Machin—who says the three pillars of Canada’s retirement income system are CPP, OAS/GIS, and workplace pensions and personal savings—discussed the sustainability of the national pension plan and how advisors can spread that message during his lunch keynote speech.
Investors are nervous about their futures for several reasons, said Machin. Not only do they “worry about their finances and their ability to save enough,” but they also see that Canada, along with the rest of the world, is facing economic challenges.
Clients are uneasy due to factors such as demographic shifts and the rise of the aging population, along with how accelerating technological change is affecting economies. Says Machin: “We tend to think of such forces in terms of their impact on institutions, corporations and economies.”
However, these forces can also have day-to-day impact. More of your clients are caring for aging parents, for example, or may work in industries where technological change is a disrupter, so it’s no surprise that “many are deeply worried about their future[s],” says Machin.
How can you help? Machin says educating people as early as possible about their retirement income options is key. During his speech, he said such conversations help boost investors’ “awareness and understanding,” as well as Canadians’ overall financial literacy.
A fact you can share with clients, he said, is Canada’s chief actuary finds the CPP “is sustainable over 75 years,” assuming a real rate of return of 3.9%. The CPPIB’s ten-year annualized real rate of return is 5.3%, he added.
When asking about people’s post-work worries, one thing to gauge is whether or not there’s a gap between their fears and real expectations. For instance, CPPIB found that while six in 10 survey respondents questioned the CPP’s longevity, 42% of working-age Canadians still expected to rely heavily on the pension plan. That figure was up 13% from 15 years ago.
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