Document Properties
- Type of Publication: Actuarial Report
The Honourable William F. Morneau, P.C., M.P.
Minister of Finance
House of Commons
Ottawa, Canada
K1A 0A6
Dear Minister:
In accordance with section 115 of the Canada Pension Plan, which provides that an actuarial report shall be prepared every three years for purposes of the financial state review by the Minister of Finance and the ministers of the Crown from the provinces, I am pleased to submit the Thirtieth Actuarial Report on the Canada Pension Plan, prepared as at 31 December 2018.
Yours sincerely,
Assia Billig, FCIA, FSA, PhD
Chief Actuary
LIST OF TABLES
- Table 1 - Best-Estimate Assumptions
- Table 2 - Population of Canada less Québec
- Table 3 - Economic Assumptions
- Table 4 - Contributions - Base CPP
- Table 5 - Beneficiaries - Base CPP
- Table 6 - Beneficiaries by Sex - Base CPP
- Table 7 - Expenditures - Base CPP
- Table 8 - Expenditures - Base CPP (2019 constant dollars)
- Table 9 - Expenditures as Percentage of Contributory Earnings - Base CPP
- Table 10 - Historical Results - Base CPP
- Table 11 - Financial Projections - Base CPP, 9.9% Legislated Contribution Rate
- Table 12 - Financial Projections – Base CPP, 9.9% Legislated Contribution Rate (2019 constant dollars)
- Table 13 - Sources of Revenues and Funding of Expenditures - Base CPP, 9.9% Legislated Contribution Rate
- Table 14 - Financial Projections - Base CPP, Minimum Contribution Rate of 9.75% 2022-2033, 9.72% 2034+
- Table 15 - Progression of Minimum Contribution Rate over Time – Base CPP
- Table 16 - Contributions - Additional CPP
- Table 17 - Beneficiaries - Additional CPP
- Table 18 - Beneficiaries by Sex – Additional CPP
- Table 19 - Expenditures - Additional CPP
- Table 20 - Expenditures – Additional CPP (2019 constant dollars)
- Table 21 - Financial Projections - Additional CPP, 2.0%, 8.0% Legislated First and Second Additional Contribution Rates
- Table 22 - Financial Projections - Additional CPP, 2.0%, 8.0% Legislated First and Second Additional Contribution Rates (2019 constant dollars)
- Table 23 - Sources of Revenues - Additional CPP
- Table 24 - Financial Projections - Additional CPP, First and Second Additional Minimum Contribution Rates of 1.98% / 7.92%
- Table 25 - Progression of Additional Minimum Contribution Rates over Time
- Table 26 - Change in Assets - 31 December 2015 to 31 December 2018 - Base CPP
- Table 27 - Summary of Expenditures - 2016 to 2018 – Base CPP
- Table 28 - Reconciliation of Changes in Minimum Contribution Rate
- Table 29 - Reconciliation of Changes in Additional Minimum Contribution Rates
- Table 30 - Legislated Contribution Rates
- Table 31 - Projected Maximum Additional CPP Retirement Benefit
- Table 32 - Legislated Pension Adjustment Factors
- Table 33 - Projected Maximum Additional CPP Disability Benefit
- Table 34 - Projected Maximum Additional CPP Survivor’s Benefit, Survivor under Age 65
- Table 35 - Projected Maximum Additional CPP Survivor’s Benefit, Survivor Age 65 or Over
- Table 36 - Data Sources
- Table 37 - Cohort Fertility Rates by Age and Year of Birth
- Table 38 - Fertility Rates for Canada
- Table 39 - Annual Mortality Improvement Rates for Canada
- Table 40 - Mortality Rates for Canada
- Table 41 - Life Expectancies for Canada, without improvements after the year shown
- Table 42 - Life Expectancies for Canada, with improvements after the year shown
- Table 43 - Population of Canada by Age
- Table 44 - Population of Canada less Québec by Age
- Table 45 - Analysis of Population of Canada less Québec by Age
- Table 46 - Births, Net Migrants, and Deaths for Canada less Québec
- Table 47 - Active population (Canada, ages 15 and over)
- Table 48 - Labour Force Participation, Employment and Unemployment (Canada, ages 15 and over)
- Table 49 - Labour Force Participation Rates (Canada)
- Table 50 - Employment of Population (Canada, ages 18 to 69)
- Table 51 - Active Population (Canada less Québec, ages 15 and over)
- Table 52 - Labour Force Participation Rates (Canada less Québec)
- Table 53 - Employment of Population (Canada less Québec, ages 18 to 69)
- Table 54 - Real Wage Increase and Related Components
- Table 55 - Inflation, Real AAE and AWE Increases
- Table 56 - Average Annual Earnings (Canada less Québec, ages 18 to 69)
- Table 57 - Total Earnings (Canada less Québec, ages 18 to 69)
- Table 58 - Average Pensionable Earnings up to YMPE (Canada less Québec)
- Table 59 - Average Pensionable Earnings up to the YAMPE (Canada less Québec)
- Table 60 - Proportion of Contributors to the CPP, by Age Group
- Table 61 - Average Contributory Earnings for Pensionable Earnings up to YMPE
- Table 62 - Average Contributory Earnings for Pensionable Earnings up to YAMPE
- Table 63 - Total Adjusted Contributory Earnings for Pensionable Earnings up to YMPE
- Table 64 - Total Adjusted Contributory Earnings for Pensionable Earnings up to YAMPE
- Table 65 - Net Assets as at 31 December 2018 - Base CPP
- Table 66 - Base CPP (Core Pool) Initial Asset Mix as at 31 December 2018
- Table 67 - Real Rates of Return by Asset Type (before investment expenses)
- Table 68 - Asset Mix, Portfolio Risk and Expected Rates of Return (before investment expenses) Base CPP
- Table 69 - Asset Mix, Portfolio Risk and Expected Rates of Return (before investment expenses) Additional CPP
- Table 70 - Overall Rate of Return on base and additional CPP Assets
- Table 71 - Annual Rates of Return on CPP Assets
- Table 72 - Benefits Payable as at 31 December 2018 – Base CPP
- Table 73 - Benefit Eligibility Rates by Type of Benefit
- Table 74 - Proportion of Contributors to CPP (adjusted for benefit computation purposes)
- Table 75 - Average Pensionable Earnings up to YMPE (adjusted for benefit computation purposes)
- Table 76 - Average Pensionable Earnings up to YAMPE (adjusted for benefit computation purposes)
- Table 77 - Average Earnings-Related Benefit as Percentage of Maximum Benefit - Base CPP
- Table 78 - Average Additional Earnings-Related Benefit as Percentage of Maximum Additional Benefit - Additional CPP
- Table 79 - Retirement Pension Take-up Rates (2021+)
- Table 80 - New Retirement Beneficiaries and Pensions
- Table 81 - Mortality Rates of Retirement Beneficiaries
- Table 82 - Life Expectancies of Retirement Beneficiaries, with improvements after the year shown
- Table 83 - Life Expectancies of Retirement Beneficiaries by Level of Base CPP Pension (2019), with future improvements
- Table 84 - Proportion of CPP Retirement Beneficiaries who are Contributors
- Table 85 - Average Contributory Earnings of Working Beneficiaries up to the YMPE
- Table 86 - Average Contributory Earnings of Working Beneficiaries up to the YAMPE
- Table 87 - Working Beneficiaries – Contributors, Contributions, and Post-Retirement Benefits
- Table 88 - Ultimate Disability Incidence Rates (2019+)
- Table 89 - New Disability Beneficiaries
- Table 90 - New Disability Pensions and Post Retirement Disability Benefits
- Table 91 - Disability Termination Rates in 2019 and 2035
- Table 92 - Proportion of Contributors Married or in Common-Law Relationship at Time of Death
- Table 93 - New Survivor Beneficiaries
- Table 94 - New Survivor Pensions
- Table 95 - Mortality Rates of Survivor Beneficiaries
- Table 96 - Life Expectancies of Survivor Beneficiaries, with improvements after the year shown
- Table 97 - Number of Death Benefits
- Table 98 - New Children’s Benefits
- Table 99 - Operating Expenses – Base CPP
- Table 100 - Operating Expenses - Additional CPP
- Table 101 - Full Funding Rates in Respect of the Amendments to the Base CPP
- Table 102 - Additional CPP Balance Sheet (Open Group Basis, additional minimum contribution rates)
- Table 103 - Base CPP Balance Sheet (Open Group Basis)
- Table 104 - Additional CPP Balance Sheet (Open Group Basis, legislated additional contribution rates)
- Table 105 - Reconciliation of Changes in Pay-As-You-Go Rates - Base CPP
- Table 106 - Reconciliation of Changes in Minimum Contribution Rate - Base CPP
- Table 107 - Reconciliation of Changes in Additional Minimum Contribution Rates
- Table 108 - Sensitivity of the Base CPP Minimum Contribution Rate to the Investment Policy
- Table 109 - Impact of Investment Strategy on Probability of Significant Loss
- Table 110 - Investment Policy Impact on First Additional Minimum Contribution Rate
- Table 111 - Probabilities of FAMCR being within Specified Ranges as at 31 December 2048 Given Various Portfolios at Previous Valuation Date
- Table 112 - Individual Sensitivity Test Assumptions
- Table 113 - Life Expectancy in 2050 under Alternative Assumptions
- Table 114 - Sensitivity of Base CPP Minimum Contribution Rate
- Table 115 - Sensitivity of Base CPP Assets/Expenditures Ratio
- Table 116 - Sensitivity of Additional CPP Minimum Contribution Rates
- Table 117 - Sensitivity of Additional CPP Assets/Expenditures Ratio
- Table 118 - Higher and Lower Economic Growth Sensitivity Tests
- Table 119 - Younger and Older Populations Sensitivity Test Assumptions
1. Executive Summary
1.1 Main Findings
Main Findings 30th CPP Actuarial Report
|
BASE CPP |
ADDITIONAL CPP |
Contributions |
|
|
|
|
|
|
|
Expenditures |
|
|
Assets |
Total assets projected to grow from $372 billion at the end of 2018 to $688 billion by 2030 and $1.7 trillion by 2050.
In 2050, investment income is projected to represent 37% of revenues.
|
Total assets projected to grow from $0 billion at the end of 2018 to $191 billion by 2030 and $1.3 trillion by 2050.
In 2050, investment income is projected to represent 61% of revenues.
|
Minimum Contribution Rates needed to sustain the CPP |
|
The first additional minimum contribution rate as a percentage of first additional contributory earnings is 1.49% in 2022 and 1.98% for years 2023 and thereafter.
The second additional minimum contribution rate as a percentage of second additional contributory earnings is 7.92% for years 2024 and thereafter.
|
|
1.2 Introduction
This is the 30th Actuarial Report on the Canada Pension Plan since the inception of the Canada Pension Plan (CPP or the Plan) in 1966. The valuation date is 31 December 2018. This report has been prepared in compliance with the timing and information requirements of the Canada Pension Plan. Section 113.1 of the Canada Pension Plan provides that the Minister of Finance and ministers of the Crown from the provinces shall review the financial state of the CPP once every three years and may consequently make recommendations to change the benefits or contribution rates, or both. Section 113.1 identifies the factors the ministers consider in their review, including information to be provided by the Chief Actuary.
As of 1 January 2019, the CPP has two components: the base and additional Plans. The CPP consisted only of the base Plan (or base CPP) prior to 2019, and this component continues. The additional Plan (or additional CPP) is the new enhancement to the CPP as of 2019. An important purpose of the report is to inform contributors and beneficiaries of the current and projected financial states of the base and additional CPP. The report provides information to evaluate the base and additional Plans’ financial sustainability over a long period, assuming that the legislation remains unchanged. Such information should facilitate a better understanding of the financial states of the base and additional Plans and the factors that influence costs, and thus contribute to an informed public discussion of issues related to the finances of the two components of the CPP.
The previous triennial report was the 27th Actuarial Report on the Canada Pension Plan as at 31 December 2015, which was tabled in the House of Commons on 27 September 2016.
The Canada Pension Plan was subject to a series of amendments since the 27th CPP Actuarial Report but prior to 31 December 2018 pursuant to the adoption of Bills C-26, C-74, and C-86. These Bills are described further in Appendix A of this report. The 28th CPP Actuarial Report was prepared to show the estimates for the Plan in respect of the introduction of the additional Plan (Bill C-26). The 29th CPP Actuarial Report was prepared to show the effect of Bill C-74 on the long-term financial states of the base and additional Plans. There was no supplemental actuarial report in respect of Bill C-86 since the cost impacts on the CPP were deemed to be small to negligible.
Under Bill C-97 – Budget Implementation Act, 2019, No. 1, the application for a CPP retirement pension is waived upon reaching age 70, effective 1 January 2020. Bill C-97 was introduced in 2019 and received Royal Assent on 21 June 2019. This amendment is considered to be a subsequent event for the purpose of this report, since it became known to the Chief Actuary after the valuation date but before the report date and was determined to have an effect on the financial state of the CPP.
In addition, amendments to the regulations regarding the calculation of the CPP contribution rates were proposed in 2018 to clarify the determination of full funding rates and introduce the calculation of the additional CPP minimum contribution rates. These regulations as well as proposed regulations regarding the sustainability of the additional CPP, namely the Calculation of Contribution Rates Regulations, 2018 and the Additional Canada Pension Plan Sustainability Regulations are awaiting formal consent by the provinces.
This 30th CPP Actuarial Report takes into account all the above listed amendments and proposed regulations as well as the subsequent event of the amendment under Bill C-97. Further, this CPP Actuarial Report takes into account the updated population estimates from Statistics Canada that became available in January 2019. This is also considered to be a subsequent event for the purpose of this report.
1.3 Independent Peer Review Process
As part of its policy of ensuring that it provides sound and relevant actuarial advice to Members of Parliament and to the Canadian population, as was done for previous reports, the Office of the Chief Actuary (OCA) has commissioned an external peer review of this actuarial report on the CPP.
The external peer review is intended to ensure that the actuarial reports meet high professional standards, and are based on reasonable methods and assumptions. Over the years, peer review recommendations have been carefully considered and many of them implemented.
1.4 Scope of the Report
Section 2 presents a general overview of the methodology used in preparing the actuarial estimates included in this report, which are based on the best-estimate assumptions described in section 3. The results for the base Plan and additional Plan are presented separately in sections 4 and 5, respectively, and include for each component the projections of the revenues, expenditures, and assets over more than the next 75 years. Section 6 provides the reconciliation of the results for the base Plan with those of the 27th CPP Actuarial Report as well as the reconciliation of the results for the additional Plan with those of the 28th CPP Actuarial Report. Section 7 presents a general conclusion about the financial states of the base and additional Plans, and section 8 provides the actuarial opinion.
The various appendices provide a summary of the Plan provisions, a description of the data, assumptions and methodology employed, supplemental information on the financing of the CPP, detailed reconciliations of the results with previous reports, the uncertainty of results, and acknowledgements of data providers and staff who contributed to this report.
1.5 Uncertainty of Results
This actuarial report on the Canada Pension Plan presents projections of its revenues and expenditures for both of its components, the base and additional CPP, over a long period of time. Both the length of the projection period and the number of assumptions required ensure that actual future experience will not develop precisely in accordance with the best-estimate projections.
To measure the sensitivity of the long-term projected financial position of the base and additional Plans to future changes in the demographic, economic, and investment environments, a variety of sensitivity tests were performed. The tests and results are presented in detail in Appendix E of this report.
These tests show that the minimum contribution rate (MCR) of the base CPP as well as the first and second additional minimum contribution rates (FAMCR and SAMCR) of the additional Plan would deviate significantly compared to their best estimates, if other than best-estimate assumptions were realized.
Real rates of return on investments, the future evolution of mortality, and future economic growth are among the important factors that could result in the minimum contribution rates being higher than the respective legislated rates. The following table highlights some of the impacts of these factors on the MCR of the base CPP and the FAMCR and SAMCR of the additional Plan.
Highlights of Uncertainty of Results
Base CPP |
Additional CPP |
Rate of Return |
The 30th CPP Actuarial Report is based on an assumed nominal average 75-year rate of return of 5.95% for the base CPP and 5.38% for the additional CPP. |
A decrease of 1% in the assumed nominal average annual 75-year rate of return would result in: |
|
|
An increase of 1% in the assumed nominal average annual 75-year rate of return would result in: |
|
|
Given that the additional CPP relies more heavily on investment earnings as a source of revenues than the base CPP, the AMCRs are more sensitive to changes in the rate of return assumption than the MCR. |
Rate of Return Intervaluation Experience |
For the 30th CPP Actuarial Report, the assumed cumulative nominal rates of return over the inter-valuation period 2019-2021 are 16.3% for the base CPP and 8.1% for the additional CPP. |
If the actual cumulative nominal rate of return over the inter-valuation period 2019-2021 is 6.3% (i.e. 10 percentage points lower than the best-estimate assumption), the MCR for the years 2025 to 2033, determined at the next actuarial valuation, would be the same as the legislated contribution rate of 9.9%.
|
|
Mortality |
The 30th CPP Actuarial Report is based on the assumption that mortality will continue to improve but at a slower pace than over the last few decades. |
If mortality were to improve faster than assumed with life expectancies at age 65 for males and females being about 2.4 years higher by 2050 compared to the best estimates, this would result in: |
|
|
If mortality is assumed to stay at the same level as in 2019, i.e. with no future improvements, this would result in: |
|
|
These differences represent the annual costs of increasing longevity for the base and additional Plans. |
Economic Growth |
The 30th CPP Actuarial Report is based on the assumption of moderate and sustainable economic growth. |
If lower economic growth is assumed with total employment earnings in 2035 being 13% lower compared to the best estimate, this would result in: |
|
|
If higher economic growth is assumed with total employment earnings in 2035 being 15% higher compared to the best estimate, this would result in: |
|
|
The impacts are in the opposite direction for the base and additional Plans due to the different financing approaches of the two components of the CPP. The base CPP relies more heavily on contributions as a source of revenues than the additional CPP. |
|
1.6 Conclusion
The actuarial projections of the financial states of the base and additional Plans presented in this report reveal the following.
Base CPP
This report confirms that the legislated contribution rate of 9.9% is sufficient to finance the base CPP over the long term. Under the legislated contribution rate, contributions to the base Plan are projected to be higher than expenditures over the period 2019 to 2021, with a portion of investment income thereafter required to pay for expenditures. Total assets of the base Plan are expected to increase significantly over the next decade and then to continue increasing, but at a slower pace. Under the legislated contribution rate of 9.9%, base CPP assets are projected to accumulate to $688 billion by the end of 2030 and $1.7 trillion by 2050, while the ratio of assets to the following year’s expenditures is projected to remain relatively stable at a level of 7.6 over the period 2021 to 2031, then grow to 8.8 in 2050 and continue increasing over the projection period.
The MCR of the base CPP is 9.75% for years 2022 to 2033 and 9.72% for the year 2034 and thereafter, which is lower than the legislated contribution rate of 9.9%. Thus, despite the projected substantial increase in benefits paid as a result of an aging population, the legislated rate exceeds the MCR, and the base Plan is expected to be able to meet its obligations throughout the projection period.
Since the MCR of the base CPP is below the legislated contribution rate of 9.9%, the insufficient rates provisions in subsections 113.1(11.05) to 113.1(11.15) of the Canada Pension Plan do not apply. Therefore, in the absence of specific action by the federal and provincial governments, the legislated contribution rate will remain at 9.9% for the year 2019 and thereafter.
Additional CPP
This report confirms that the legislated first and second additional contribution rates of 2.0% for 2023 and thereafter and 8.0% for 2024 and thereafter, respectively, result in projected contributions and investment income that are sufficient to fully pay the projected expenditures of the additional CPP over the long term. Under the legislated additional contribution rates, contributions to the additional Plan are projected to be higher than expenditures up to the year 2057 inclusive, with a portion of investment income thereafter required to pay for expenditures. As such, total assets of the additional Plan are expected to increase rapidly over the first several decades. Under the legislated additional contribution rates, additional CPP assets are projected to grow to $191 billion by the end of 2030 and to $1.3 trillion by 2050, while the ratio of assets to the following year’s expenditures is projected to increase rapidly until 2025 and then decrease to a level of about 26 by 2080.
The FAMCR is 1.98% for the year 2023 and thereafter, and the SAMCR is 7.92% for the year 2024 and thereafter, which are lower than the respective legislated additional contribution rates.
In accordance with the Additional Canada Pension Plan Sustainability Regulations, the AMCRs are sufficiently close to the legislated additional contribution rates such that no immediate action is required to address the differences. Therefore, in the absence of specific action by the federal and provincial governments, the legislated additional contribution rates will remain at their scheduled values.
Base and Additional CPP
To measure the sensitivity of the financial projections of each of the base and additional Plans to future changes in the demographic, economic, and investment environments, a variety of sensitivity tests were performed. Analyses of different asset allocations, the impacts of varying investment experience, and sensitivity tests on key assumptions show that the minimum contribution rates of the base and additional CPP could deviate significantly from their best-estimate values if other than best-estimate assumptions were to be realized, as shown in Appendix E of this report.
The projected financial states of the base and additional Plans presented in this report are based on the assumed demographic, economic, and investment outlooks over the long term. Given the length of the projection period and the number of assumptions required, it is unlikely that the actual experience will develop precisely in accordance with the assumptions. Therefore, it remains important to assess the financial states of the two components on a regular basis by producing periodic actuarial valuation reports. For this purpose, as required by the Canada Pension Plan, the next such actuarial valuation will be as at 31 December 2021.
2. Methodology
As of 1 January 2019, the CPP has two components: the base and additional Plans. The base Plan was the CPP prior to 2019, and this component continues. The additional Plan is the new enhancement to the CPP as of 2019. When not qualified, the term CPP or the Plan used in this report refers to the entire CPP, that is, to both its components.
The actuarial examination of the CPP involves projections of the revenues and expenditures of both components over a long period of time, so that the future impact of historical and projected trends in demographic and economic factors can be properly assessed. The actuarial estimates in this report are based on the provisions of the Canada Pension Plan as at 31 December 2018, data regarding the starting point for the projections, and best-estimate assumptions regarding future demographic, economic, and investment experience.
The revenues of the base and additional Plans include both contributions and investment income. The projection of contributions begins with a projection of the working-age population. This requires assumptions regarding demographic factors such as fertility, migration, and mortality. Total contributory earnings for each component of the Plan are derived by applying labour force participation and job creation rates to the projected population and by projecting future employment earnings. This requires assumptions about various factors such as wage increases, an earnings distribution, and unemployment rates. Contributions for each of the components of the CPP are obtained by applying the respective component’s contribution rate(s) to the respective contributory earnings. Investment income is projected on the basis of the existing portfolio of assets (for the base CPP), projected net cash flows (contributions less expenditures), and the assumptions regarding the future asset mix and rates of return on investments net of investment expenses. Since the assumptions regarding the future asset mix differ between the base and additional Plans, the resulting assumptions regarding investment income differ as well.
Expenditures for each component of the Plan consist of the benefits paid out and operating expenses. Newly emerging benefits are projected by applying assumptions regarding retirement, disability, and death to the populations eligible for benefits, together with the benefit provisions and the earnings histories of participants (actual and projected). The projection of total benefits, which includes the continuation of benefits already in pay at the valuation date, requires further assumptions. Operating expenses, excluding Canada Pension Plan Investment Board (CPPIB) operating expenses, are projected by considering the historical and projected relationship between expenses and total employment earnings, while CPPIB operating expenses are considered in the determination of the rates of return.
The assumptions and results presented in the following sections make it possible to measure the financial states of the base and additional CPP separately in each projection year and to calculate the minimum contribution rates. For the base Plan, the minimum contribution rate (MCR) is the sum of two types of rates. The first of these excludes the full funding provision for increased or new benefits, and is referred to as the “steady-state” contribution rate. The second type of rate that makes up the MCR is the full funding rate for increased or new benefits.
For the additional CPP, there are two additional minimum contribution rates (AMCRs), the first additional minimum contribution rate (FAMCR) and the second additional minimum contribution rate (SAMCR). The FAMCR is applicable to contributory earnings below the Year’s Maximum Pensionable Earnings (YMPE) and the SAMCR is applicable to earnings between the YMPE and the Year’s Additional Maximum Pensionable Earnings (YAMPE).
Details of the methodology used to determine the MCR and AMCRs are presented in Appendix C.
A wide variety of factors influence both the current and projected financial state of the components of the CPP. Accordingly, the results shown in this report differ from those shown in previous reports. Likewise, future actuarial examinations will reveal results that differ from the projections included in this report.
3. Best-Estimate Assumptions
3.1 Introduction
The information required by statute, which is presented in sections 4 and 5 of this report, necessitates making numerous assumptions regarding future demographic, economic, and investment trends. The projections included in this report cover a long period of time (over 75 years), and the assumptions are determined by examining historical long-term and short-term trends and applying judgment as to the extent these trends will continue in the future. These assumptions reflect the Chief Actuary’s best judgment and are referred to in this report as the best-estimate assumptions. The assumptions were chosen to be independently reasonable and appropriate in the aggregate, taking into account certain interrelationships between them.
The assumptions were developed taking into account two subsequent events, that is, events that became known to the Chief Actuary after the valuation date, but before the report date, that were deemed to have an effect on the financial states of the base or additional CPP as at the valuation date. The first subsequent event is the amendment to the Plan under Bill C-97 – Budget Implementation Act, 2019, No. 1, which received Royal Assent on 21 June 2019 (application for a CPP retirement pension is waived upon reaching age 70, effective 1 January 2020). This amendment is further described in Appendices A and B of this report. The second subsequent event is the use of updated population estimates (for years 2018 and prior) from Statistics Canada that became available in January 2019.
The Chief Actuary held a seminar in September 2018 on the long-term demographic, economic, and investment outlook for Canada to obtain opinions from a wide range of individuals with relevant expertise. Five experts in the fields of demographics, economics, investments, and foresight were invited to present their views. Among the participants at the seminar were representatives from the OCA, federal departments including Statistics Canada, Employment and Social Development Canada (ESDC), and the Department of Finance, representatives from provincial and territorial governments, as well as representatives from Retraite Québec, the CPPIB, and other organizations. Representatives of the OCA also attended a seminar on the demographic, economic and financial outlook for 2018-2068 held by Retraite Québec in November 2018. Various presentation materials from both seminars are available on OSFI’s Web site.
Table 1 presents a summary of the most important assumptions used in this report compared with those used in the previous triennial report. The assumptions are described in more detail in Appendix B of this report.
Table 1 Best-Estimate Assumptions
Canada |
30th Report (as at 31 December 2018) |
27th Report (as at 31 December 2015) |
Total Fertility Rate |
1.62 (2027+) |
1.65 (2019+) |
Mortality |
Statistics Canada Life Tables
(CLT 3-year average table:
2014 – 2016)
with assumed future improvements |
Canadian Human Mortality Database
(CHMD 2011)
with assumed future improvements |
Canadian Life Expectancy
at birth in 2019
at age 65 in 2019 |
Males
86.9 years
21.4 years |
Females
89.9 years
23.9 years |
Males
87.0 years
21.5 years |
Females
89.9 years
23.9 years |
Net Migration Rate |
0.62% of population (for 2021+) |
0.62% of population (for 2016+) |
Participation Rate (age group 18-69) |
79.2% |
(2035) |
79.1% |
(2035) |
Employment Rate (age group 18-69) |
74.4% |
(2035) |
74.4% |
(2035) |
Unemployment Rate (ages 15+) |
6.2% |
(2030+) |
6.2% |
(2025+) |
Rate of Increase in Prices |
2.0% |
(2019+) |
2.0% |
(2017+) |
Real Wage Increase |
1.0% |
(2025+) |
1.1% |
(2025+) |
Real Rate of Return (average 2019-2093) |
Base CPP Assets |
4.0% |
4.0% |
Additional CPP Assets |
3.4% |
3.6% |
Retirement Rates for Cohort at Age 60 |
Males |
27.0% (2021+) |
Males |
34.0% (2016+) |
Females |
29.5% (2021+) |
Females |
38.0% (2016+) |
CPP Disability Incidence Rates (per 1,000 eligible) |
Males |
2.95 (2019+) |
Males |
3.17 (2020+) |
Females |
3.65 (2019+) |
Females |
3.72 (2020+) |
|
3.2 Demographic Assumptions
The population projections start with the Canada and Québec populations on 1 July 2018, to which are applied fertility, migration, and mortality assumptions. The relevant population for the Canada Pension Plan is the population of Canada less that of Québec and is obtained by subtracting the projected results for Québec from those for Canada. The population projections are essential in determining the future number of CPP contributors and beneficiaries.
3.2.1 Fertility
The first cause of the aging of the Canadian population is the decline in the total fertility rate that occurred during the last 50 years. The total fertility rate in Canada decreased rapidly from a level of about 4.0 children per woman in the late 1950s to 1.6 by the mid-1980s. The total fertility rate rose slightly in the early 1990s, but then declined to a level of 1.5 by the late 1990s. Canada is one of many industrialized countries that saw their fertility rates increase starting in the 2000s. By 2008, the total fertility rate for Canada reached 1.68. However, in some industrialized countries, including Canada, the total fertility rate has decreased since 2008, which could be attributable to the most recent economic downturn experienced. As of 2017, the total fertility rate for Canada stood at 1.55.
Similar to Canada, the total fertility rate in Québec fell from a high of about 4.0 children per woman in the 1950s; however, the Québec rate fell to a greater degree, reaching 1.4 by the mid-1980s. The Québec rate then recovered somewhat in the early 1990s to over 1.6 and subsequently declined to below 1.5 by the late 1990s. There was a significant increase in the Québec rate in the 2000s, with the rate reaching 1.74 in 2008. However, similar to Canada’s fertility rate, the fertility rate for Québec has been decreasing in recent years and stood at 1.60 in 2017.
The overall decrease in the total fertility rate over the last 50 years occurred as a result of changes in a variety of social, medical, and economic factors. Although there have been periods of growth in the total fertility rates in recent decades, it is unlikely that the rates will return to historical levels in the absence of significant societal changes.
The assumed age-specific fertility rates lead to an assumed total fertility rate for Canada that will increase from its 2017 level of 1.55 children per woman to an ultimate level of 1.62 in 2027. The assumed age-specific fertility rates for Québec lead to a total fertility rate for the province that will increase from its 2017 level of 1.60 to an ultimate level of 1.65 in 2027.
3.2.2 Mortality
Another element that has contributed to the aging of the population is the significant reduction in the age-specific mortality rates. This can be measured by the increase in life expectancy at age 65, which directly affects how long retirement benefits will be paid to beneficiaries. Male life expectancy (without future mortality improvements, i.e. reductions in mortality) at age 65 increased by 42% between 1966 and 2015, rising from 13.6 to 19.3 years. For women, life expectancy at age 65 (without future improvements) increased by 31%, from 16.9 to 22.1 years over the same period. Although the overall gains in life expectancy at age 65 since 1966 are similar for males and females (between 5 and 6 years), about 65% of the increase occurred after 1991 for males, while for females, only about 45% of the increase occurred in that period.
Mortality improvements are expected to continue in the future, but at a slower pace than most recently observed over the 15-year period ending in 2015. Further, it is assumed that ultimately, mortality improvement rates for males will decrease to the same level as for females. The analysis of the Canadian experience over the period 1925 to 2015, including the recent slowdown trends observed in mortality improvement rates for Old Age Security (OAS) beneficiaries, was combined with an analysis of the possible drivers of future mortality improvements.
The 15-year average mortality improvement rates by age and sex for the period ending in 2015 are the starting point for the projected annual mortality improvement rates from 2016 onward. For ages 65 and over, the annual mortality improvement rates for 2016 to 2017 were estimated using the trends derived from the administrative data on OAS beneficiaries, representing 98% of the general population.
Starting from 2015 (2017 for ages 65 and over), the rates are assumed to gradually reduce to their ultimate levels in 2035, which are for both sexes 0.8% per year for ages below 90, 0.5% for ages 90 to 94, and 0.2% for ages 95 and above. Considering future mortality improvements, life expectancy at age 65 in 2019 is projected to be 21.4 years for males, and 23.9 years for females. This represents a decrease of 0.1 years in life expectancy at age 65 in 2019 for males and no change for females, relative to the 27th CPP Actuarial Report projections.
To project CPP benefits, the mortality rates for CPP retirement, survivor, and disability beneficiaries reflect actual experience for those segments of the population. Specific mortality experience for CPP beneficiaries is discussed further in Appendix B of this report.
3.2.3 Net Migration
Net migration corresponds to the number of immigrants less the number of emigrants, plus the number of returning Canadians and the net increase in the number of non-permanent residents.
The net migration rate is expected to decrease from its current (2018) level of 1.11% of the population to 0.86% in 2019, 0.73% in 2020, and reach an ultimate level of 0.62% of the population for the year 2021 and thereafter. The ultimate net migration rate of 0.62% corresponds to the average experience observed over the last 10 years, excluding the net increase in non-permanent residents during that period. For the Québec population, the 2021 ultimate net migration rate assumption corresponds to the 10-year average historical experience for the province of 0.43%, excluding the net increase in non-permanents residents.
3.2.4 Population Projections
Table 2 shows the population of Canada less Québec for three age groups (0-19, 20-64 and 65 and over) throughout the projection period. The ratio of the number of people aged 20-64 to those aged 65 and over is a measure that approximates the ratio of the number of working-age people to retirees. Because of the aging population, this ratio is projected to drop from 3.6 in 2019 to about half its value or 1.9 in 2095.
Table 2 Population of Canada less Québec (thousands)
Year |
Total |
Age
0-19 |
Age
20-64 |
Age
65 and Over |
Ratio of 20-64 to
65 and Over |
2019 |
29,025 |
6,351 |
17,707 |
4,967 |
3.6 |
2020 |
29,354 |
6,368 |
17,821 |
5,165 |
3.5 |
2021 |
29,657 |
6,389 |
17,903 |
5,365 |
3.3 |
2022 |
29,963 |
6,428 |
17,965 |
5,570 |
3.2 |
2023 |
30,272 |
6,479 |
18,013 |
5,780 |
3.1 |
2024 |
30,583 |
6,533 |
18,059 |
5,991 |
3.0 |
2025 |
30,896 |
6,596 |
18,092 |
6,208 |
2.9 |
2030 |
32,432 |
6,860 |
18,320 |
7,251 |
2.5 |
2035 |
33,841 |
7,096 |
18,825 |
7,921 |
2.4 |
2040 |
35,094 |
7,286 |
19,428 |
8,380 |
2.3 |
2045 |
36,227 |
7,382 |
20,121 |
8,724 |
2.3 |
2050 |
37,302 |
7,458 |
20,686 |
9,158 |
2.3 |
2055 |
38,381 |
7,609 |
21,099 |
9,674 |
2.2 |
2060 |
39,516 |
7,839 |
21,390 |
10,286 |
2.1 |
2065 |
40,716 |
8,093 |
21,716 |
10,907 |
2.0 |
2075 |
43,164 |
8,525 |
22,937 |
11,702 |
2.0 |
2085 |
45,555 |
8,892 |
24,291 |
12,372 |
2.0 |
2095 |
48,097 |
9,381 |
25,459 |
13,257 |
1.9 |
3.3 Economic and Investment Assumptions
The main economic assumptions for the Canada Pension Plan are: labour force participation rates, job creation rates, unemployment rates, the rate of increase in prices, and real increases in average employment earnings. For asset projections, further assumptions on real rates of return on invested assets are required.
One of the key elements underlying the best estimate economic assumptions relates to the continued trend toward longer working lives. Older workers are expected to exit the workforce at a later age, which could alleviate the impact of the aging of the population on future labour force growth. However, despite the expected later exit ages, labour force growth is projected to weaken as the working-age population expands at a slower pace and baby boomers exit the labour force. As a result, labour shortages together with projected improvements in productivity growth are assumed to create upward pressure on real wages until 2025.
3.3.1 Labour Force
Employment levels vary with the rate of unemployment, and reflect trends in increased workforce participation by women, longer periods of formal education among young adults, as well as changing retirement patterns of older workers.
As the population ages, older age groups with lower labour force participation increase in size. As a result, the labour force participation rate for Canadians aged 15 and over is expected to decline from 65.2% in 2019 to 63.0% in 2035. A more useful measure of the working-age population is the participation rate of those aged 18 to 69, which is expected to increase from 76.0% in 2019 to 79.2% in 2035.
The increase in the participation rate for those aged 18 to 69 is mainly due to an assumed increase in participation rates for those aged 55 and over as a result of an expected continued trend toward longer working lives. Furthermore, labour shortages create attractive employment opportunities that will continue to exert upward pressure on the participation rates for all age groups. It is also expected that future participation rates will increase with the aging of cohorts that have a stronger labour force attachment compared to previous cohorts due to higher education attainment. The cohort effect of stronger labour force attachment of women is expected to continue but at a much slower pace than in the past, resulting in a gradual narrowing of the gap between the age-specific participation rates of men and women.
As a result, the participation rates for females are projected to increase slightly more than for males. Overall, the male participation rate of those aged 18 to 69 is expected to increase from 79.8% in 2019 to 82.8% in 2035, while the female participation rate for the same age group is expected to increase from 72.1% in 2019 to 75.6% in 2035. Thereafter, the 2035 gap of 7.2% between males and females in this age group is expected to vary between 7.0% and 7.2%.
The job creation rate (i.e. the change in the number of persons employed) in Canada was on average 1.6% from 1976 to 2018 based on available employment data, and it is assumed that the rate will be 1.1% in 2019. The job creation rate assumption is determined on the basis of expected moderate economic growth and an unemployment rate for Canada, ages 15 and over, that is expected to increase from 5.8% in 2018 to 5.9% in 2019 and then reach an ultimate level of 6.2% by 2030. The assumed job creation rate for Canada, ages 15 and over, is on average about 0.7% from 2019 to 2025 and 0.6% from 2025 to 2030, which is slightly lower than the labour force growth rate. It is assumed that, starting in 2030, the job creation rate will follow the labour force growth rate, with both averaging 0.7% per year between 2030 and 2035, and 0.5% per year thereafter. The aging of the population is the main reason behind the expected slower long-term growth in the labour force and job creation rate.
3.3.2 Price Increases
Price increases, as measured by changes in the Consumer Price Index (CPI), tend to fluctuate from year to year. In Canada, increases in prices (inflation) was 2.3% in 2018.
In 2016, the Bank of Canada and the Government renewed their commitment to keep inflation between 1% and 3% until the end of 2021. The Senior Deputy Governor of the Bank of Canada indicated in November 2018 that the Bank was undergoing an extensive review of its monetary policy framework. A number of variants to replace the inflation target are being explored. The Bank is also looking at a possible dual mandate of targeting inflation as well as GDP growth or employment. Nevertheless, given the success of the 2% inflation target, it is considered very likely that the Bank will renew its inflation target commitment or that the target will at least constitute an important part of the Bank’s future mandate.
Price increase forecasts from various economists indicate an average increase in prices of 2.0% from 2019 to 2040. To reflect these forecasts and the expectation that the Bank of Canada will renew its inflation target, the price increase assumption is set at 2.0% for 2019 and thereafter.
3.3.3 Real Wage Increases
Wage increases affect the financial state of the Canada Pension Plan in two ways. In the short term, an increase in the average wage translates into higher contribution income, with little immediate impact on benefits. Over the long term, higher average wages produce higher benefits.
The difference between nominal wage increases and inflation represents increases in the real wage, which is also referred to in this report as the real wage increase. There are five main factors that influence increases in the real wage, namely general productivity, the extent to which changes in productivity are shared between labour and capital, changes in the compensation structure offered to employees, changes in the average number of hours worked, and changes in labour’s terms of trade.
The real wage increase is projected to gradually rise from 0.3% in 2019 to an ultimate value of 1.0% by 2025. The ultimate real wage increase assumption is developed taking into account the relationships described above, historical trends, labour shortages, and other changes in the labour market. The ultimate real wage increase assumption combined with the ultimate price increase assumption results in an assumed annual increase in average nominal wages of 3.0% in 2025 and thereafter.
The assumptions regarding the increase in average real annual employment earnings and job creation rates result in projected average annual real increases in total Canadian employment earnings of about 1.6% for the period 2018 to 2035. After 2035, this decreases to about 1.5% on average over the remainder of the projection period, reflecting the assumed 1.0% real increase in annual wages and projected average 0.5% annual growth in the working-age population.
Given historical trends and the long-term relationship between increases in the average annual employment earnings and the YMPE, it is assumed that the nominal wage increase assumption is also applicable to the increases in the YMPE from one year to the next.
3.3.4 Real Rates of Return on Investments
Real rates of return on investments are the excess of the nominal rates of return over price increases and are required for the projection of revenue arising from investment income. A real rate of return is assumed for each year in the projection period and for each of the main asset categories in which the base and additional CPP assets are invested. The assumed long-term real rates of return on base and additional CPP assets take into account the assumed asset mixes of investments, as well as the assumed real rates of return for all categories of CPP assets. The real rates of return on investments are net of all investment expenses, including CPPIB operating expenses. The 75-year average real rate of return on the base CPP assets is assumed to be 3.95%. The additional CPP, which is assumed to have a different asset mix than the base CPP, has an expected 75-year average real rate of return of 3.38%.
For the period 2019 to 2028, the assumed annual real rates of return are lower than the assumed ultimate real rates of return in 2029 due to lower expected bond returns during the period. The average real rates of return over the period 2019-2028 for the base and additional CPP are respectively 3.6% and 2.1%. The ultimate real rates of return for the base and additional CPP are respectively 4.0% and 3.6%. Table 3 summarizes the main economic assumptions over the projection period.
Table 3 Economic Assumptions (percentages)
Year |
Real Increase Average Annual Earnings |
Real Increase Average Weekly Earnings (YMPE) |
Price Increase |
Labour Force (Canada) |
Real Rates of Return on Investments |
Participation Rate (Ages 15+) |
Job Creation Rate (Ages 15+) |
Unemployment Rate |
Labour Force Annual Increase |
Base CPP |
Additional CPP |
2019 |
0.3 |
0.3 |
2.0 |
65.2 |
1.1 |
5.9 |
1.1 |
2.9 |
(0.7) |
2020 |
0.5 |
0.5 |
2.0 |
65.1 |
0.8 |
5.9 |
0.8 |
2.8 |
0.4 |
2021 |
0.6 |
0.6 |
2.0 |
64.9 |
0.7 |
5.9 |
0.7 |
3.8 |
2.3 |
2022 |
0.7 |
0.7 |
2.0 |
64.7 |
0.7 |
6.0 |
0.7 |
3.6 |
2.4 |
2023 |
0.8 |
0.8 |
2.0 |
64.5 |
0.7 |
6.0 |
0.7 |
3.7 |
2.5 |
2024 |
0.9 |
0.9 |
2.0 |
64.3 |
0.6 |
6.0 |
0.7 |
3.7 |
2.6 |
2025 |
1.0 |
1.0 |
2.0 |
64.1 |
0.6 |
6.1 |
0.7 |
3.6 |
2.7 |
2030 |
1.0 |
1.0 |
2.0 |
63.2 |
0.6 |
6.2 |
0.6 |
4.0 |
3.6 |
2035 |
1.0 |
1.0 |
2.0 |
63.0 |
0.7 |
6.2 |
0.7 |
4.0 |
3.6 |
2040 |
1.0 |
1.0 |
2.0 |
62.5 |
0.6 |
6.2 |
0.6 |
4.0 |
3.6 |
2045 |
1.0 |
1.0 |
2.0 |
62.2 |
0.5 |
6.2 |
0.5 |
4.0 |
3.6 |
2050 |
1.0 |
1.0 |
2.0 |
61.9 |
0.4 |
6.2 |
0.4 |
4.0 |
3.6 |
2055 |
1.0 |
1.0 |
2.0 |
61.5 |
0.3 |
6.2 |
0.3 |
4.0 |
3.6 |
2060 |
1.0 |
1.0 |
2.0 |
61.0 |
0.3 |
6.2 |
0.3 |
4.0 |
3.6 |
2065 |
1.0 |
1.0 |
2.0 |
60.5 |
0.4 |
6.2 |
0.4 |
4.0 |
3.6 |
2075 |
1.0 |
1.0 |
2.0 |
60.2 |
0.5 |
6.2 |
0.5 |
4.0 |
3.6 |
2085 |
1.0 |
1.0 |
2.0 |
60.1 |
0.5 |
6.2 |
0.5 |
4.0 |
3.6 |
2095 |
1.0 |
1.0 |
2.0 |
59.8 |
0.4 |
6.2 |
0.4 |
4.0 |
3.6 |
|
3.4 Other Assumptions
This report is based on several other key assumptions, such as retirement benefit take-up rates and disability incidence rates.
3.4.1 Retirement Benefit Take-up Rates
The retirement benefit take-up rates are determined on a cohort basis. The sex-distinct retirement benefit take-up rate for any given age and year from age 60 and above corresponds to the number of emerging (new) retirement beneficiaries divided by the total number of people eligible for retirement benefits for the given sex, age, and year. The unreduced pension age under the Canada Pension Plan is 65. However, since 1987 a person can choose to receive a reduced retirement pension as early as age 60. This provision has had the effect of lowering the average age at pension take-up. In 1986, the average age at pension take-up was 65.2, compared to an average age of 62.5 over the decade ending in 2018.
In 2012, there was a significant increase observed in the retirement benefit take-up rates at age 60 for the cohort reaching age 60 that year. The retirement benefit take-up rates at age 60 in 2012 were 41% and 43% for males and females, respectively, compared to the corresponding rates of 32% and 35% in 2011. The observed increase in the retirement benefit take-up rates at
age 60 in 2012 may have resulted from two provisions of the Economic Recovery Act (stimulus). First, the work cessation test to receive the pension early (prior to age 65) was removed in 2012. As such, starting in 2012, individuals may receive a CPP retirement pension without having to stop working or materially reduce their earnings. The removal of the work cessation test may have thus led at least in part to the observed increase in take-up rates at age 60 in 2012. Second, greater reductions in early retirement pensions were scheduled to be phased in over a five-year period, starting in 2012. The anticipation of greater adjustments may have also contributed toward the observed increase in retirement benefit take-up rates at age 60 in 2012.
After 2012, the age 60 retirement benefit take-up rates have continually decreased as the higher actuarial adjustments were phased in and the effect of the removal of the work cessation test diminished. For cohorts reaching age 60 in 2018, the retirement benefit take-up rates are 27.9% for males and 30.6% for females, which are the lowest such rates since 1992.
The retirement take-up rates at age 60 observed for 2018 are assumed to further decrease over the next three years such that, for cohorts reaching age 60 in 2021 and thereafter, the retirement benefit take-up rates are assumed to be 27.0% for males and 29.5% for females. For cohorts reaching age 65 in 2026 and thereafter, the retirement benefit take-up rates are 46.4% for both sexes. These rates result in a projected average age at retirement pension take-up in 2030 of 63.5 for males and 63.3 for females. The same retirement take–up rates apply to the additional CPP.
3.4.2 Disability Incidence Rates - Disability Pension
The sex-distinct disability incidence rate in respect of the disability pension at any given age is the number of new disability beneficiaries divided by the total number of people eligible for the disability pension at that age. The disability incidence rates for the base Plan are the same as for the additional Plan.
Based on the experience over the period from 2003 to 2018, the overall incidence rates for the year 2019 and thereafter are assumed to remain constant at the values in 2018, which are 2.95 per thousand eligible for males and 3.65 per thousand eligible for females.
The assumptions for the disability incidence rates in respect of the disability pension recognize that current disability incidence rates are significantly below the levels experienced from the mid-1970s to mid-1990s for males and during the early 1980s and early to mid-1990s for females. It is also recognized that incidence rates for both sexes have been relatively stable since 1997 as a result of administrative changes made to the disability program.
4. Results - Base CPP
4.1 Overview
The key observations and findings of the actuarial projections of the financial state of the base Canada Pension Plan presented in this report are as follows.
With the legislated contribution rate of 9.9%, contributions to the base CPP are projected to be more than sufficient to cover the expenditures over the period 2019 to 2021. Thereafter, a portion of investment income is required to make up the difference between contributions and expenditures. Between 2030 and 2050, it is projected that about 22% of investment income will be required to pay for expenditures. In 2095, it is projected that 37% of investment income will be required to cover expenditures.
With the legislated contribution rate of 9.9%, total assets of the base Plan are expected to increase significantly over the next decade and then will continue increasing, but at a slower pace. Total assets are expected to grow from $372 billion at the end of 2018 to $688 billion by the end of 2030. Assets are then projected to reach $1.7 trillion by 2050 and $9.9 trillion by 2095. The ratio of assets to the following year’s expenditures is projected to remain relatively stable at a level of 7.6 over the period 2021 to 2031 and then grow thereafter to values of 8.8 in 2050 and 9.5 in 2095.
With the legislated contribution rate of 9.9%, investment income of the base Plan, which is expected to represent 26% of revenues (i.e. contributions and investment income) in 2019, is projected to represent 37% of revenues in 2050 and 42% of revenues by 2095. This illustrates the importance of investment income as a source of revenues for the base Plan.
The minimum contribution rate (MCR) to sustain the base Plan is 9.75% of contributory earnings for years 2022 to 2033 and 9.72% for the year 2034 and thereafter. The legislated contribution rate of 9.9% applies to the first three years after the valuation year, that is, to the current triennial review period of 2019-2021.
The MCR consists of two separate components. First, the steady-state contribution rate, which is the lowest rate that results in the projected ratio of the assets to the following year’s expenditures of the base Plan remaining generally constant over the long term, before consideration of any full funding of increased or new benefits, is 9.71% for the year 2022 and thereafter. The second component is the full funding rate that is required to fully fund the recent amendments made to the Canada Pension Plan under Bill C-74 – Budget Implementation Act, 2018, No. 1. The full funding rate is 0.04% for years 2022 to 2033 and 0.01% for the year 2034 and thereafter.
Under the MCR, the ratio of assets to the following year’s expenditures is projected to decrease slightly from 7.6 in 2022 to 7.5 in 2031 and to be the same fifty years later in 2081.
The MCR determined for this report is lower than the MCR of 9.79% determined under the 27th CPP Actuarial Report. Experience over the period 2016 to 2018 was better than expected overall, especially regarding investment returns, leading to a decrease in the MCR. This decrease is partially offset by changes in assumptions. As well, the amendments under Bills C-74 and C-97 have the effects of increasing the MCR. The net result of all changes since the 27th CPP Actuarial Report is an overall absolute decrease in the MCR of 0.07% for the year 2034 and thereafter.
Although the pay-as-you-go rate is expected to increase over time from 9.4% in 2019 to 12.5% by 2095 due to the retirement of the baby boom generation and the projected continued aging of the population, the legislated contribution rate of 9.9% is sufficient to finance the base Plan over the long term. The pay-as-you-go rate is the contribution rate that would need to be paid if there were no assets.
The number of contributors to the CPP is expected to grow from 14.5 million in 2019 to 18.4 million in 2050 and 23.1 million by 2095. Under the legislated contribution rate of 9.9%, base CPP contributions are expected to increase from $51.7 billion in 2019 to $165.5 billion in 2050 and to continue increasing thereafter.
The number of base CPP retirement beneficiaries is expected to increase from 5.6 million in 2019 to 9.9 million in 2050 and to continue increasing thereafter.
There continues to be more female than male base CPP retirement beneficiaries, and by 2050 there is expected to be approximately 750,000 (or 16%) more female than male retirement beneficiaries. Thereafter, the relative difference is projected to fall.
Total expenditures of the base Plan are expected to grow rapidly from approximately $49.3 billion in 2019 to $86.8 billion in 2030. Thereafter, total expenditures are projected to grow at a slower pace, reaching $187.9 billion in 2050 and $1.0 trillion by 2095.
4.2 Contributions
Projected contributions are the product of the contribution rate, the number of contributors, and the average contributory earnings. The contribution rate for the base CPP is set by law and is 9.9%. As of 1 January 2019, all contributors to the base CPP also contribute to the additional CPP.
Table 4 presents the projected number of CPP contributors, including CPP retirement beneficiaries who are working (i.e. “working beneficiaries”), their base CPP contributory earnings and contributions. The number of contributors by age and sex is directly linked to the assumed labour force participation rates applied to the projected working-age population and the job creation rates. Hence, the demographic and economic assumptions have a great influence on the expected level of contributions. In this report, the number of CPP contributors is expected to increase continuously throughout the projection period, but at a generally decreasing pace, from 14.5 million in 2019 to 18.4 million in 2050 and 23.1 million by 2095. The future increase in the number of contributors is limited due to the projected lower growth in the working-age population and labour force.
The growth in base CPP contributory earnings, which are derived by subtracting the Year’s Basic Exemption (YBE) from pensionable earnings (up to the YMPE) is linked to the growth in average employment earnings through the assumption regarding annual increases in wages and is affected by the freeze on the YBE since 1998.
Contributions to the base CPP are expected to increase from $51.7 billion in 2019 to $165.5 billion in 2050 and to continue increasing thereafter, as shown in Table 4. The projected YMPE is also shown, which is assumed to increase according to the nominal wage increase assumption. The YMPE is projected to increase from $57,400 in 2019 to $67,100 in 2025 and $140,500 by 2050.
Since the legislated contribution rate is constant at 9.9% for the year 2019 and thereafter, contributions to the base CPP increase at the same rate as total contributory earnings over the projection period.
Table 4 Contributions - Base CPP
Year |
Contribution Rate (%) |
YMPE ($) |
Number of Contributors (thousands) |
Contributory Earnings ($ million) |
Contributions ($ million) |
2019 |
9.9 |
57,400 |
14,528 |
521,967 |
51,675 |
2020 |
9.9 |
58,700 |
14,712 |
542,126 |
53,670 |
2021 |
9.9 |
60,200 |
14,869 |
563,194 |
55,756 |
2022 |
9.9 |
61,800 |
15,026 |
585,498 |
57,964 |
2023 |
9.9 |
63,400 |
15,152 |
607,349 |
60,128 |
2024 |
9.9 |
65,200 |
15,274 |
630,884 |
62,458 |
2025 |
9.9 |
67,100 |
15,391 |
655,541 |
64,899 |
2030 |
9.9 |
77,800 |
15,935 |
791,884 |
78,397 |
2035 |
9.9 |
90,200 |
16,599 |
960,579 |
95,097 |
2040 |
9.9 |
104,600 |
17,201 |
1,157,737 |
114,616 |
2045 |
9.9 |
121,200 |
17,854 |
1,394,863 |
138,091 |
2050 |
9.9 |
140,500 |
18,422 |
1,671,351 |
165,464 |
2055 |
9.9 |
162,900 |
18,855 |
1,987,685 |
196,781 |
2060 |
9.9 |
188,900 |
19,214 |
2,353,547 |
233,001 |
2065 |
9.9 |
219,000 |
19,606 |
2,789,376 |
276,148 |
2075 |
9.9 |
294,300 |
20,741 |
3,973,597 |
393,386 |
2085 |
9.9 |
395,500 |
21,989 |
5,669,320 |
561,263 |
2095 |
9.9 |
531,600 |
23,126 |
8,026,025 |
794,577 |
4.3 Expenditures
The projected number of base CPP beneficiaries by type of benefit is given in Table 5, while Table 6 presents information for male and female beneficiaries separately. The number of retirement, disability, and survivor beneficiaries increases throughout the projection period. In particular, the number of retirement beneficiaries is expected to increase from 5.6 million in 2019 to 7.9 million by 2030 or by 42% due to the aging of the population and retirement of the baby boomers. By 2050, the number of retirement beneficiaries is projected to be 9.9 million. Female retirement beneficiaries continue to outnumber their male counterparts, and by 2050 there is projected to be 750,000 or 16% more female than male beneficiaries. Over the same period, the number of disability and survivor beneficiaries is projected to increase but at a much slower pace than for retirement beneficiaries.
Table 5 Beneficiaries - Base CPP (thousands)
Year |
Retirement,,, |
Disability, |
Survivor, |
Children |
Death |
2019 |
5,561 |
404 |
1,292 |
218 |
159 |
2020 |
5,807 |
408 |
1,313 |
224 |
163 |
2021 |
6,017 |
412 |
1,335 |
230 |
167 |
2022 |
6,234 |
415 |
1,357 |
237 |
172 |
2023 |
6,461 |
417 |
1,380 |
244 |
176 |
2024 |
6,688 |
420 |
1,403 |
249 |
181 |
2025 |
6,913 |
421 |
1,427 |
254 |
186 |
2030 |
7,893 |
423 |
1,559 |
280 |
216 |
2035 |
8,555 |
448 |
1,703 |
309 |
252 |
2040 |
9,024 |
485 |
1,841 |
337 |
288 |
2045 |
9,442 |
526 |
1,952 |
356 |
317 |
2050 |
9,926 |
554 |
2,029 |
360 |
338 |
2055 |
10,492 |
570 |
2,074 |
359 |
351 |
2060 |
11,122 |
573 |
2,099 |
358 |
357 |
2065 |
11,686 |
574 |
2,128 |
364 |
363 |
2075 |
12,554 |
618 |
2,256 |
383 |
395 |
2085 |
13,316 |
671 |
2,395 |
397 |
433 |
2095 |
14,269 |
705 |
2,432 |
408 |
447 |
|
Table 6 Beneficiaries by Sex - Base CPP (thousands)
Year |
Males |
Females |
Retirement,,, |
Disability, |
Survivor, |
Death |
Retirement,,, |
Disability, |
Survivor, |
Death |
2019 |
2,688 |
183 |
251 |
95 |
2,872 |
221 |
1,042 |
65 |
2020 |
2,797 |
184 |
259 |
97 |
3,010 |
224 |
1,054 |
67 |
2021 |
2,894 |
185 |
268 |
98 |
3,124 |
227 |
1,067 |
69 |
2022 |
2,993 |
186 |
277 |
100 |
3,241 |
229 |
1,080 |
71 |
2023 |
3,098 |
187 |
285 |
103 |
3,364 |
231 |
1,094 |
74 |
2024 |
3,202 |
187 |
294 |
105 |
3,486 |
232 |
1,109 |
76 |
2025 |
3,305 |
187 |
303 |
107 |
3,608 |
234 |
1,124 |
79 |
2030 |
3,747 |
186 |
346 |
122 |
4,147 |
238 |
1,213 |
95 |
2035 |
4,023 |
194 |
386 |
139 |
4,533 |
253 |
1,317 |
113 |
2040 |
4,200 |
210 |
416 |
154 |
4,824 |
274 |
1,424 |
133 |
2045 |
4,364 |
229 |
436 |
166 |
5,078 |
296 |
1,516 |
151 |
2050 |
4,588 |
243 |
446 |
174 |
5,338 |
311 |
1,582 |
164 |
2055 |
4,881 |
250 |
452 |
178 |
5,611 |
321 |
1,622 |
173 |
2060 |
5,224 |
249 |
458 |
180 |
5,898 |
324 |
1,641 |
177 |
2065 |
5,525 |
247 |
467 |
183 |
6,161 |
327 |
1,662 |
179 |
2075 |
5,950 |
267 |
489 |
201 |
6,604 |
352 |
1,767 |
194 |
2085 |
6,316 |
290 |
500 |
220 |
7,000 |
381 |
1,895 |
213 |
2095 |
6,789 |
305 |
501 |
224 |
7,480 |
400 |
1,931 |
222 |
|
Table 7 shows the amount of projected base CPP expenditures by type. Total expenditures of the base Plan are expected to grow rapidly from approximately $49.3 billion in 2019 to $86.8 billion in 2030. Thereafter, total expenditures are projected to grow at a slower pace, reaching $187.9 billion in 2050. Table 8 shows the same information but in millions of 2019 constant dollars.
Table 9 shows the projected base CPP expenditures by type expressed as a percentage of contributory earnings. These are referred to as the pay-as-you-go (or “PayGo”) rates. A pay-as-you-go rate corresponds to the contribution rate that would need to be paid if there were no assets. Although the total pay-as-you-go rate is expected to increase significantly from 9.4% in 2019 to 12.5% by the end of the projection period, the legislated contribution rate of 9.9% is sufficient to finance the base Plan over the projection period.
Table 7 Expenditures - Base CPP ($ million)
Year |
Retirement |
Disability |
Survivor |
Children |
Death |
Operating Expenses |
Total |
2019 |
38,541 |
4,363 |
4,802 |
528 |
398 |
659 |
49,291 |
2020 |
41,228 |
4,498 |
4,899 |
554 |
408 |
683 |
52,270 |
2021 |
43,665 |
4,630 |
5,002 |
582 |
418 |
707 |
55,004 |
2022 |
46,369 |
4,756 |
5,109 |
611 |
429 |
733 |
58,007 |
2023 |
49,249 |
4,876 |
5,222 |
642 |
441 |
759 |
61,188 |
2024 |
52,295 |
5,007 |
5,342 |
669 |
453 |
786 |
64,551 |
2025 |
55,472 |
5,131 |
5,472 |
696 |
466 |
814 |
68,052 |
2026 |
58,730 |
5,257 |
5,614 |
724 |
479 |
843 |
71,648 |
2027 |
62,031 |
5,385 |
5,769 |
753 |
493 |
874 |
75,305 |
2028 |
65,391 |
5,513 |
5,938 |
784 |
508 |
905 |
79,039 |
2029 |
68,811 |
5,655 |
6,123 |
816 |
524 |
937 |
82,867 |
2030 |
72,245 |
5,820 |
6,326 |
850 |
540 |
971 |
86,752 |
2031 |
75,652 |
6,021 |
6,546 |
885 |
557 |
1,006 |
90,667 |
2032 |
79,012 |
6,248 |
6,785 |
920 |
574 |
1,043 |
94,583 |
2033 |
82,362 |
6,494 |
7,040 |
957 |
593 |
1,081 |
98,526 |
2034 |
85,757 |
6,755 |
7,313 |
996 |
611 |
1,121 |
102,553 |
2035 |
89,223 |
7,029 |
7,603 |
1,038 |
629 |
1,163 |
106,684 |
2036 |
92,768 |
7,314 |
7,909 |
1,080 |
647 |
1,204 |
110,922 |
2037 |
96,357 |
7,625 |
8,231 |
1,122 |
665 |
1,247 |
115,248 |
2038 |
99,979 |
7,962 |
8,568 |
1,166 |
684 |
1,293 |
119,651 |
2039 |
103,674 |
8,322 |
8,920 |
1,210 |
701 |
1,340 |
124,167 |
2040 |
107,497 |
8,693 |
9,285 |
1,254 |
718 |
1,388 |
128,835 |
2041 |
111,464 |
9,080 |
9,662 |
1,296 |
734 |
1,439 |
133,676 |
2042 |
115,578 |
9,483 |
10,050 |
1,338 |
750 |
1,492 |
138,691 |
2043 |
119,867 |
9,900 |
10,448 |
1,378 |
765 |
1,547 |
143,907 |
2044 |
124,366 |
10,327 |
10,858 |
1,418 |
780 |
1,605 |
149,353 |
2045 |
129,101 |
10,757 |
11,276 |
1,456 |
792 |
1,663 |
155,045 |
2046 |
134,106 |
11,189 |
11,702 |
1,491 |
804 |
1,724 |
161,016 |
2047 |
139,395 |
11,622 |
12,135 |
1,525 |
816 |
1,787 |
167,279 |
2048 |
144,971 |
12,056 |
12,575 |
1,559 |
826 |
1,851 |
173,838 |
2049 |
150,859 |
12,495 |
13,021 |
1,592 |
836 |
1,917 |
180,720 |
2050 |
157,090 |
12,932 |
13,472 |
1,624 |
844 |
1,984 |
187,948 |
2055 |
193,653 |
15,126 |
15,781 |
1,783 |
876 |
2,349 |
229,568 |
2060 |
240,078 |
17,272 |
18,239 |
1,969 |
891 |
2,769 |
281,218 |
2065 |
294,776 |
19,706 |
21,144 |
2,209 |
905 |
3,267 |
342,009 |
2070 |
355,890 |
23,218 |
24,885 |
2,505 |
937 |
3,874 |
411,310 |
2075 |
427,008 |
27,465 |
29,737 |
2,837 |
987 |
4,619 |
492,653 |
2080 |
510,241 |
32,551 |
35,628 |
3,196 |
1,040 |
5,509 |
588,165 |
2085 |
609,556 |
38,607 |
42,324 |
3,578 |
1,083 |
6,563 |
701,711 |
2090 |
731,717 |
45,267 |
49,594 |
3,997 |
1,108 |
7,804 |
839,487 |
2095 |
881,259 |
52,698 |
57,461 |
4,482 |
1,116 |
9,264 |
1,006,280 |
|
Table 8 Expenditures - Base CPP (millions of 2019 constant dollars)
Year |
Retirement |
Disability |
Survivor |
Children |
Death |
Operating Expenses |
Total |
2019 |
38,541 |
4,363 |
4,802 |
528 |
398 |
659 |
49,291 |
2020 |
40,419 |
4,410 |
4,803 |
543 |
400 |
670 |
51,245 |
2021 |
41,969 |
4,450 |
4,808 |
559 |
402 |
680 |
52,868 |
2022 |
43,694 |
4,482 |
4,814 |
576 |
404 |
691 |
54,661 |
2023 |
45,499 |
4,504 |
4,824 |
593 |
407 |
701 |
56,528 |
2024 |
47,365 |
4,535 |
4,838 |
606 |
410 |
712 |
58,466 |
2025 |
49,258 |
4,556 |
4,859 |
618 |
414 |
723 |
60,428 |
2026 |
51,128 |
4,576 |
4,888 |
630 |
417 |
734 |
62,373 |
2027 |
52,943 |
4,596 |
4,924 |
643 |
421 |
746 |
64,272 |
2028 |
54,716 |
4,613 |
4,969 |
656 |
425 |
757 |
66,136 |
2029 |
56,449 |
4,639 |
5,023 |
670 |
430 |
769 |
67,980 |
2030 |
58,104 |
4,681 |
5,088 |
684 |
435 |
781 |
69,772 |
2031 |
59,651 |
4,748 |
5,162 |
698 |
439 |
793 |
71,490 |
2032 |
61,079 |
4,830 |
5,245 |
712 |
444 |
806 |
73,116 |
2033 |
62,420 |
4,921 |
5,335 |
725 |
449 |
819 |
74,671 |
2034 |
63,718 |
5,019 |
5,433 |
740 |
454 |
833 |
76,198 |
2035 |
64,994 |
5,120 |
5,538 |
756 |
458 |
847 |
77,714 |
2036 |
66,251 |
5,224 |
5,648 |
771 |
462 |
860 |
79,216 |
2037 |
67,465 |
5,339 |
5,763 |
786 |
466 |
873 |
80,692 |
2038 |
68,628 |
5,465 |
5,882 |
800 |
469 |
887 |
82,132 |
2039 |
69,770 |
5,600 |
6,003 |
814 |
472 |
902 |
83,561 |
2040 |
70,924 |
5,735 |
6,126 |
827 |
474 |
916 |
85,002 |
2041 |
72,099 |
5,873 |
6,250 |
839 |
475 |
931 |
86,467 |
2042 |
73,294 |
6,014 |
6,373 |
848 |
476 |
946 |
87,952 |
2043 |
74,524 |
6,155 |
6,496 |
857 |
476 |
962 |
89,470 |
2044 |
75,805 |
6,295 |
6,618 |
864 |
475 |
978 |
91,035 |
2045 |
77,148 |
6,428 |
6,739 |
870 |
474 |
994 |
92,652 |
2046 |
78,568 |
6,555 |
6,856 |
874 |
471 |
1,010 |
94,333 |
2047 |
80,065 |
6,675 |
6,970 |
876 |
468 |
1,026 |
96,081 |
2048 |
81,635 |
6,789 |
7,081 |
878 |
465 |
1,042 |
97,890 |
2049 |
83,285 |
6,898 |
7,188 |
879 |
461 |
1,058 |
99,770 |
2050 |
85,025 |
6,999 |
7,292 |
879 |
457 |
1,074 |
101,726 |
2055 |
94,933 |
7,415 |
7,736 |
874 |
429 |
1,152 |
112,540 |
2060 |
106,597 |
7,669 |
8,098 |
874 |
396 |
1,230 |
124,864 |
2065 |
118,545 |
7,925 |
8,503 |
889 |
364 |
1,314 |
137,540 |
2070 |
129,630 |
8,457 |
9,064 |
912 |
341 |
1,411 |
149,817 |
2075 |
140,873 |
9,061 |
9,810 |
936 |
326 |
1,524 |
162,529 |
2080 |
152,463 |
9,726 |
10,646 |
955 |
311 |
1,646 |
175,747 |
2085 |
164,969 |
10,449 |
11,455 |
968 |
293 |
1,776 |
189,910 |
2090 |
179,362 |
11,096 |
12,157 |
980 |
271 |
1,913 |
205,779 |
2095 |
195,655 |
11,700 |
12,757 |
995 |
248 |
2,057 |
223,412 |
|
Table 9 Expenditures as Percentage of Contributory Earnings - Base CPP (pay-as-you-go rates) (%)
Year |
Retirement |
Disability |
Survivor |
Children |
Death |
Operating Expenses |
Total |
2019 |
7.38 |
0.84 |
0.92 |
0.10 |
0.08 |
0.13 |
9.44 |
2020 |
7.60 |
0.83 |
0.90 |
0.10 |
0.08 |
0.13 |
9.64 |
2021 |
7.75 |
0.82 |
0.89 |
0.10 |
0.07 |
0.13 |
9.77 |
2022 |
7.92 |
0.81 |
0.87 |
0.10 |
0.07 |
0.13 |
9.91 |
2023 |
8.11 |
0.80 |
0.86 |
0.11 |
0.07 |
0.12 |
10.07 |
2024 |
8.29 |
0.79 |
0.85 |
0.11 |
0.07 |
0.12 |
10.23 |
2025 |
8.46 |
0.78 |
0.83 |
0.11 |
0.07 |
0.12 |
10.38 |
2026 |
8.63 |
0.77 |
0.82 |
0.11 |
0.07 |
0.12 |
10.53 |
2027 |
8.77 |
0.76 |
0.82 |
0.11 |
0.07 |
0.12 |
10.65 |
2028 |
8.91 |
0.75 |
0.81 |
0.11 |
0.07 |
0.12 |
10.77 |
2029 |
9.03 |
0.74 |
0.80 |
0.11 |
0.07 |
0.12 |
10.87 |
2030 |
9.12 |
0.73 |
0.80 |
0.11 |
0.07 |
0.12 |
10.96 |
2031 |
9.20 |
0.73 |
0.80 |
0.11 |
0.07 |
0.12 |
11.02 |
2032 |
9.24 |
0.73 |
0.79 |
0.11 |
0.07 |
0.12 |
11.06 |
2033 |
9.27 |
0.73 |
0.79 |
0.11 |
0.07 |
0.12 |
11.09 |
2034 |
9.28 |
0.73 |
0.79 |
0.11 |
0.07 |
0.12 |
11.10 |
2035 |
9.29 |
0.73 |
0.79 |
0.11 |
0.07 |
0.12 |
11.11 |
2036 |
9.31 |
0.73 |
0.79 |
0.11 |
0.06 |
0.12 |
11.13 |
2037 |
9.31 |
0.74 |
0.80 |
0.11 |
0.06 |
0.12 |
11.14 |
2038 |
9.31 |
0.74 |
0.80 |
0.11 |
0.06 |
0.12 |
11.14 |
2039 |
9.30 |
0.75 |
0.80 |
0.11 |
0.06 |
0.12 |
11.14 |
2040 |
9.29 |
0.75 |
0.80 |
0.11 |
0.06 |
0.12 |
11.13 |
2041 |
9.28 |
0.76 |
0.80 |
0.11 |
0.06 |
0.12 |
11.13 |
2042 |
9.27 |
0.76 |
0.81 |
0.11 |
0.06 |
0.12 |
11.12 |
2043 |
9.25 |
0.76 |
0.81 |
0.11 |
0.06 |
0.12 |
11.11 |
2044 |
9.25 |
0.77 |
0.81 |
0.11 |
0.06 |
0.12 |
11.11 |
2045 |
9.26 |
0.77 |
0.81 |
0.10 |
0.06 |
0.12 |
11.12 |
2046 |
9.26 |
0.77 |
0.81 |
0.10 |
0.06 |
0.12 |
11.12 |
2047 |
9.29 |
0.77 |
0.81 |
0.10 |
0.05 |
0.12 |
11.14 |
2048 |
9.31 |
0.77 |
0.81 |
0.10 |
0.05 |
0.12 |
11.17 |
2049 |
9.35 |
0.77 |
0.81 |
0.10 |
0.05 |
0.12 |
11.20 |
2050 |
9.40 |
0.77 |
0.81 |
0.10 |
0.05 |
0.12 |
11.25 |
2055 |
9.74 |
0.76 |
0.79 |
0.09 |
0.04 |
0.12 |
11.55 |
2060 |
10.20 |
0.73 |
0.77 |
0.08 |
0.04 |
0.12 |
11.95 |
2065 |
10.57 |
0.71 |
0.76 |
0.08 |
0.03 |
0.12 |
12.26 |
2070 |
10.71 |
0.70 |
0.75 |
0.08 |
0.03 |
0.12 |
12.37 |
2075 |
10.75 |
0.69 |
0.75 |
0.07 |
0.02 |
0.12 |
12.40 |
2080 |
10.74 |
0.69 |
0.75 |
0.07 |
0.02 |
0.12 |
12.38 |
2085 |
10.75 |
0.68 |
0.75 |
0.06 |
0.02 |
0.12 |
12.38 |
2090 |
10.84 |
0.67 |
0.73 |
0.06 |
0.02 |
0.12 |
12.44 |
2095 |
10.98 |
0.66 |
0.72 |
0.06 |
0.01 |
0.12 |
12.54 |
|
4.4 Financial Projections with Legislated Contribution Rate
4.4.1 Market Value of Assets as at 31 December 2018
Prior to 2001, CPP assets were valued at cost because they were traditionally limited to short-term investments and 20-year non-marketable bonds in the form of loans to the provinces. With the creation of the CPP Investment Board (CPPIB) in 1997, excess cash flows (contributions less Plan expenditures) not needed to pay benefits are invested in the capital markets as of 1999. Those assets, as is usually the case for private pension plans, are valued at market. The market value of base CPP assets is $371.7 billion as at 31 December 2018.
4.4.2 Projected Financial State
Table 10 presents historical results of the base CPP while Table 11 and Table 12 present the projected financial state of the base CPP using the legislated contribution rate of 9.9% in current dollars and in 2019 constant dollars, respectively. The projected financial state of the base CPP using the minimum contribution rate of 9.75% for years 2022-2033, and 9.72% for 2034 and thereafter is discussed in the next section 4.5.
Base CPP assets are projected to increase significantly over the next decade and then to continue increasing, but at a slower pace. As shown in Table 11, base CPP assets are projected to increase from $371.7 billion in 2018 to $687.6 billion in 2030 and to $1,718.2 billion by 2050.
The substantially better than expected investment experience of the base Plan over the previous three years and thus higher than expected level of base CPP assets as at the end of 2018 leads to projected base CPP assets that are significantly higher than projected under the previous triennial actuarial report (the 27th CPP Actuarial Report as at 31 December 2015).
Table 10 Historical Results - Base CPP
Year |
PayGo Rate (%) |
Contribution Rate (%) |
Contributions ($ million) |
Expenditures ($ million) |
Net Cash Flow ($ million) |
Net Investment Income ($ million) |
Assets at 31 Dec. ($ million) |
Yield/ Return (%) |
Assets/Expenditures Ratio |
1966 |
0.05 |
3.6 |
531 |
8 |
523 |
2 |
525 |
0.7 |
52.5 |
1970 |
0.45 |
3.6 |
773 |
97 |
676 |
193 |
3,596 |
6.2 |
24.1 |
1975 |
1.42 |
3.6 |
1,426 |
561 |
865 |
607 |
9,359 |
7.2 |
11.5 |
1980 |
2.72 |
3.6 |
2,604 |
1,965 |
639 |
1,466 |
18,433 |
8.7 |
7.6 |
1985 |
4.31 |
3.6 |
4,032 |
4,826 |
(794) |
3,113 |
31,130 |
10.8 |
5.7 |
1986 |
4.20 |
3.6 |
4,721 |
5,503 |
(782) |
3,395 |
33,743 |
10.9 |
4.7 |
1987 |
5.02 |
3.8 |
5,393 |
7,130 |
(1,737) |
3,654 |
35,660 |
10.9 |
4.3 |
1988 |
5.41 |
4.0 |
6,113 |
8,272 |
(2,159) |
3,886 |
37,387 |
11.0 |
4.0 |
1989 |
5.89 |
4.2 |
6,694 |
9,391 |
(2,697) |
4,162 |
38,852 |
11.3 |
3.7 |
1990 |
5.82 |
4.4 |
7,889 |
10,438 |
(2,549) |
4,386 |
40,689 |
11.4 |
3.5 |
1991 |
6.31 |
4.6 |
8,396 |
11,518 |
(3,122) |
4,476 |
42,043 |
11.2 |
3.2 |
1992 |
7.07 |
4.8 |
8,883 |
13,076 |
(4,193) |
4,497 |
42,347 |
11.0 |
3.0 |
1993 |
7.79 |
5.0 |
9,166 |
14,273 |
(5,107) |
4,480 |
41,720 |
10.9 |
2.7 |
1994 |
8.33 |
5.2 |
9,585 |
15,362 |
(5,777) |
4,403 |
40,346 |
11.0 |
2.5 |
1995 |
7.91 |
5.4 |
10,911 |
15,986 |
(5,075) |
4,412 |
39,683 |
11.3 |
2.4 |
1996 |
8.71 |
5.6 |
10,757 |
16,723 |
(5,966) |
4,177 |
37,894 |
11.0 |
2.2 |
1997 |
8.67 |
6.0 |
12,165 |
17,570 |
(5,405) |
3,971 |
36,460 |
10.8 |
2.0 |
1998 |
8.11 |
6.4 |
14,473 |
18,338 |
(3,865) |
3,938 |
36,535 |
10.9 |
1.9 |
1999 |
8.23 |
7.0 |
16,052 |
18,877 |
(2,825) |
764 |
42,783 |
1.7 |
2.2 |
2000 |
7.69 |
7.8 |
19,977 |
19,683 |
294 |
4,446 |
47,523 |
9.9 |
2.3 |
2001 |
7.85 |
8.6 |
22,469 |
20,515 |
1,954 |
3,154 |
52,631 |
6.2 |
2.4 |
2002 |
8.16 |
9.4 |
24,955 |
21,666 |
3,289 |
187 |
56,107 |
0.3 |
2.5 |
2003 |
8.19 |
9.9 |
27,454 |
22,716 |
4,738 |
6,769 |
67,614 |
11.1 |
2.8 |
2004 |
8.29 |
9.9 |
28,459 |
23,833 |
4,626 |
6,475 |
78,715 |
8.9 |
3.2 |
2005 |
8.37 |
9.9 |
29,539 |
24,976 |
4,563 |
11,083 |
94,361 |
13.2 |
3.6 |
2006 |
8.33 |
9.9 |
31,000 |
26,080 |
4,920 |
14,300 |
113,581 |
14.4 |
4.1 |
2007 |
8.15 |
9.9 |
33,621 |
27,691 |
5,930 |
3,269 |
122,780 |
2.7 |
4.2 |
2008 |
8.03 |
9.9 |
36,053 |
29,259 |
6,794 |
(18,350) |
111,224 |
-14.2 |
3.6 |
2009 |
8.16 |
9.9 |
37,492 |
30,901 |
6,591 |
9,021 |
126,836 |
7.6 |
4.0 |
2010 |
8.83 |
9.9 |
35,885 |
32,023 |
3,862 |
11,804 |
142,502 |
8.9 |
4.2 |
2011 |
8.73 |
9.9 |
38,202 |
33,691 |
4,511 |
8,057 |
155,070 |
5.4 |
4.3 |
2012 |
8.84 |
9.9 |
40,682 |
36,321 |
4,361 |
15,664 |
175,095 |
9.7 |
4.7 |
2013 |
8.73 |
9.9 |
42,632 |
37,575 |
5,057 |
23,887 |
204,039 |
13.2 |
5.3 |
2014 |
8.70 |
9.9 |
44,181 |
38,808 |
5,373 |
32,136 |
241,548 |
15.2 |
5.9 |
2015 |
8.79 |
9.9 |
46,026 |
40,883 |
5,143 |
38,667 |
285,358 |
15.6 |
6.7 |
2016 |
9.06 |
9.9 |
46,492 |
42,561 |
3,931 |
12,244 |
301,533 |
4.2 |
6.8 |
2017 |
9.17 |
9.9 |
48,139 |
44,596 |
3,543 |
35,257 |
340,333 |
11.4 |
7.3 |
2018 |
9.30 |
9.9 |
49,594 |
46,591 |
3,003 |
28,364 |
371,700 |
8.2 |
7.5 |
|
Table 11 Financial Projections - Base CPP, 9.9% Legislated Contribution Rate
Year |
PayGo Rate |
Contribution Rate (%) |
Contributory Earnings (%) |
Contributions ($ million) |
Expenditures ($ million) |
Net Cash Flow ($ million) |
Net Investment Income ($ million) |
Assets at 31 Dec. ($ million) |
Net Rate of Return ($ million) |
Assets/ Expenditures Ratio (%) |
2019 |
9.44 |
9.9 |
521,967 |
51,675 |
49,291 |
2,383 |
18,335 |
392,419 |
4.85 |
7.5 |
2020 |
9.64 |
9.9 |
542,126 |
53,670 |
52,270 |
1,400 |
19,307 |
413,126 |
4.85 |
7.5 |
2021 |
9.77 |
9.9 |
563,194 |
55,756 |
55,004 |
752 |
24,159 |
438,037 |
5.77 |
7.6 |
2022 |
9.91 |
9.9 |
585,498 |
57,964 |
58,007 |
(42) |
24,929 |
462,924 |
5.62 |
7.6 |
2023 |
10.07 |
9.9 |
607,349 |
60,128 |
61,188 |
(1,061) |
26,648 |
488,511 |
5.69 |
7.6 |
2024 |
10.23 |
9.9 |
630,884 |
62,458 |
64,551 |
(2,093) |
28,367 |
514,785 |
5.74 |
7.6 |
2025 |
10.38 |
9.9 |
655,541 |
64,899 |
68,052 |
(3,153) |
29,315 |
540,947 |
5.64 |
7.6 |
2026 |
10.53 |
9.9 |
680,630 |
67,382 |
71,648 |
(4,265) |
31,113 |
567,795 |
5.70 |
7.5 |
2027 |
10.65 |
9.9 |
707,105 |
70,003 |
75,305 |
(5,301) |
34,283 |
596,776 |
5.99 |
7.6 |
2028 |
10.77 |
9.9 |
734,162 |
72,682 |
79,039 |
(6,357) |
35,149 |
625,568 |
5.85 |
7.5 |
2029 |
10.87 |
9.9 |
762,391 |
75,477 |
82,867 |
(7,390) |
37,993 |
656,171 |
6.03 |
7.6 |
2030 |
10.96 |
9.9 |
791,884 |
78,397 |
86,752 |
(8,356) |
39,826 |
687,641 |
6.03 |
7.6 |
2031 |
11.02 |
9.9 |
822,419 |
81,419 |
90,667 |
(9,248) |
41,704 |
720,098 |
6.03 |
7.6 |
2032 |
11.06 |
9.9 |
854,840 |
84,629 |
94,583 |
(9,954) |
43,649 |
753,793 |
6.03 |
7.7 |
2033 |
11.09 |
9.9 |
888,788 |
87,990 |
98,526 |
(10,536) |
45,673 |
788,929 |
6.03 |
7.7 |
2034 |
11.10 |
9.9 |
924,146 |
91,490 |
102,553 |
(11,062) |
47,768 |
825,636 |
6.02 |
7.7 |
2035 |
11.11 |
9.9 |
960,579 |
95,097 |
106,684 |
(11,587) |
49,959 |
864,008 |
6.02 |
7.8 |
2036 |
11.13 |
9.9 |
996,622 |
98,666 |
110,922 |
(12,256) |
52,249 |
904,001 |
6.02 |
7.8 |
2037 |
11.14 |
9.9 |
1,034,670 |
102,432 |
115,248 |
(12,815) |
54,639 |
945,824 |
6.01 |
7.9 |
2038 |
11.14 |
9.9 |
1,074,381 |
106,364 |
119,651 |
(13,287) |
57,141 |
989,679 |
6.01 |
8.0 |
2039 |
11.14 |
9.9 |
1,114,968 |
110,382 |
124,167 |
(13,785) |
59,782 |
1,035,676 |
6.01 |
8.0 |
2040 |
11.13 |
9.9 |
1,157,737 |
114,616 |
128,835 |
(14,219) |
62,550 |
1,084,006 |
6.01 |
8.1 |
2041 |
11.13 |
9.9 |
1,201,584 |
118,957 |
133,676 |
(14,719) |
65,463 |
1,134,750 |
6.01 |
8.2 |
2042 |
11.12 |
9.9 |
1,247,334 |
123,486 |
138,691 |
(15,205) |
68,538 |
1,188,083 |
6.01 |
8.3 |
2043 |
11.11 |
9.9 |
1,295,428 |
128,247 |
143,907 |
(15,659) |
71,775 |
1,244,199 |
6.01 |
8.3 |
2044 |
11.11 |
9.9 |
1,344,464 |
133,102 |
149,353 |
(16,251) |
75,166 |
1,303,114 |
6.01 |
8.4 |
2045 |
11.12 |
9.9 |
1,394,863 |
138,091 |
155,045 |
(16,954) |
78,719 |
1,364,879 |
6.01 |
8.5 |
2046 |
11.12 |
9.9 |
1,447,496 |
143,302 |
161,016 |
(17,714) |
82,443 |
1,429,608 |
6.01 |
8.5 |
2047 |
11.14 |
9.9 |
1,501,085 |
148,607 |
167,279 |
(18,671) |
86,341 |
1,497,277 |
6.01 |
8.6 |
2048 |
11.17 |
9.9 |
1,556,720 |
154,115 |
173,838 |
(19,723) |
90,414 |
1,567,968 |
6.01 |
8.7 |
2049 |
11.20 |
9.9 |
1,613,094 |
159,696 |
180,720 |
(21,023) |
94,662 |
1,641,607 |
6.01 |
8.7 |
2050 |
11.25 |
9.9 |
1,671,351 |
165,464 |
187,948 |
(22,484) |
99,085 |
1,718,208 |
6.01 |
8.8 |
2055 |
11.55 |
9.9 |
1,987,685 |
196,781 |
229,568 |
(32,788) |
123,788 |
2,145,008 |
6.01 |
9.0 |
2060 |
11.95 |
9.9 |
2,353,547 |
233,001 |
281,218 |
(48,217) |
152,558 |
2,640,210 |
6.01 |
9.0 |
2065 |
12.26 |
9.9 |
2,789,376 |
276,148 |
342,009 |
(65,861) |
185,432 |
3,205,873 |
6.01 |
9.0 |
2070 |
12.37 |
9.9 |
3,324,016 |
329,078 |
411,310 |
(82,232) |
223,716 |
3,866,645 |
6.01 |
9.1 |
2075 |
12.40 |
9.9 |
3,973,597 |
393,386 |
492,653 |
(99,266) |
269,472 |
4,657,652 |
6.01 |
9.1 |
2080 |
12.38 |
9.9 |
4,749,801 |
470,230 |
588,165 |
(117,934) |
324,797 |
5,615,242 |
6.01 |
9.2 |
2085 |
12.38 |
9.9 |
5,669,320 |
561,263 |
701,711 |
(140,448) |
392,136 |
6,781,144 |
6.01 |
9.3 |
2090 |
12.44 |
9.9 |
6,750,680 |
668,317 |
839,487 |
(171,170) |
473,590 |
8,189,811 |
6.01 |
9.4 |
2095 |
12.54 |
9.9 |
8,026,025 |
794,577 |
1,006,280 |
(211,703) |
570,803 |
9,869,059 |
6.01 |
9.5 |
2050 |
11.25 |
9.9 |
1,671,351 |
165,464 |
187,948 |
(22,484) |
99,085 |
1,718,208 |
6.01 |
8.8 |
2055 |
11.55 |
9.9 |
1,987,685 |
196,781 |
229,568 |
(32,788) |
123,788 |
2,145,008 |
6.01 |
9.0 |
2060 |
11.95 |
9.9 |
2,353,547 |
233,001 |
281,218 |
(48,217) |
152,558 |
2,640,210 |
6.01 |
9.0 |
2065 |
12.26 |
9.9 |
2,789,376 |
276,148 |
342,009 |
(65,861) |
185,432 |
3,205,873 |
6.01 |
9.0 |
2070 |
12.37 |
9.9 |
3,324,016 |
329,078 |
411,310 |
(82,232) |
223,716 |
3,866,645 |
6.01 |
9.1 |
2075 |
12.40 |
9.9 |
3,973,597 |
393,386 |
492,653 |
(99,266) |
269,472 |
4,657,652 |
6.01 |
9.1 |
2080 |
12.38 |
9.9 |
4,749,801 |
470,230 |
588,165 |
(117,934) |
324,797 |
5,615,242 |
6.01 |
9.2 |
2085 |
12.38 |
9.9 |
5,669,320 |
561,263 |
701,711 |
(140,448) |
392,136 |
6,781,144 |
6.01 |
9.3 |
2090 |
12.44 |
9.9 |
6,750,680 |
668,317 |
839,487 |
(171,170) |
473,590 |
8,189,811 |
6.01 |
9.4 |
2095 |
12.54 |
9.9 |
8,026,025 |
794,577 |
1,006,280 |
(211,703) |
570,803 |
9,869,059 |
6.01 |
9.5 |
|
Table 12 Financial Projections – Base CPP, 9.9% Legislated Contribution Rate (millions of 2019 constant dollars)
Year |
PayGo Rate
(%) |
Contribution Rate (%) |
Contributory Earnings ($ million) |
Contributions ($ million) |
Expenditures ($ million) |
Net Cash Flow ($ million) |
Net Investment Income ($ million) |
Assets at 31 Dec. ($ million) |
2019 |
9.44 |
9.9 |
521,967 |
51,675 |
49,291 |
2,383 |
18,335 |
392,419 |
2020 |
9.64 |
9.9 |
531,496 |
52,618 |
51,245 |
1,373 |
18,928 |
405,025 |
2021 |
9.77 |
9.9 |
541,324 |
53,591 |
52,868 |
723 |
23,221 |
421,027 |
2022 |
9.91 |
9.9 |
551,728 |
54,621 |
54,661 |
(40) |
23,492 |
436,224 |
2023 |
10.07 |
9.9 |
561,096 |
55,549 |
56,528 |
(980) |
24,618 |
451,309 |
2024 |
10.23 |
9.9 |
571,411 |
56,570 |
58,466 |
(1,896) |
25,693 |
466,257 |
2025 |
10.38 |
9.9 |
582,102 |
57,628 |
60,428 |
(2,800) |
26,031 |
480,346 |
2026 |
10.53 |
9.9 |
592,530 |
58,660 |
62,373 |
(3,713) |
27,086 |
494,300 |
2027 |
10.65 |
9.9 |
603,508 |
59,747 |
64,272 |
(4,525) |
29,260 |
509,343 |
2028 |
10.77 |
9.9 |
614,314 |
60,817 |
66,136 |
(5,319) |
29,411 |
523,448 |
2029 |
10.87 |
9.9 |
625,426 |
61,917 |
67,980 |
(6,062) |
31,168 |
538,289 |
2030 |
10.96 |
9.9 |
636,883 |
63,051 |
69,772 |
(6,720) |
32,030 |
553,044 |
2031 |
11.02 |
9.9 |
648,471 |
64,199 |
71,490 |
(7,292) |
32,883 |
567,792 |
2032 |
11.06 |
9.9 |
660,819 |
65,421 |
73,116 |
(7,694) |
33,742 |
582,706 |
2033 |
11.09 |
9.9 |
673,590 |
66,685 |
74,671 |
(7,985) |
34,614 |
597,910 |
2034 |
11.10 |
9.9 |
686,654 |
67,979 |
76,198 |
(8,219) |
35,493 |
613,459 |
2035 |
11.11 |
9.9 |
699,729 |
69,273 |
77,714 |
(8,440) |
36,393 |
629,383 |
2036 |
11.13 |
9.9 |
711,750 |
70,463 |
79,216 |
(8,753) |
37,314 |
645,604 |
2037 |
11.14 |
9.9 |
724,434 |
71,719 |
80,692 |
(8,973) |
38,256 |
662,228 |
2038 |
11.14 |
9.9 |
737,489 |
73,011 |
82,132 |
(9,121) |
39,224 |
679,346 |
2039 |
11.14 |
9.9 |
750,342 |
74,284 |
83,561 |
(9,277) |
40,232 |
696,980 |
2040 |
11.13 |
9.9 |
763,847 |
75,621 |
85,002 |
(9,381) |
41,269 |
715,201 |
2041 |
11.13 |
9.9 |
777,232 |
76,946 |
86,467 |
(9,521) |
42,344 |
734,001 |
2042 |
11.12 |
9.9 |
791,004 |
78,309 |
87,952 |
(9,642) |
43,464 |
753,430 |
2043 |
11.11 |
9.9 |
805,395 |
79,734 |
89,470 |
(9,736) |
44,624 |
773,545 |
2044 |
11.11 |
9.9 |
819,493 |
81,130 |
91,035 |
(9,905) |
45,816 |
794,288 |
2045 |
11.12 |
9.9 |
833,541 |
82,521 |
92,652 |
(10,131) |
47,041 |
815,623 |
2046 |
11.12 |
9.9 |
848,033 |
83,955 |
94,333 |
(10,378) |
48,300 |
837,553 |
2047 |
11.14 |
9.9 |
862,185 |
85,356 |
96,081 |
(10,724) |
49,592 |
859,998 |
2048 |
11.17 |
9.9 |
876,608 |
86,784 |
97,890 |
(11,106) |
50,913 |
882,942 |
2049 |
11.20 |
9.9 |
890,542 |
88,164 |
99,770 |
(11,606) |
52,260 |
906,284 |
2050 |
11.25 |
9.9 |
904,612 |
89,557 |
101,726 |
(12,169) |
53,629 |
929,973 |
2055 |
11.55 |
9.9 |
974,409 |
96,467 |
112,540 |
(16,073) |
60,684 |
1,051,532 |
2060 |
11.95 |
9.9 |
1,044,999 |
103,455 |
124,864 |
(21,409) |
67,737 |
1,172,280 |
2065 |
12.26 |
9.9 |
1,121,758 |
111,054 |
137,540 |
(26,486) |
74,572 |
1,289,254 |
2070 |
12.37 |
9.9 |
1,210,750 |
119,864 |
149,817 |
(29,953) |
81,487 |
1,408,398 |
2075 |
12.40 |
9.9 |
1,310,914 |
129,780 |
162,529 |
(32,749) |
88,900 |
1,536,588 |
2080 |
12.38 |
9.9 |
1,419,270 |
140,508 |
175,747 |
(35,239) |
97,051 |
1,677,869 |
2085 |
12.38 |
9.9 |
1,534,333 |
151,899 |
189,910 |
(38,011) |
106,127 |
1,835,235 |
2090 |
12.44 |
9.9 |
1,654,761 |
163,821 |
205,779 |
(41,958) |
116,089 |
2,007,528 |
2095 |
12.54 |
9.9 |
1,781,917 |
176,410 |
223,412 |
(47,002) |
126,728 |
2,191,103 |
|
Over the period 2019 to 2021, contributions are projected to exceed expenditures for the base CPP. Thereafter, a small but increasing portion of investment income is required to cover the shortfall. This causes the total revenues (contributions and investment income) to continue to be higher than expenditures but to a lesser extent over the long term, which causes the assets to grow at a slower pace.
Table 13 shows in more detail the sources of the revenues required to cover the expenditures, from which several observations can be made:
During the period 2019 to 2021, contributions are more than sufficient to cover expenditures.
From 2022 onward, a portion of investment income is required to fund net cash outflows. It is project that in 2050, 23% of investment income is required to pay for expenditures.
Investment income, which is expected to represent 26% of revenues in 2019, is further projected to represent 34% of revenues in 2030 and 37% of revenues by 2050. This clearly illustrates the importance of investment income as a source of revenues for the base Plan.
Table 13 Sources of Revenues and Funding of Expenditures - Base CPP, 9.9% Legislated Contribution Rate ($ million)
Year |
Contributions |
Net Investment Income |
Total Revenues |
Net Investment Income as % of Revenues (%) |
Expenditures |
Expenditures as % of Revenues (%) |
% of Net Investment Income Needed to Pay Expenditures (%) |
2019 |
51,675 |
18,335 |
70,010 |
26.2 |
49,291 |
70.4 |
0.0 |
2020 |
53,670 |
19,307 |
72,977 |
26.5 |
52,270 |
71.6 |
0.0 |
2021 |
55,756 |
24,159 |
79,915 |
30.2 |
55,004 |
68.8 |
0.0 |
2022 |
57,964 |
24,929 |
82,894 |
30.1 |
58,007 |
70.0 |
0.2 |
2023 |
60,128 |
26,648 |
86,775 |
30.7 |
61,188 |
70.5 |
4.0 |
2024 |
62,458 |
28,367 |
90,825 |
31.2 |
64,551 |
71.1 |
7.4 |
2025 |
64,899 |
29,315 |
94,214 |
31.1 |
68,052 |
72.2 |
10.8 |
2026 |
67,382 |
31,113 |
98,495 |
31.6 |
71,648 |
72.7 |
13.7 |
2027 |
70,003 |
34,283 |
104,286 |
32.9 |
75,305 |
72.2 |
15.5 |
2028 |
72,682 |
35,149 |
107,831 |
32.6 |
79,039 |
73.3 |
18.1 |
2029 |
75,477 |
37,993 |
113,470 |
33.5 |
82,867 |
73.0 |
19.5 |
2030 |
78,397 |
39,826 |
118,222 |
33.7 |
86,752 |
73.4 |
21.0 |
2031 |
81,419 |
41,704 |
123,124 |
33.9 |
90,667 |
73.6 |
22.2 |
2032 |
84,629 |
43,649 |
128,278 |
34.0 |
94,583 |
73.7 |
22.8 |
2033 |
87,990 |
45,673 |
133,663 |
34.2 |
98,526 |
73.7 |
23.1 |
2034 |
91,490 |
47,768 |
139,259 |
34.3 |
102,553 |
73.6 |
23.2 |
2035 |
95,097 |
49,959 |
145,057 |
34.4 |
106,684 |
73.5 |
23.2 |
2036 |
98,666 |
52,249 |
150,915 |
34.6 |
110,922 |
73.5 |
23.5 |
2037 |
102,432 |
54,639 |
157,071 |
34.8 |
115,248 |
73.4 |
23.5 |
2038 |
106,364 |
57,141 |
163,505 |
34.9 |
119,651 |
73.2 |
23.3 |
2039 |
110,382 |
59,782 |
170,164 |
35.1 |
124,167 |
73.0 |
23.1 |
2040 |
114,616 |
62,550 |
177,166 |
35.3 |
128,835 |
72.7 |
22.7 |
2041 |
118,957 |
65,463 |
184,420 |
35.5 |
133,676 |
72.5 |
22.5 |
2042 |
123,486 |
68,538 |
192,024 |
35.7 |
138,691 |
72.2 |
22.2 |
2043 |
128,247 |
71,775 |
200,023 |
35.9 |
143,907 |
71.9 |
21.8 |
2044 |
133,102 |
75,166 |
208,268 |
36.1 |
149,353 |
71.7 |
21.6 |
2045 |
138,091 |
78,719 |
216,810 |
36.3 |
155,045 |
71.5 |
21.5 |
2046 |
143,302 |
82,443 |
225,745 |
36.5 |
161,016 |
71.3 |
21.5 |
2047 |
148,607 |
86,341 |
234,948 |
36.7 |
167,279 |
71.2 |
21.6 |
2048 |
154,115 |
90,414 |
244,529 |
37.0 |
173,838 |
71.1 |
21.8 |
2049 |
159,696 |
94,662 |
254,359 |
37.2 |
180,720 |
71.0 |
22.2 |
2050 |
165,464 |
99,085 |
264,549 |
37.5 |
187,948 |
71.0 |
22.7 |
2055 |
196,781 |
123,788 |
320,569 |
38.6 |
229,568 |
71.6 |
26.5 |
2060 |
233,001 |
152,558 |
385,559 |
39.6 |
281,218 |
72.9 |
31.6 |
2065 |
276,148 |
185,432 |
461,580 |
40.2 |
342,009 |
74.1 |
35.5 |
2070 |
329,078 |
223,716 |
552,794 |
40.5 |
411,310 |
74.4 |
36.8 |
2075 |
393,386 |
269,472 |
662,858 |
40.7 |
492,653 |
74.3 |
36.8 |
2080 |
470,230 |
324,797 |
795,027 |
40.9 |
588,165 |
74.0 |
36.3 |
2085 |
561,263 |
392,136 |
953,399 |
41.1 |
701,711 |
73.6 |
35.8 |
2090 |
668,317 |
473,590 |
1,141,907 |
41.5 |
839,487 |
73.5 |
36.1 |
2095 |
794,577 |
570,803 |
1,365,379 |
41.8 |
1,006,280 |
73.7 |
37.1 |
|
Chart 1 shows historical and projected revenues and expenditures of the base CPP for the period 2000 to 2050.
Chart 1 - Revenues and Expenditures - Base CPP, 9.9% legislated contribution rate (billions of 2019 constant dollars)
Description
Line chart showing the historical and projected base CPP’s revenues and expenditures using the 9.9% legislated contribution rate. Y axis represents billions of 2019 constant dollars. X axis represents the year.
Contributions are 19.9 in the year 2000, increase to 49.6 in 2018, and are projected to continue increasing to reach 89.6 in 2050.
Investment Income is 4.5 in 2000, increases overall to reach 28.4 in 2018, and is then projected to decrease in 2019 before increasing thereafter to reach 53.6 in 2050.
Total Revenues is 24.4 in 2000, increase overall to reach 78.0 in 2018, and are then projected to decrease in 2019 before increasing thereafter to reach 143.2 in 2050.
Expenditures is 19.7 in 2000, increase to 46.6 in 2018, and are projected to continue increasing to reach 101.7 in 2050.
4.5 Financial Projections with Minimum Contribution Rate
The results presented in Table 14 are based on the best-estimate assumptions, but use the MCR of 9.75% for 2022-2033 and 9.72% thereafter as opposed to the legislated contribution rate of 9.9% for 2022 and thereafter. The financial projections of the base Plan under the legislated rate of 9.9% were previously presented in Table 11. Under the MCR, the ratio of assets to the following year’s expenditures is projected to decrease slightly from 7.6 in 2022 to 7.5 in 2031 and to be the same fifty years later in 2081.
In the case that the MCR, as determined by an actuarial report, exceeds the legislated rate, the insufficient rates provisions of the CPP statute may result in adjustments to the base CPP legislated contribution rate and, perhaps, benefits in pay if the federal and provincial governments make no recommendation to either increase the legislated rate or maintain it. In respect of this 30th CPP Actuarial Report, the MCR is less than the legislated rate of 9.9%, and thus the insufficient rates provisions do not apply. Therefore, in the absence of specific action by the federal and provincial governments, the legislated contribution rate will remain at 9.9% for the year 2019 and thereafter.
Table 14 Financial Projections - Base CPP, Minimum Contribution Rate of 9.75% 2022-2033, 9.72% 2034+
Year |
PayGo
Rate (%) |
Contribution
Rate (%) |
Contributory
Earnings ($ million) |
Contributions ($ million) |
Expenditures ($ million) |
Net Cash Flow ($ million) |
Net Investment Income ($ million) |
Assets at 31 Dec. ($ million) |
Assets/ Expenditures Ratio |
2019 |
9.44 |
9.90 |
521,967 |
51,675 |
49,291 |
2,383 |
18,335 |
392,419 |
7.5 |
2020 |
9.64 |
9.90 |
542,126 |
53,670 |
52,270 |
1,400 |
19,307 |
413,126 |
7.5 |
2021 |
9.77 |
9.90 |
563,194 |
55,756 |
55,004 |
752 |
24,159 |
438,037 |
7.6 |
2022 |
9.91 |
9.75 |
585,498 |
57,086 |
58,007 |
(920) |
24,902 |
462,019 |
7.6 |
2023 |
10.07 |
9.75 |
607,349 |
59,216 |
61,188 |
(1,972) |
26,568 |
486,615 |
7.5 |
2024 |
10.23 |
9.75 |
630,884 |
61,511 |
64,551 |
(3,040) |
28,228 |
511,803 |
7.5 |
2025 |
10.38 |
9.75 |
655,541 |
63,915 |
68,052 |
(4,136) |
29,117 |
536,784 |
7.5 |
2026 |
10.53 |
9.75 |
680,630 |
66,361 |
71,648 |
(5,286) |
30,844 |
562,342 |
7.5 |
2027 |
10.65 |
9.75 |
707,105 |
68,943 |
75,305 |
(6,362) |
33,922 |
589,902 |
7.5 |
2028 |
10.77 |
9.75 |
734,162 |
71,581 |
79,039 |
(7,458) |
34,712 |
617,156 |
7.4 |
2029 |
10.87 |
9.75 |
762,391 |
74,333 |
82,867 |
(8,534) |
37,449 |
646,071 |
7.4 |
2030 |
10.96 |
9.75 |
791,884 |
77,209 |
86,752 |
(9,544) |
39,179 |
675,706 |
7.5 |
2031 |
11.02 |
9.75 |
822,419 |
80,186 |
90,667 |
(10,481) |
40,945 |
706,170 |
7.5 |
2032 |
11.06 |
9.75 |
854,840 |
83,347 |
94,583 |
(11,236) |
42,769 |
737,703 |
7.5 |
2033 |
11.09 |
9.75 |
888,788 |
86,657 |
98,526 |
(11,869) |
44,661 |
770,495 |
7.5 |
2034 |
11.10 |
9.72 |
924,146 |
89,827 |
102,553 |
(12,726) |
46,605 |
804,374 |
7.5 |
2035 |
11.11 |
9.72 |
960,579 |
93,368 |
106,684 |
(13,316) |
48,623 |
839,681 |
7.6 |
2036 |
11.13 |
9.72 |
996,622 |
96,872 |
110,922 |
(14,050) |
50,727 |
876,358 |
7.6 |
2037 |
11.14 |
9.72 |
1,034,670 |
100,570 |
115,248 |
(14,678) |
52,915 |
914,595 |
7.6 |
2038 |
11.14 |
9.72 |
1,074,381 |
104,430 |
119,651 |
(15,221) |
55,199 |
954,573 |
7.7 |
2039 |
11.14 |
9.72 |
1,114,968 |
108,375 |
124,167 |
(15,792) |
57,605 |
996,386 |
7.7 |
2040 |
11.13 |
9.72 |
1,157,737 |
112,532 |
128,835 |
(16,303) |
60,118 |
1,040,201 |
7.8 |
2041 |
11.13 |
9.72 |
1,201,584 |
116,794 |
133,676 |
(16,882) |
62,758 |
1,086,077 |
7.8 |
2042 |
11.12 |
9.72 |
1,247,334 |
121,241 |
138,691 |
(17,450) |
65,537 |
1,134,163 |
7.9 |
2043 |
11.11 |
9.72 |
1,295,428 |
125,916 |
143,907 |
(17,991) |
68,456 |
1,184,628 |
7.9 |
2044 |
11.11 |
9.72 |
1,344,464 |
130,682 |
149,353 |
(18,671) |
71,504 |
1,237,461 |
8.0 |
2045 |
11.12 |
9.72 |
1,394,863 |
135,581 |
155,045 |
(19,465) |
74,688 |
1,292,684 |
8.0 |
2046 |
11.12 |
9.72 |
1,447,496 |
140,697 |
161,016 |
(20,320) |
78,016 |
1,350,380 |
8.1 |
2047 |
11.14 |
9.72 |
1,501,085 |
145,905 |
167,279 |
(21,373) |
81,487 |
1,410,494 |
8.1 |
2048 |
11.17 |
9.72 |
1,556,720 |
151,313 |
173,838 |
(22,525) |
85,103 |
1,473,072 |
8.2 |
2049 |
11.20 |
9.72 |
1,613,094 |
156,793 |
180,720 |
(23,927) |
88,860 |
1,538,005 |
8.2 |
2050 |
11.25 |
9.72 |
1,671,351 |
162,455 |
187,948 |
(25,492) |
92,756 |
1,605,269 |
8.2 |
2055 |
11.55 |
9.72 |
1,987,685 |
193,203 |
229,568 |
(36,365) |
114,202 |
1,974,373 |
8.3 |
2060 |
11.95 |
9.72 |
2,353,547 |
228,765 |
281,218 |
(52,454) |
138,402 |
2,388,719 |
8.2 |
2065 |
12.26 |
9.72 |
2,789,376 |
271,127 |
342,009 |
(70,881) |
164,915 |
2,841,877 |
8.0 |
2070 |
12.37 |
9.72 |
3,324,016 |
323,094 |
411,310 |
(88,216) |
194,388 |
3,346,858 |
7.8 |
2075 |
12.40 |
9.72 |
3,973,597 |
386,234 |
492,653 |
(106,419) |
227,986 |
3,922,967 |
7.7 |
2080 |
12.38 |
9.72 |
4,749,801 |
461,681 |
588,165 |
(126,484) |
266,597 |
4,585,240 |
7.5 |
2085 |
12.38 |
9.72 |
5,669,320 |
551,058 |
701,711 |
(150,653) |
311,042 |
5,346,716 |
7.4 |
2090 |
12.44 |
9.72 |
6,750,680 |
656,166 |
839,487 |
(183,321) |
361,230 |
6,203,247 |
7.1 |
2095 |
12.54 |
9.72 |
8,026,025 |
780,130 |
1,006,280 |
(226,150) |
415,863 |
7,130,703 |
6.8 |
|
Table 15 shows the progression of the MCR over time under the best-estimate assumptions of this report.
As shown in Table 15, the MCR is relatively stable over the periods considered. If the best-estimate assumptions of this report are realized, the MCR will increase between 0.01% and 0.05% for each of the next four reports and will remain below the legislated contribution rate of 9.9%. Thus, the current legislated contribution rate is projected to be sufficient over subsequent reports as long as the best-estimate assumptions remain the same and base Plan experience does not deviate materially from the assumptions.
Table 15 Progression of Minimum Contribution Rate over Time – Base CPP
Valuation Year |
Steady-State Target Years |
Steady-State Target A/E Ratio |
Steady-State Contribution Rate |
Full Funding Rate |
Minimum Contribution Rate (MCR) |
Average PayGo Rate Over Target Years Period |
Prior
to 2034 |
2034+ |
Prior
to 2034 |
2034+ |
2018 |
2031 and 2081 |
7.5 |
9.71% |
0.04% |
0.01% |
9.75% |
9.72% |
11.7 |
2021 |
2034 and 2084 |
7.6 |
9.71% |
0.04% |
0.01% |
9.75% |
9.72% |
11.8 |
2024 |
2037 and 2087 |
7.8 |
9.73% |
0.04% |
0.01% |
9.77% |
9.74% |
11.9 |
2027 |
2040 and 2090 |
8.0 |
9.74% |
0.05% |
0.01% |
9.79% |
9.75% |
11.9 |
2030 |
2043 and 2093 |
8.2 |
9.78% |
N/A |
N/A |
N/A |
9.78% |
12.0 |
|
5. Results – Additional CPP
5.1 Overview
The key observations and findings of the actuarial projections of the financial state of the additional CPP presented in this report are as follows.
With the legislated first and second additional contribution rates of 2.0% for 2023 and thereafter and 8.0% for 2024 and thereafter, respectively, contributions to the additional CPP are projected to be higher than expenditures up to the year 2057 inclusive.
With the legislated first and second additional contribution rates of 2.0% for 2023 and thereafter and 8.0% for 2024 and thereafter, total assets are expected to increase rapidly over the first several decades as contributions are projected to exceed expenditures. The additional CPP assets are projected to grow from $1.5 billion at the end of 2019 to $68 billion by 2025, $191 billion by 2030, $1.3 trillion by 2050, and $9.8 trillion by 2095. The ratio of assets to the following year’s expenditures is projected to increase rapidly until 2025 and then decrease after that, reaching a level of about 26 by 2075 and remaining at that level for the years following up to 2095.
Due to the financing approach of the additional Plan, investment income will become the major source of revenues of the additional Plan. With the legislated first and second additional contribution rates of 2.0% for 2023 and thereafter and 8.0% for 2024 and thereafter, investment income is projected to represent about 70% of revenues (i.e. contributions and investment income) of the additional CPP by 2075.
The first additional minimum contribution rate (FAMCR) applicable to pensionable earnings between the YBE and YMPE is 1.49% in 2022 and 1.98% for the year 2023 and thereafter. The second additional minimum contribution rate (SAMCR) applicable to pensionable earnings above the YMPE up to the YAMPE is 7.92% for the year 2024 and thereafter. The phased-in legislated first additional contribution rates of 0.3%, 0.6%, and 1.0% applies respectively to the first three years after the valuation year, that is, to the current triennial review period of 2019-2021.
Under the FAMCR of 1.98% for 2023 and thereafter and the SAMCR of 7.92% for 2024 and thereafter, the additional CPP open group assets represent 107% of its open group actuarial obligations as at 1 January 2019, and the ratio of invested assets to expenditures stabilizes at a value of 25 for the target years 2088 and 2098.
Although demographic experience over 2016 to 2018 was better than anticipated and acted to lower the AMCRs, changes in assumptions, especially those related to the CPPIB investment policy, and the amendments under Bills C-74 and C-97 have more than offset the decrease. As a result, the net result of all changes since the 28th CPP Actuarial Report is an overall absolute increase in the FAMCR of 0.05% and corresponding increase in the SAMCR of 0.20%.
Demographic changes affecting the base CPP, particularly the aging of the population, will also affect the additional Plan, but to a lesser extent than the base Plan due to the different financing approaches of the base and additional Plans.
The number of contributors to the additional CPP is the same as to the base CPP, since an individual cannot contribute to the additional Plan without also contributing to the base Plan. Under the legislated first and second additional contribution rates of 2.0% and 8.0%, respectively, additional contributions are expected to increase from $1.6 billion in 2019 to $17 billion in 2025, $43 billion in 2050, and to continue increasing thereafter.
The number of beneficiaries of additional retirement benefits is expected to increase from 0.2 million in 2019 to 1.8 million in 2025, 8.9 million in 2050, and to continue increasing thereafter.
Total additional CPP expenditures are expected to steadily grow over time as the additional Plan matures and individuals accrue benefits. Total additional CPP expenditures are projected to increase from approximately $85 million in 2020 to $1.7 billion in 2030, $28 billion in 2050, and $359 billion by 2095.
5.2 Contributions
Projected additional contributions are the product of the additional contribution rates, the number of contributors, and the average first and second additional contributory earnings. The first and second additional contribution rates for the additional CPP are set by law and are 2.0% for 2023 and thereafter and 8.0% for 2024 and thereafter. The first additional contribution rate is phased in over the period 2019 to 2023 as: 0.3%, 0.6%, 1.0%, 1.5%, and 2.0%, and the second tier of the additional Plan starts in 2024.
Table 16 presents the projected number of contributors to the additional CPP, including retirement beneficiaries who receive additional retirement benefits and are working (working beneficiaries), their additional contributory earnings, and additional contributions.
As all contributors to the additional Plan are contributors to the base Plan, the number of contributors to the additional Plan is linked to the same assumed labour force participation rates applied to the working-age population and the job creation rates as for the base Plan.
The additional contributory earnings relating to the first tier of the additional CPP are the same as the base CPP contributory earnings (pensionable earnings between the YBE and YMPE). As such, the projected total first additional contributory earnings shown in Table 16 are the same as the projected total base CPP contributory earnings shown in Table 4.
The second additional contributory earnings relating to pensionable earnings above the YMPE up to the YAMPE are based on the assumed annual increases in wages and the assumed proportion of individuals with pensionable earnings between the YMPE and YAMPE.
As shown in Table 16, total contributions to the additional CPP are expected to be $1.6 billion in 2019 and then are projected to increase to about $12.1 billion in 2023 following the phase-in of the first additional contribution rate. The total additional contributions are projected to reach $17.0 billion by 2025, following the full phase-in of the additional CPP. Thereafter, total contributions to the additional Plan continue to increase, reaching $43.0 billion by 2050.
The projected YMPE and YAMPE are also shown, which are assumed to increase with the nominal wage increase assumption, with the YAMPE equal to 107% of the YMPE in 2024 and 114% of the YMPE from 2025 onward (rounded down to the nearest $100). The YAMPE is projected to be $69,700 initially in 2024 and to then increase to $160,100 by 2050.
After the end of the phase-in period in 2025, the first and second additional contributions to the additional CPP increase at the same rate as the first and second additional contributory earnings, respectively, throughout the projection period. This growth is reflected in the projected total additional contributions.
Table 16
Contributions - Additional CPP
Year |
First Additional Contribution Rate
(%) |
Second Additional Contribution Rate
(%) |
YMPE
($) |
YAMPE
($) |
Number of Contributors
(thousands) |
First Additional Contributory Earnings
($ million) |
Second Additional Contributory Earnings
($ million) |
Additional Contributions
($ million) |
2019 |
0.3 |
– |
57,400 |
– |
14,528 |
521,967 |
– |
1,566 |
2020 |
0.6 |
– |
58,700 |
– |
14,712 |
542,126 |
– |
3,253 |
2021 |
1.0 |
– |
60,200 |
– |
14,869 |
563,194 |
– |
5,632 |
2022 |
1.5 |
– |
61,800 |
– |
15,026 |
585,498 |
– |
8,782 |
2023 |
2.0 |
– |
63,400 |
– |
15,152 |
607,349 |
– |
12,147 |
2024 |
2.0 |
8.0 |
65,200 |
69,700 |
15,274 |
630,884 |
24,189 |
14,553 |
2025 |
2.0 |
8.0 |
67,100 |
76,400 |
15,391 |
655,541 |
48,363 |
16,980 |
2030 |
2.0 |
8.0 |
77,800 |
88,600 |
15,935 |
791,884 |
57,959 |
20,474 |
2035 |
2.0 |
8.0 |
90,200 |
102,800 |
16,599 |
960,579 |
70,032 |
24,814 |
2040 |
2.0 |
8.0 |
104,600 |
119,200 |
17,201 |
1,157,737 |
83,697 |
29,851 |
2045 |
2.0 |
8.0 |
121,200 |
138,100 |
17,854 |
1,394,863 |
100,221 |
35,915 |
2050 |
2.0 |
8.0 |
140,500 |
160,100 |
18,422 |
1,671,351 |
119,475 |
42,985 |
2055 |
2.0 |
8.0 |
162,900 |
185,700 |
18,855 |
1,987,685 |
141,782 |
51,096 |
2060 |
2.0 |
8.0 |
188,900 |
215,300 |
19,214 |
2,353,547 |
166,935 |
60,426 |
2065 |
2.0 |
8.0 |
219,000 |
249,600 |
19,606 |
2,789,376 |
197,054 |
71,552 |
2075 |
2.0 |
8.0 |
294,300 |
335,500 |
20,741 |
3,973,597 |
279,401 |
101,824 |
2085 |
2.0 |
8.0 |
395,500 |
450,800 |
21,989 |
5,669,320 |
396,260 |
145,087 |
2095 |
2.0 |
8.0 |
531,600 |
606,000 |
23,126 |
8,026,025 |
559,448 |
205,276 |
5.3 Expenditures
Under the additional CPP, there are only earnings-related benefits. There are no flat-rate components to the additional disability and survivor benefits, and no additional flat-rate children’s or death benefits.
The projected number of additional CPP beneficiaries by type of benefit is given in Table 17, while Table 18 presents information for male and female beneficiaries separately. The number of additional retirement beneficiaries increases over time as the number of contributors reaching age 60 (earliest retirement age) and over with at least one valid contribution to the additional CPP increases. The total number of retirement beneficiaries receiving additional retirement benefits is projected to increase from 182,000 in 2019 to 8.9 million by 2050.
The total number of disability and survivor beneficiaries receiving additional benefits increases over time as well. Since eligibility to these benefits is harmonized between the base and additional CPP, all new disability and survivor beneficiaries of the base CPP will also be entitled to additional benefits as long as they (in the case of disability beneficiaries) and their deceased partners (in the case of survivor beneficiaries) had made at least one contribution to the additional Plan. The total number of disability beneficiaries receiving additional benefits is projected to increase from 23,000 in 2019 to 541,000 in 2050. The total number of survivor beneficiaries receiving additional benefits is projected to increase from 15,000 to 1.6 million in 2050.
As the number of additional CPP retirement, disability, and survivor beneficiaries eventually becomes the same as those for the base CPP, the difference between female and male beneficiaries will likewise become equal.
Table 19 shows the amount of projected additional CPP expenditures by type. Projected additional benefit expenditures are low over the first few years of the additional Plan as additional benefits start to accrue. In 2019 and 2020, total expenditures are largely attributable to the operating expenses of the additional Plan. As higher additional benefits become payable to a greater number of beneficiaries, projected additional expenditures increase to reach $447 million in 2025 and $28 billion by 2050. Table 20 presents the same information but in 2019 constant dollars.
Table 17 Beneficiaries - Additional CPP (thousands)
Year |
Retirement,, |
Disability |
Survivor, |
2019 |
182 |
23 |
15 |
2020 |
409 |
50 |
33 |
2021 |
655 |
76 |
55 |
2022 |
917 |
102 |
78 |
2023 |
1,198 |
128 |
103 |
2024 |
1,490 |
153 |
131 |
2025 |
1,789 |
177 |
160 |
2030 |
3,290 |
276 |
343 |
2035 |
4,842 |
363 |
597 |
2040 |
6,310 |
438 |
912 |
2045 |
7,673 |
501 |
1,248 |
2050 |
8,935 |
541 |
1,552 |
2055 |
10,031 |
563 |
1,783 |
2060 |
10,950 |
567 |
1,943 |
2065 |
11,638 |
569 |
2,055 |
2075 |
12,553 |
614 |
2,245 |
2085 |
13,316 |
665 |
2,394 |
2095 |
14,269 |
699 |
2,432 |
|
Table 18
Beneficiaries by Sex – Additional CPP (thousands)
|
Males |
Females |
Year |
Retirement,, |
Disability |
Survivor, |
Retirement,, |
Disability |
Survivor, |
2019 |
95 |
12 |
5 |
87 |
12 |
10 |
2020 |
215 |
25 |
11 |
195 |
25 |
22 |
2021 |
343 |
38 |
18 |
312 |
38 |
36 |
2022 |
479 |
51 |
26 |
438 |
52 |
52 |
2023 |
624 |
63 |
34 |
574 |
65 |
69 |
2024 |
774 |
75 |
44 |
716 |
79 |
87 |
2025 |
927 |
86 |
53 |
863 |
92 |
107 |
2030 |
1,679 |
128 |
110 |
1,611 |
148 |
232 |
2035 |
2,414 |
162 |
183 |
2,428 |
200 |
414 |
2040 |
3,081 |
193 |
260 |
3,229 |
245 |
652 |
2045 |
3,682 |
220 |
328 |
3,991 |
281 |
920 |
2050 |
4,239 |
237 |
380 |
4,696 |
304 |
1,172 |
2055 |
4,736 |
246 |
415 |
5,295 |
317 |
1,368 |
2060 |
5,177 |
246 |
440 |
5,773 |
322 |
1,503 |
2065 |
5,514 |
244 |
459 |
6,124 |
325 |
1,596 |
2075 |
5,950 |
264 |
488 |
6,603 |
350 |
1,757 |
2085 |
6,316 |
287 |
500 |
7,000 |
378 |
1,894 |
2095 |
6,789 |
302 |
501 |
7,480 |
398 |
1,931 |
|
Table 19 Expenditures - Additional CPP ($ million)
Year |
Retirement |
Disability |
Survivor |
Operating Expenses |
Total |
2019 |
1 |
0 |
0 |
92 |
92 |
2020 |
9 |
0 |
0 |
76 |
85 |
2021 |
28 |
1 |
0 |
79 |
108 |
2022 |
64 |
3 |
1 |
81 |
149 |
2023 |
123 |
6 |
2 |
84 |
216 |
2024 |
216 |
12 |
3 |
87 |
318 |
2025 |
332 |
20 |
5 |
90 |
447 |
2026 |
475 |
31 |
8 |
94 |
608 |
2027 |
658 |
46 |
12 |
97 |
812 |
2028 |
884 |
64 |
17 |
101 |
1,066 |
2029 |
1,154 |
87 |
24 |
104 |
1,369 |
2030 |
1,464 |
112 |
32 |
108 |
1,717 |
2031 |
1,821 |
142 |
42 |
112 |
2,117 |
2032 |
2,232 |
175 |
54 |
116 |
2,577 |
2033 |
2,704 |
213 |
69 |
120 |
3,107 |
2034 |
3,246 |
256 |
87 |
125 |
3,713 |
2035 |
3,856 |
303 |
108 |
129 |
4,395 |
2036 |
4,534 |
354 |
132 |
134 |
5,153 |
2037 |
5,281 |
409 |
160 |
139 |
5,988 |
2038 |
6,099 |
469 |
192 |
144 |
6,903 |
2039 |
6,997 |
534 |
228 |
149 |
7,908 |
2040 |
7,988 |
604 |
270 |
154 |
9,016 |
2041 |
9,080 |
678 |
317 |
160 |
10,236 |
2042 |
10,281 |
757 |
370 |
166 |
11,574 |
2043 |
11,600 |
841 |
431 |
172 |
13,043 |
2044 |
13,050 |
930 |
498 |
178 |
14,656 |
2045 |
14,643 |
1,022 |
574 |
185 |
16,424 |
2046 |
16,392 |
1,118 |
659 |
192 |
18,361 |
2047 |
18,306 |
1,217 |
752 |
199 |
20,474 |
2048 |
20,390 |
1,319 |
857 |
206 |
22,772 |
2049 |
22,656 |
1,424 |
972 |
213 |
25,265 |
2050 |
25,117 |
1,531 |
1,098 |
220 |
27,967 |
2055 |
40,585 |
2,075 |
1,929 |
261 |
44,849 |
2060 |
61,753 |
2,568 |
3,144 |
308 |
67,772 |
2065 |
87,235 |
3,015 |
4,822 |
363 |
95,435 |
2070 |
114,901 |
3,610 |
7,039 |
430 |
125,981 |
2075 |
145,843 |
4,363 |
9,858 |
513 |
160,577 |
2080 |
180,661 |
5,281 |
13,261 |
612 |
199,815 |
2085 |
220,416 |
6,396 |
17,127 |
729 |
244,669 |
2090 |
267,394 |
7,640 |
21,260 |
867 |
297,162 |
2095 |
323,451 |
9,036 |
25,523 |
1,029 |
359,038 |
|
Table 20 Expenditures – Additional CPP (millions of 2019 constant dollars)
Year |
Retirement |
Disability |
Survivor |
Operating Expenses |
Total |
2019 |
1 |
0 |
0 |
92 |
92 |
2020 |
9 |
0 |
0 |
75 |
83 |
2021 |
27 |
1 |
0 |
76 |
104 |
2022 |
60 |
3 |
1 |
76 |
140 |
2023 |
114 |
6 |
2 |
78 |
200 |
2024 |
196 |
11 |
3 |
79 |
288 |
2025 |
295 |
18 |
4 |
80 |
397 |
2026 |
414 |
27 |
7 |
82 |
529 |
2027 |
562 |
39 |
10 |
83 |
693 |
2028 |
740 |
54 |
14 |
85 |
892 |
2029 |
947 |
71 |
20 |
85 |
1,123 |
2030 |
1,177 |
90 |
26 |
87 |
1,381 |
2031 |
1,436 |
112 |
33 |
88 |
1,669 |
2032 |
1,725 |
135 |
42 |
90 |
1,992 |
2033 |
2,049 |
161 |
52 |
91 |
2,355 |
2034 |
2,412 |
190 |
65 |
93 |
2,759 |
2035 |
2,809 |
221 |
79 |
94 |
3,202 |
2036 |
3,238 |
253 |
94 |
96 |
3,680 |
2037 |
3,698 |
286 |
112 |
97 |
4,193 |
2038 |
4,187 |
322 |
132 |
99 |
4,738 |
2039 |
4,709 |
359 |
153 |
100 |
5,322 |
2040 |
5,270 |
399 |
178 |
102 |
5,949 |
2041 |
5,873 |
439 |
205 |
103 |
6,621 |
2042 |
6,520 |
480 |
235 |
105 |
7,340 |
2043 |
7,212 |
523 |
268 |
107 |
8,109 |
2044 |
7,954 |
567 |
304 |
108 |
8,933 |
2045 |
8,750 |
611 |
343 |
111 |
9,815 |
2046 |
9,603 |
655 |
386 |
112 |
10,757 |
2047 |
10,515 |
699 |
432 |
114 |
11,760 |
2048 |
11,482 |
743 |
483 |
116 |
12,823 |
2049 |
12,508 |
786 |
537 |
118 |
13,948 |
2050 |
13,594 |
829 |
594 |
119 |
15,137 |
2055 |
19,896 |
1,017 |
946 |
128 |
21,986 |
2060 |
27,419 |
1,140 |
1,396 |
137 |
30,091 |
2065 |
35,082 |
1,212 |
1,939 |
146 |
38,380 |
2070 |
41,852 |
1,315 |
2,564 |
157 |
45,888 |
2075 |
48,114 |
1,439 |
3,252 |
169 |
52,975 |
2080 |
53,983 |
1,578 |
3,962 |
183 |
59,706 |
2085 |
59,653 |
1,731 |
4,635 |
197 |
66,217 |
2090 |
65,545 |
1,873 |
5,211 |
213 |
72,842 |
2095 |
71,812 |
2,006 |
5,667 |
228 |
79,713 |
|
5.4 Financial Projections with Legislated Additional Contribution Rates
Table 21 and Table 22 present the projected financial state of the additional CPP using the legislated first and second additional contribution rates of 2.0% and 8.0% in current dollars and in 2019 constant dollars, respectively. The projected financial state of the additional CPP using the FAMCR and SAMCR of 1.98% and 7.92%, respectively is discussed in the next section 5.5.
Under the legislated additional contribution rates, additional contributions are projected to be higher than additional expenditures up to the year 2057 inclusive. Over that period, the additional assets are projected to grow rapidly, from $1.5 billion at the end of 2019 to $68 billion by 2025, $191 billion by 2030, and $1,284 billion by 2050.
In comparison with Table 11, additional CPP assets are projected to be 75% of base CPP assets by 2050, and this percentage is expected to further increase to 99% by 2095. The substantially better than expected investment experience of the base Plan over the previous three years and thus higher than expected level of base CPP assets as at the end of 2018, together with the decrease in the assumed best-estimate rates of return on the additional CPP assets, lead to projected base CPP assets exceeding the additional CPP assets over the entire projection period.
Table 21 Financial Projections - Additional CPP, 2.0%, 8.0% Legislated First and Second Additional Contribution Rates
Year |
First / Second Additional Contribution Rates
(%) |
First Additional Contributory Earnings
($ million) |
Second Additional Contributory Earnings
($ million) |
Contributions
($ million) |
Expenditures
($ million) |
Net
Cash Flow
($ million) |
Net Investment Income
($ million) |
Assets at
31 Dec.
($ million) |
Net Rate of Return
(%) |
Assets/ Expenditures Ratio |
2019 |
0.3 |
521,967 |
0 |
1,566 |
92 |
1,474 |
11 |
1,485 |
1.31 |
17.4 |
2020 |
0.6 |
542,126 |
0 |
3,253 |
85 |
3,167 |
77 |
4,729 |
2.36 |
43.7 |
2021 |
1.0 |
563,194 |
0 |
5,632 |
108 |
5,524 |
333 |
10,586 |
4.27 |
70.9 |
2022 |
1.5 |
585,498 |
0 |
8,782 |
149 |
8,633 |
673 |
19,893 |
4.37 |
92.2 |
2023 |
2.0 |
607,349 |
0 |
12,147 |
216 |
11,931 |
1,188 |
33,012 |
4.48 |
103.9 |
2024 |
2.0 / 8.0 |
630,884 |
24,189 |
14,553 |
318 |
14,235 |
1,877 |
49,124 |
4.59 |
109.9 |
2025 |
2.0 / 8.0 |
655,541 |
48,363 |
16,980 |
447 |
16,533 |
2,735 |
68,392 |
4.69 |
112.5 |
2026 |
2.0 / 8.0 |
680,630 |
50,231 |
17,631 |
608 |
17,023 |
3,731 |
89,146 |
4.79 |
109.8 |
2027 |
2.0 / 8.0 |
707,105 |
52,104 |
18,310 |
812 |
17,498 |
5,219 |
111,863 |
5.28 |
105.0 |
2028 |
2.0 / 8.0 |
734,162 |
54,076 |
19,009 |
1,066 |
17,944 |
6,445 |
136,252 |
5.29 |
99.5 |
2029 |
2.0 / 8.0 |
762,391 |
56,025 |
19,730 |
1,369 |
18,361 |
8,175 |
162,788 |
5.58 |
94.8 |
2030 |
2.0 / 8.0 |
791,884 |
57,959 |
20,474 |
1,717 |
18,758 |
9,670 |
191,216 |
5.58 |
90.3 |
2031 |
2.0 / 8.0 |
822,419 |
60,505 |
21,289 |
2,117 |
19,172 |
11,270 |
221,658 |
5.58 |
86.0 |
2032 |
2.0 / 8.0 |
854,840 |
62,590 |
22,104 |
2,577 |
19,527 |
12,982 |
254,167 |
5.58 |
81.8 |
2033 |
2.0 / 8.0 |
888,788 |
64,684 |
22,950 |
3,107 |
19,844 |
14,808 |
288,819 |
5.58 |
77.8 |
2034 |
2.0 / 8.0 |
924,146 |
67,288 |
23,866 |
3,713 |
20,153 |
16,754 |
325,726 |
5.58 |
74.1 |
2035 |
2.0 / 8.0 |
960,579 |
70,032 |
24,814 |
4,395 |
20,419 |
18,825 |
364,970 |
5.58 |
70.8 |
2036 |
2.0 / 8.0 |
996,622 |
72,662 |
25,745 |
5,153 |
20,592 |
21,024 |
406,586 |
5.58 |
67.9 |
2037 |
2.0 / 8.0 |
1,034,670 |
74,830 |
26,680 |
5,988 |
20,692 |
23,353 |
450,631 |
5.58 |
65.3 |
2038 |
2.0 / 8.0 |
1,074,381 |
78,070 |
27,733 |
6,903 |
20,830 |
25,820 |
497,281 |
5.58 |
62.9 |
2039 |
2.0 / 8.0 |
1,114,968 |
80,924 |
28,773 |
7,908 |
20,865 |
28,429 |
546,575 |
5.58 |
60.6 |
2040 |
2.0 / 8.0 |
1,157,737 |
83,697 |
29,851 |
9,016 |
20,834 |
31,184 |
598,593 |
5.58 |
58.5 |
2041 |
2.0 / 8.0 |
1,201,584 |
86,618 |
30,961 |
10,236 |
20,725 |
34,089 |
653,407 |
5.58 |
56.5 |
2042 |
2.0 / 8.0 |
1,247,334 |
90,125 |
32,157 |
11,574 |
20,582 |
37,150 |
711,139 |
5.58 |
54.5 |
2043 |
2.0 / 8.0 |
1,295,428 |
93,564 |
33,394 |
13,043 |
20,350 |
40,371 |
771,861 |
5.58 |
52.7 |
2044 |
2.0 / 8.0 |
1,344,464 |
96,618 |
34,619 |
14,656 |
19,963 |
43,756 |
835,580 |
5.58 |
50.9 |
2045 |
2.0 / 8.0 |
1,394,863 |
100,221 |
35,915 |
16,424 |
19,491 |
47,306 |
902,377 |
5.58 |
49.1 |
2046 |
2.0 / 8.0 |
1,447,496 |
103,743 |
37,249 |
18,361 |
18,889 |
51,024 |
972,290 |
5.58 |
47.5 |
2047 |
2.0 / 8.0 |
1,501,085 |
107,966 |
38,659 |
20,474 |
18,185 |
54,914 |
1,045,389 |
5.58 |
45.9 |
2048 |
2.0 / 8.0 |
1,556,720 |
111,554 |
40,059 |
22,772 |
17,287 |
58,977 |
1,121,653 |
5.58 |
44.4 |
2049 |
2.0 / 8.0 |
1,613,094 |
115,289 |
41,485 |
25,265 |
16,220 |
63,213 |
1,201,086 |
5.58 |
42.9 |
2050 |
2.0 / 8.0 |
1,671,351 |
119,475 |
42,985 |
27,967 |
15,018 |
67,622 |
1,283,725 |
5.58 |
41.6 |
2055 |
2.0 / 8.0 |
1,987,685 |
141,782 |
51,096 |
44,849 |
6,247 |
92,278 |
1,744,760 |
5.58 |
35.6 |
2060 |
2.0 / 8.0 |
2,353,547 |
166,935 |
60,426 |
67,772 |
(7,347) |
121,178 |
2,283,364 |
5.58 |
31.3 |
2065 |
2.0 / 8.0 |
2,789,376 |
197,054 |
71,552 |
95,435 |
(23,883) |
154,354 |
2,901,110 |
5.58 |
28.6 |
2070 |
2.0 / 8.0 |
3,324,016 |
234,030 |
85,203 |
125,981 |
(40,778) |
192,670 |
3,615,675 |
5.58 |
27.3 |
2075 |
2.0 / 8.0 |
3,973,597 |
279,401 |
101,824 |
160,577 |
(58,753) |
237,549 |
4,453,573 |
5.58 |
26.5 |
2080 |
2.0 / 8.0 |
4,749,801 |
332,684 |
121,611 |
199,815 |
(78,204) |
290,620 |
5,445,382 |
5.58 |
26.1 |
2085 |
2.0 / 8.0 |
5,669,320 |
396,260 |
145,087 |
244,669 |
(99,581) |
353,940 |
6,629,755 |
5.58 |
26.1 |
2090 |
2.0 / 8.0 |
6,750,680 |
470,912 |
172,687 |
297,162 |
(124,475) |
429,898 |
8,050,972 |
5.58 |
26.1 |
2095 |
2.0 / 8.0 |
8,026,025 |
559,448 |
205,276 |
359,038 |
(153,762) |
521,174 |
9,759,199 |
5.58 |
26.2 |
|
Table 22 Financial Projections - Additional CPP, 2.0%, 8.0% Legislated First and Second Additional Contribution Rates
(millions of 2019 constant dollars)
Year |
First / Second Additional Contribution Rates
(%) |
First Additional Contributory Earnings
($ million) |
Second Additional Contributory Earnings
($ million) |
Contributions
($ million) |
Expenditures
($ million) |
Net Cash Flow
($ million) |
Net Investment Income
($ million) |
Assets at 31 Dec.
($ million) |
2019 |
0.3 |
521,967 |
0 |
1,566 |
92 |
1,474 |
11 |
1,485 |
2020 |
0.6 |
531,496 |
0 |
3,189 |
84 |
3,105 |
76 |
4,636 |
2021 |
1.0 |
541,324 |
0 |
5,413 |
104 |
5,309 |
320 |
10,175 |
2022 |
1.5 |
551,728 |
0 |
8,276 |
141 |
8,135 |
634 |
18,745 |
2023 |
2.0 |
561,096 |
0 |
11,222 |
199 |
11,023 |
1,098 |
30,498 |
2024 |
2.0 / 8.0 |
571,411 |
21,909 |
13,181 |
288 |
12,893 |
1,700 |
44,493 |
2025 |
2.0 / 8.0 |
582,102 |
42,945 |
15,078 |
397 |
14,681 |
2,429 |
60,730 |
2026 |
2.0 / 8.0 |
592,530 |
43,729 |
15,349 |
529 |
14,820 |
3,248 |
77,607 |
2027 |
2.0 / 8.0 |
603,508 |
44,471 |
15,628 |
693 |
14,935 |
4,454 |
95,474 |
2028 |
2.0 / 8.0 |
614,314 |
45,249 |
15,906 |
892 |
15,014 |
5,393 |
114,009 |
2029 |
2.0 / 8.0 |
625,426 |
45,960 |
16,185 |
1,123 |
15,063 |
6,707 |
133,543 |
2030 |
2.0 / 8.0 |
636,883 |
46,614 |
16,467 |
1,381 |
15,086 |
7,777 |
153,788 |
2031 |
2.0 / 8.0 |
648,471 |
47,708 |
16,786 |
1,669 |
15,117 |
8,887 |
174,776 |
2032 |
2.0 / 8.0 |
660,819 |
48,384 |
17,087 |
1,992 |
15,095 |
10,036 |
196,479 |
2033 |
2.0 / 8.0 |
673,590 |
49,022 |
17,394 |
2,354 |
15,039 |
11,223 |
218,889 |
2034 |
2.0 / 8.0 |
686,654 |
49,996 |
17,733 |
2,759 |
14,974 |
12,449 |
242,019 |
2035 |
2.0 / 8.0 |
699,729 |
51,015 |
18,076 |
3,202 |
14,874 |
13,713 |
265,861 |
2036 |
2.0 / 8.0 |
711,750 |
51,892 |
18,386 |
3,680 |
14,706 |
15,015 |
290,369 |
2037 |
2.0 / 8.0 |
724,434 |
52,393 |
18,680 |
4,193 |
14,488 |
16,351 |
315,514 |
2038 |
2.0 / 8.0 |
737,489 |
53,589 |
19,037 |
4,738 |
14,299 |
17,723 |
341,349 |
2039 |
2.0 / 8.0 |
750,342 |
54,460 |
19,364 |
5,322 |
14,041 |
19,132 |
367,829 |
2040 |
2.0 / 8.0 |
763,847 |
55,221 |
19,695 |
5,949 |
13,746 |
20,574 |
394,937 |
2041 |
2.0 / 8.0 |
777,232 |
56,028 |
20,027 |
6,621 |
13,406 |
22,050 |
422,649 |
2042 |
2.0 / 8.0 |
791,004 |
57,153 |
20,392 |
7,340 |
13,052 |
23,559 |
450,973 |
2043 |
2.0 / 8.0 |
805,395 |
58,171 |
20,762 |
8,109 |
12,652 |
25,100 |
479,883 |
2044 |
2.0 / 8.0 |
819,493 |
58,892 |
21,101 |
8,933 |
12,168 |
26,671 |
509,312 |
2045 |
2.0 / 8.0 |
833,541 |
59,890 |
21,462 |
9,814 |
11,648 |
28,269 |
539,242 |
2046 |
2.0 / 8.0 |
848,033 |
60,779 |
21,823 |
10,757 |
11,066 |
29,893 |
569,628 |
2047 |
2.0 / 8.0 |
862,185 |
62,013 |
22,205 |
11,760 |
10,445 |
31,541 |
600,445 |
2048 |
2.0 / 8.0 |
876,608 |
62,817 |
22,558 |
12,823 |
9,735 |
33,211 |
631,617 |
2049 |
2.0 / 8.0 |
890,542 |
63,648 |
22,903 |
13,948 |
8,955 |
34,898 |
663,084 |
2050 |
2.0 / 8.0 |
904,612 |
64,665 |
23,265 |
15,137 |
8,129 |
36,600 |
694,811 |
2055 |
2.0 / 8.0 |
974,409 |
69,505 |
25,049 |
21,986 |
3,062 |
45,237 |
855,322 |
2060 |
2.0 / 8.0 |
1,044,999 |
74,121 |
26,830 |
30,092 |
(3,262) |
53,804 |
1,013,837 |
2065 |
2.0 / 8.0 |
1,121,758 |
79,246 |
28,775 |
38,380 |
(9,605) |
62,074 |
1,166,692 |
2070 |
2.0 / 8.0 |
1,210,750 |
85,244 |
31,034 |
45,888 |
(14,853) |
70,179 |
1,316,985 |
2075 |
2.0 / 8.0 |
1,310,914 |
92,176 |
33,592 |
52,975 |
(19,383) |
78,369 |
1,469,261 |
2080 |
2.0 / 8.0 |
1,419,270 |
99,408 |
36,338 |
59,706 |
(23,368) |
86,839 |
1,627,114 |
2085 |
2.0 / 8.0 |
1,534,333 |
107,243 |
39,266 |
66,217 |
(26,950) |
95,790 |
1,794,263 |
2090 |
2.0 / 8.0 |
1,654,761 |
115,432 |
42,330 |
72,842 |
(30,512) |
105,379 |
1,973,496 |
2095 |
2.0 / 8.0 |
1,781,917 |
124,207 |
45,575 |
79,713 |
(34,138) |
115,710 |
2,166,712 |
|
Table 23 shows the sources of the revenues (contributions and investment income) required to cover the additional CPP expenditures. With the growth in the additional assets, the importance of the investment income increases rapidly. By 2075, investment income is projected to represent about 70% of revenues of the additional CPP. The importance of investment income as a source of revenues is directly related to the financing approach of the additional CPP.
A strong reliance of the additional CPP on investment income as a source of revenues results in the additional contribution rates being much more sensitive to financial market environments than is the case for the base CPP. The sensitivity of the base and additional CPP to investment experience is examined in Appendix E of this report.
Chart 2 shows projected revenues and expenditures of the additional CPP for the period 2019 to 2069.
Chart 2 - Revenues and Expenditures - Additional CPP, 2.0%/8.0% legislated contribution rates (billions of 2019 constant dollars)
Description
Line chart showing the projected additional CPP’s revenues and expenditures by using 2.0% and 8.0% legislated contribution rates. Y axis represents billions of 2019 constant dollars. X axis represents the year.
Contributions start at 1.6 in 2019 and are projected to increase to 30.6 in 2069.
Investment Income starts from 0 in 2019 and grows to a projected 68.5 in 2069.
Total Revenues, which equals the sum of contributions and investment income, start at 1.6 in 2019 and are projected to be 99.1 in 2069.
Expenditures start at 0 in 2019 and are projected to increase to 44.4 in 2069.
Table 23 also shows the projected additional CPP expenditures as a percentage of total additional revenues. This percentage is projected to increase as the additional Plan matures from about 2% in 2022 to 10% in 2035. It continues to grow but at decreasing pace, and stabilizes at about 49% by 2095.
Table 23 Sources of Revenues - Additional CPP
($ million)
Year |
Contributions |
Net Investment Income |
Total Revenues |
Net Investment Income as % of Revenues
(%) |
Expenditures |
Expenditures as % of Revenues
(%) |
% of Net Investment Income Needed to Pay Expenditures
(%) |
2019 |
1,566 |
11 |
1,577 |
0.7 |
92 |
5.8 |
0.0 |
2020 |
3,253 |
77 |
3,330 |
2.3 |
85 |
2.6 |
0.0 |
2021 |
5,632 |
333 |
5,965 |
5.6 |
108 |
1.8 |
0.0 |
2022 |
8,782 |
673 |
9,456 |
7.1 |
149 |
1.6 |
0.0 |
2023 |
12,147 |
1,188 |
13,335 |
8.9 |
216 |
1.6 |
0.0 |
2024 |
14,553 |
1,877 |
16,430 |
11.4 |
318 |
1.9 |
0.0 |
2025 |
16,980 |
2,735 |
19,715 |
13.9 |
447 |
2.3 |
0.0 |
2026 |
17,631 |
3,731 |
21,362 |
17.5 |
608 |
2.8 |
0.0 |
2027 |
18,310 |
5,219 |
23,529 |
22.2 |
812 |
3.5 |
0.0 |
2028 |
19,009 |
6,445 |
25,455 |
25.3 |
1,066 |
4.2 |
0.0 |
2029 |
19,730 |
8,175 |
27,905 |
29.3 |
1,369 |
4.9 |
0.0 |
2030 |
20,474 |
9,670 |
30,144 |
32.1 |
1,717 |
5.7 |
0.0 |
2031 |
21,289 |
11,270 |
32,559 |
34.6 |
2,117 |
6.5 |
0.0 |
2032 |
22,104 |
12,982 |
35,086 |
37.0 |
2,577 |
7.3 |
0.0 |
2033 |
22,950 |
14,808 |
37,759 |
39.2 |
3,107 |
8.2 |
0.0 |
2034 |
23,866 |
16,754 |
40,620 |
41.2 |
3,713 |
9.1 |
0.0 |
2035 |
24,814 |
18,825 |
43,639 |
43.1 |
4,395 |
10.1 |
0.0 |
2036 |
25,745 |
21,024 |
46,769 |
45.0 |
5,153 |
11.0 |
0.0 |
2037 |
26,680 |
23,353 |
50,033 |
46.7 |
5,988 |
12.0 |
0.0 |
2038 |
27,733 |
25,820 |
53,553 |
48.2 |
6,903 |
12.9 |
0.0 |
2039 |
28,773 |
28,429 |
57,202 |
49.7 |
7,908 |
13.8 |
0.0 |
2040 |
29,851 |
31,184 |
61,034 |
51.1 |
9,016 |
14.8 |
0.0 |
2041 |
30,961 |
34,089 |
65,050 |
52.4 |
10,236 |
15.7 |
0.0 |
2042 |
32,157 |
37,150 |
69,307 |
53.6 |
11,574 |
16.7 |
0.0 |
2043 |
33,394 |
40,371 |
73,765 |
54.7 |
13,043 |
17.7 |
0.0 |
2044 |
34,619 |
43,756 |
78,375 |
55.8 |
14,656 |
18.7 |
0.0 |
2045 |
35,915 |
47,306 |
83,221 |
56.8 |
16,424 |
19.7 |
0.0 |
2046 |
37,249 |
51,024 |
88,274 |
57.8 |
18,361 |
20.8 |
0.0 |
2047 |
38,659 |
54,914 |
93,573 |
58.7 |
20,474 |
21.9 |
0.0 |
2048 |
40,059 |
58,977 |
99,036 |
59.6 |
22,772 |
23.0 |
0.0 |
2049 |
41,485 |
63,213 |
104,698 |
60.4 |
25,265 |
24.1 |
0.0 |
2050 |
42,985 |
67,622 |
110,607 |
61.1 |
27,967 |
25.3 |
0.0 |
2055 |
51,096 |
92,278 |
143,374 |
64.4 |
44,849 |
31.3 |
0.0 |
2060 |
60,426 |
121,178 |
181,604 |
66.7 |
67,772 |
37.3 |
6.1 |
2065 |
71,552 |
154,354 |
225,906 |
68.3 |
95,435 |
42.2 |
15.5 |
2070 |
85,203 |
192,670 |
277,873 |
69.3 |
125,981 |
45.3 |
21.2 |
2075 |
101,824 |
237,549 |
339,373 |
70.0 |
160,577 |
47.3 |
24.7 |
2080 |
121,611 |
290,620 |
412,230 |
70.5 |
199,815 |
48.5 |
26.9 |
2085 |
145,087 |
353,940 |
499,027 |
70.9 |
244,669 |
49.0 |
28.1 |
2090 |
172,687 |
429,898 |
602,585 |
71.3 |
297,162 |
49.3 |
29.0 |
2095 |
205,276 |
521,174 |
726,450 |
71.7 |
359,038 |
49.4 |
29.5 |
|
5.5 Financial Projections with Additional Minimum Contribution Rates
The results presented in Table 24 are based on the best-estimate assumptions, but use the FAMCR of 1.98% for 2023 and thereafter and SAMCR of 7.92% for 2024 and thereafter as opposed to the legislated first and second additional contribution rates of 2.0% and 8.0%, respectively. The financial projections of the additional Plan under the legislated rates were previously presented in Table 21. Under the AMCRs, the additional CPP open group assets represent 107% of its open group actuarial obligations as at 1 January 2019, and the ratio of invested assets to expenditures stabilizes at a value of 25 for the target years 2088 and 2098.
Table 25 shows the progression of the additional minimum contribution rates over time under the best-estimate assumptions of this report. As shown in Table 25, if the best-estimate assumptions of this report are realized, the FAMCR and SAMCR will remain at about 1.98% and 7.92%, respectively for each of the next four reports, which are below and very close to the legislated additional contribution rates of 2.0% and 8.0%. Thus, the current legislated additional contribution rates are projected to be sufficient over subsequent reports as long as the best-estimate assumptions remain the same and additional Plan experience does not deviate materially from the assumptions.
In the event that the AMCRs, as determined under a CPP actuarial report, deviate to a certain extent from their respective legislated additional rates and the federal and provincial Ministers of Finance do not reach an agreement on how to address such deviation, certain provisions of the Additional Canada Pension Plan Sustainability Regulations would be activated. The deviation in the rates is quantified in the regulations with respect to both the magnitude (absolute basis points difference between the legislated rates and AMCRs) and duration of time that a deviation exists. In such case, adjustments would be made to current and future benefits and possibly to the contribution rates. In respect of this 30th CPP Actuarial Report, the AMCRs do not deviate materially from their respective legislated rates, and thus the provisions under the sustainability regulations do not apply. Therefore, in the absence of specific action by the federal and provincial governments, the legislated additional contribution rates will remain as scheduled.
Table 24 Financial Projections - Additional CPP, First and Second Additional Minimum Contribution Rates of 1.98% / 7.92%
Year |
First / Second Additional Contribution Rates
(%) |
First Additional Contributory Earnings
($ million) |
Second Additional Contributory Earnings
($ million) |
Contributions
($ million) |
Expenditures
($ million) |
Net Cash Flow
($ million) |
Net Investment Income
($ million) |
Assets at
31 Dec.
($ million) |
Assets/ Expenditures Ratio |
2019 |
0.30 |
521,967 |
0 |
1,566 |
92 |
1,474 |
11 |
1,485 |
17.4 |
2020 |
0.60 |
542,126 |
0 |
3,253 |
85 |
3,167 |
77 |
4,729 |
43.7 |
2021 |
1.00 |
563,194 |
0 |
5,632 |
108 |
5,524 |
333 |
10,586 |
70.9 |
2022 |
1.49 |
585,498 |
0 |
8,724 |
149 |
8,575 |
672 |
19,833 |
92.0 |
2023 |
1.98 |
607,349 |
0 |
12,026 |
216 |
11,810 |
1,182 |
32,825 |
103.3 |
2024 |
1.98 / 7.92 |
630,884 |
24,189 |
14,407 |
318 |
14,089 |
1,865 |
48,779 |
109.1 |
2025 |
1.98 / 7.92 |
655,541 |
48,363 |
16,810 |
447 |
16,363 |
2,714 |
67,857 |
111.6 |
2026 |
1.98 / 7.92 |
680,630 |
50,231 |
17,455 |
608 |
16,847 |
3,701 |
88,404 |
108.9 |
2027 |
1.98 / 7.92 |
707,105 |
52,104 |
18,127 |
812 |
17,315 |
5,174 |
110,893 |
104.0 |
2028 |
1.98 / 7.92 |
734,162 |
54,076 |
18,819 |
1,066 |
17,753 |
6,388 |
135,035 |
98.7 |
2029 |
1.98 / 7.92 |
762,391 |
56,025 |
19,533 |
1,369 |
18,164 |
8,101 |
161,300 |
94.0 |
2030 |
1.98 / 7.92 |
791,884 |
57,959 |
20,270 |
1,717 |
18,553 |
9,580 |
189,434 |
89.5 |
2031 |
1.98 / 7.92 |
822,419 |
60,505 |
21,076 |
2,117 |
18,959 |
11,164 |
219,557 |
85.2 |
2032 |
1.98 / 7.92 |
854,840 |
62,590 |
21,883 |
2,577 |
19,306 |
12,858 |
251,721 |
81.0 |
2033 |
1.98 / 7.92 |
888,788 |
64,684 |
22,721 |
3,107 |
19,614 |
14,665 |
286,000 |
77.0 |
2034 |
1.98 / 7.92 |
924,146 |
67,288 |
23,627 |
3,713 |
19,914 |
16,590 |
322,504 |
73.4 |
2035 |
1.98 / 7.92 |
960,579 |
70,032 |
24,566 |
4,395 |
20,171 |
18,638 |
361,312 |
70.1 |
2036 |
1.98 / 7.92 |
996,622 |
72,662 |
25,488 |
5,153 |
20,335 |
20,812 |
402,459 |
67.2 |
2037 |
1.98 / 7.92 |
1,034,670 |
74,830 |
26,413 |
5,988 |
20,425 |
23,115 |
445,999 |
64.6 |
2038 |
1.98 / 7.92 |
1,074,381 |
78,070 |
27,456 |
6,903 |
20,553 |
25,553 |
492,105 |
62.2 |
2039 |
1.98 / 7.92 |
1,114,968 |
80,924 |
28,486 |
7,908 |
20,577 |
28,131 |
540,813 |
60.0 |
2040 |
1.98 / 7.92 |
1,157,737 |
83,697 |
29,552 |
9,016 |
20,536 |
30,853 |
592,202 |
57.9 |
2041 |
1.98 / 7.92 |
1,201,584 |
86,618 |
30,652 |
10,236 |
20,416 |
33,723 |
646,340 |
55.8 |
2042 |
1.98 / 7.92 |
1,247,334 |
90,125 |
31,835 |
11,574 |
20,261 |
36,746 |
703,347 |
53.9 |
2043 |
1.98 / 7.92 |
1,295,428 |
93,564 |
33,060 |
13,043 |
20,016 |
39,926 |
763,290 |
52.1 |
2044 |
1.98 / 7.92 |
1,344,464 |
96,618 |
34,273 |
14,656 |
19,617 |
43,267 |
826,174 |
50.3 |
2045 |
1.98 / 7.92 |
1,394,863 |
100,221 |
35,556 |
16,424 |
19,132 |
46,770 |
892,076 |
48.6 |
2046 |
1.98 / 7.92 |
1,447,496 |
103,743 |
36,877 |
18,361 |
18,516 |
50,438 |
961,030 |
46.9 |
2047 |
1.98 / 7.92 |
1,501,085 |
107,966 |
38,272 |
20,474 |
17,798 |
54,274 |
1,033,102 |
45.4 |
2048 |
1.98 / 7.92 |
1,556,720 |
111,554 |
39,658 |
22,772 |
16,886 |
58,279 |
1,108,268 |
43.9 |
2049 |
1.98 / 7.92 |
1,613,094 |
115,289 |
41,070 |
25,265 |
15,805 |
62,453 |
1,186,526 |
42.4 |
2050 |
1.98 / 7.92 |
1,671,351 |
119,475 |
42,555 |
27,967 |
14,588 |
66,796 |
1,267,911 |
41.0 |
2055 |
1.98 / 7.92 |
1,987,685 |
141,782 |
50,585 |
44,849 |
5,736 |
91,049 |
1,721,272 |
35.2 |
2060 |
1.98 / 7.92 |
2,353,547 |
166,935 |
59,821 |
67,772 |
(7,951) |
119,392 |
2,249,304 |
30.8 |
2065 |
1.98 / 7.92 |
2,789,376 |
197,054 |
70,836 |
95,435 |
(24,599) |
151,807 |
2,852,585 |
28.2 |
2070 |
1.98 / 7.92 |
3,324,016 |
234,030 |
84,351 |
125,981 |
(41,630) |
189,085 |
3,547,455 |
26.8 |
2075 |
1.98 / 7.92 |
3,973,597 |
279,401 |
100,806 |
160,577 |
(59,771) |
232,557 |
4,358,630 |
25.9 |
2080 |
1.98 / 7.92 |
4,749,801 |
332,684 |
120,395 |
199,815 |
(79,420) |
283,724 |
5,314,323 |
25.5 |
2085 |
1.98 / 7.92 |
5,669,320 |
396,260 |
143,636 |
244,669 |
(101,032) |
344,480 |
6,450,056 |
25.3 |
2088 |
1.98 / 7.92 |
6,297,356 |
440,079 |
159,542 |
275,127 |
(115,585) |
386,433 |
7,234,526 |
25.3 |
2090 |
1.98 / 7.92 |
6,750,680 |
470,912 |
170,960 |
297,162 |
(126,202) |
416,994 |
7,805,978 |
25.3 |
2095 |
1.98 / 7.92 |
8,026,025 |
559,448 |
203,224 |
359,038 |
(155,815) |
503,659 |
9,426,798 |
25.3 |
2098 |
1.98 / 7.92 |
8,905,491 |
620,187 |
225,448 |
401,345 |
(175,898) |
563,654 |
10,549,067 |
25.3 |
|
Table 25 Progression of Additional Minimum Contribution Rates over Time
Valuation
Year |
Target
Years |
Target A/E Ratio |
Additional Minimum Contribution Rates |
Years Additional Minimum Contribution Rates
Applicable |
Assets as a % of Obligations on an Open Group Basis |
2018 |
2088 and 2098 |
25.2 |
1.98%/7.92% |
2023+, 2024+ |
106.8% |
2021 |
2088 and 2098 |
25.2 |
1.98%/7.92% |
2025+ |
106.4% |
2024 |
2088 and 2098 |
25.2 |
1.97%/7.88% |
2028+ |
105.6% |
2027 |
2088 and 2098 |
25.2 |
1.97%/7.88% |
2031+ |
105.3% |
2030 |
2088 and 2098 |
25.3 |
1.97%/7.88% |
2034+ |
105.1% |
|
6. Reconciliation with Previous Triennial Report
6.1 Base CPP
6.1.1 Introduction
The results presented in this report differ from those previously projected for a variety of reasons. Differences between the actual experience for 2016 through 2018 and that projected in the 27th CPP Actuarial Report are addressed in section 6.1.2 below. Since historical results provide the starting point for the projections shown in this report, these historical differences between actual and projected experience have an effect on the projections. The impact of experience since the last triennial valuation of the base Plan (that is, the experience update from the period 2016-2018) and changes in the assumptions and methodology on the base CPP minimum contribution rate are addressed in section 6.1.3. Detailed reconciliations of the projected pay-as-you-go rates and the minimum contribution rate are presented in Appendix D.
6.1.2 Experience Update – 31 December 2015 to 31 December 2018
The major components of the change in the base CPP assets from 31 December 2015 to 31 December 2018 are summarized in Table 26.
Contributions during the period 2016 to 2018 were about $234 million lower than expected, mainly as a result of lower than anticipated growth in total employment earnings. This represents a deviation from the expected results of about -0.2%.
Expenditures during the period were $1.9 billion lower than expected. This represents a deviation from the expected results of about -1.4%. The difference between actual and expected expenditures is due to over-projections of retirement benefits (lower take-up of retirement benefits at age 60 than expected), disability benefits (lower disability incidence rates than expected), survivor benefits and operating expenses that outweigh under-projections of death and children benefits. The details by type of expenditure are given in Table 27.
Due to the strong investment performance over the period (actual average annual nominal rate of return of 7.9% compared to the anticipated 3.9%), investment income was $39.3 billion higher than expected. This represents a deviation from the expected results of about 107%. As a result, the change in assets was $86 billion or 90% higher than expected over the period. The resulting assets as at 31 December 2018 are about $41 billion or 12% higher than projected under the 27th CPP Actuarial Report.
Table 26 Change in Assets - 31 December 2015 to 31 December 2018 - Base CPP
(cost accrual basis, $ million)
|
Actual |
Expected |
Difference |
% Change |
Actual – Expected |
Difference/ Expected |
Assets at 31 December 2015 |
285,358 |
285,358 |
- |
- |
+ Contributions |
144,226 |
144,460 |
(234) |
(0.2)% |
- Expenditures |
133,748 |
135,680 |
(1,932) |
(1.4)% |
+ Investment Income |
75,865 |
36,583 |
39,282 |
107.4% |
Change in Assets |
86,342 |
45,363 |
40,979 |
90.3% |
Assets at 31 December 2018 |
371,700 |
330,721 |
40,979 |
12.4% |
|
Table 27
Summary of Expenditures – 2016 to 2018 – Base CPP ($ million)
|
Actual |
Expected |
Difference |
% Change |
Actual – Expected |
Difference/ Expected |
Retirement |
103,628 |
105,107 |
(1,479) |
(1.4)% |
Disability |
12,248 |
12,554 |
(306) |
(2.5)% |
Survivors |
13,420 |
13,559 |
(139) |
(1.0)% |
Children |
1,569 |
1,534 |
35 |
2.2% |
Death |
1,079 |
1,020 |
59 |
5.5% |
Operating Expenses |
1,804 |
1,906 |
(102) |
(5.7)% |
Total Expenditures |
133,748 |
135,680 |
(1,932) |
(1.4)% |
|
6.1.3 Changes in the Minimum Contribution Rate
Table 28 presents the main elements of change in the base Plan MCR since the 27th CPP Actuarial Report and shows an overall decrease in the rate. The cost impacts of the amendments introduced under Bill C-74 – Budget Implementation Act, 2018, No. 1 were determined in the 29th CPP Actuarial Report. It was determined under that report that the amendments had the effect of triggering the full funding provision of the CPP statute and introducing full funding rates, which increased the MCR. Bill C-97 – Budget Implementation Act, 2019, No. 1, which waives the application for the retirement pension upon reaching age 70, also had the effect of increasing the MCR. Since Bill C-97 does not involve a benefit improvement, it does not trigger the full funding provision of the CPP statute.
Experience over the period 2016 to 2018 was better than anticipated overall, especially regarding investment income, which lowers the MCR. Changes made to the demographic assumptions also act to lower the MCR. However, these reductions in the rate are partially offset by lower assumed real wage increases, changes to the assumed retirement take-up rates, assumed disability incidence rates, and investment assumptions. A more detailed reconciliation of changes in the MCR is provided in Table 106 in Appendix D of this report.
Table 28 Reconciliation of Changes in Minimum Contribution Rate
(% of base CPP contributory earnings)
|
Steady-State Rate |
Full Funding Rates |
MCR |
2019-2033 |
2034+ |
2019-2033 |
2034+ |
27th CPP Actuarial Report - After Rounding |
9.79 |
0.00 |
0.00 |
9.79 |
9.79 |
27th CPP Actuarial Report - Before Rounding |
9.795 |
0.000 |
0.000 |
9.795 |
9.795 |
Legislated Amendments: |
|
|
|
|
|
28th CPP Actuarial Report (Bill C-26) |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
29th CPP Actuarial Report (Bill C-74) |
0.000 |
0.035 |
0.007 |
0.035 |
0.007 |
Bill C-97 |
0.009 |
0.000 |
0.000 |
0.009 |
0.009 |
Total Amendments |
0.009 |
0.034 |
0.007 |
0.044 |
0.016 |
Improvements in Methodology |
0.000 |
0.001 |
0.000 |
0.001 |
0.000 |
Experience (2016 to 2018) |
(0.233) |
0.000 |
0.000 |
(0.233) |
(0.233) |
Changes in Demographic Assumptions |
(0.061) |
0.001 |
0.001 |
(0.060) |
(0.060) |
Changes in Benefit Assumptions |
0.080 |
(0.001) |
(0.001) |
0.080 |
0.080 |
Changes in Economic Assumptions |
0.094 |
0.000 |
0.000 |
0.094 |
0.094 |
Changes in Investment Assumptions |
0.027 |
0.000 |
0.000 |
0.027 |
0.027 |
Change in Funding Target from 2028‑2078 to 2031-2081 |
(0.002) |
0.000 |
0.000 |
(0.002) |
(0.002) |
Rate before Rounding |
9.708 |
0.035 |
0.007 |
9.743 |
9.715 |
Rounded Rate, in Accordance with the proposed Calculation of Contribution Rates Regulations, 2018 |
9.71 |
0.04 |
0.01 |
9.75 |
9.72 |
30th CPP Actuarial Report |
9.71 |
0.04 |
0.01 |
9.75 |
9.72 |
|
6.2 Additional CPP
6.2.1 Introduction
The results presented in this report differ from those previously projected for a variety of reasons. Differences between the actual experience for 2016 through 2018 and that first projected in the 28th CPP Actuarial Report and then the 29th CPP Actuarial Report provide a different starting point for the additional CPP projections shown in this report. The impact of a different starting point (that is, experience since the last triennial valuation of the base Plan) and changes in the assumptions and methodology on the additional minimum contribution rates relative to the 28th and 29th CPP Actuarial Reports are addressed in section 6.2.2. Detailed reconciliations of the first and second additional minimum contribution rates are presented in Appendix D.
6.2.2 Changes in the Additional Minimum Contribution Rates
Table 29 presents the main elements of change in the first and second additional minimum contribution rates (FAMCR, SAMCR) and shows an overall increase in the rates. The cost impacts of the amendments determined in the 29th CPP Actuarial Report had the effect of increasing the AMCRs.
Although demographic experience over 2016 to 2018 was better than anticipated and acted to lower the AMCRs, changes in assumptions, especially those related to the assets allocation, and the amendments under Bills C-74 and C-97 have more than offset the decrease. As a result, the net result of all changes since the 28th CPP Actuarial Report is an overall absolute increase in the FAMCR of 0.05% and corresponding increase in the SAMCR of 0.20%. A more detailed reconciliation of changes in the AMCRs is provided in Table 107 in Appendix D of this report.
Table 29 Reconciliation of Changes in Additional Minimum Contribution Rates
(% of additional CPP contributory earnings)
|
First Additional Minimum Contribution Rate |
Second Additional Minimum Contribution Rate |
28th CPP Actuarial Report - After Rounding |
1.93 |
7.72 |
28th CPP Actuarial Report - Before Rounding |
1.925 |
7.700 |
Legislated Amendments: |
|
|
29th CPP Actuarial Report (Bill C-74) |
0.059 |
0.236 |
Bill C-97 |
0.000 |
0.000 |
Total Amendments |
0.059 |
0.236 |
Improvements in Methodology |
(0.001) |
(0.003) |
Starting Demographic and Economic Environment (2016 to 2018) |
(0.005) |
(0.020) |
Changes in Demographic Assumptions |
(0.007) |
(0.028) |
Changes in Benefit Assumptions |
(0.021) |
(0.082) |
Changes in Economic Assumptions |
(0.009) |
(0.034) |
Changes in Investment Assumptions |
0.035 |
0.138 |
Rate before Rounding |
1.977 |
7.907 |
Rounded Rates, in Accordance with the proposed Calculation of Contribution Rates Regulations, 2018 |
1.98 |
7.92 |
30th CPP Actuarial Report |
1.98 |
7.92 |
|
7. Conclusion
The actuarial projections of the financial states of the base and additional Plans presented in this report reveal the following.
Base CPP
This report confirms that the legislated contribution rate of 9.9% is sufficient to finance the base CPP over the long term. Under the legislated contribution rate, contributions to the base Plan are projected to be higher than expenditures over the period 2019 to 2021, with a portion of investment income thereafter required to pay for expenditures.
Total assets of the base Plan are expected to increase significantly over the next decade and then to continue increasing, but at a slower pace. Under the legislated contribution rate of 9.9%, base CPP assets are projected to accumulate to $688 billion by the end of 2030 and $1.7 trillion by 2050, while the ratio of assets to the following year’s expenditures is projected to remain relatively stable at a level of 7.6 over the period 2021 to 2031 and then grow to 8.8 in 2050 and continue increasing over the projection period.
The MCR of the base CPP is 9.75% for years 2022 to 2033 and 9.72% for the year 2034 and thereafter, which is lower than the legislated contribution rate of 9.9%. Thus, despite the projected substantial increase in benefits paid as a result of an aging population, the legislated rate exceeds the MCR, and the base Plan is expected to be able to meet its obligations throughout the projection period.
Since the MCR of the base CPP is below the legislated contribution rate of 9.9%, the insufficient rates provisions of the Canada Pension Plan do not apply. Therefore, in the absence of specific action by the federal and provincial governments, the legislated contribution rate will remain at 9.9% for the year 2019 and thereafter.
Additional CPP
This report confirms that the legislated first and second additional contribution rates of 2.0% for 2023 and thereafter and 8.0% for 2024 and thereafter result in projected contributions and investment income that are sufficient to fully pay the projected expenditures of the additional CPP over the long term. Under the legislated additional contribution rates, contributions to the additional Plan are projected to be higher than expenditures up to the year 2057 inclusive, with a portion of investment income thereafter required to pay for expenditures.
Total assets of the additional Plan are expected to increase rapidly over the first several decades as contributions are projected to exceed expenditures. Under the legislated additional contribution rates, additional CPP assets are projected to grow to $191 billion by the end of 2030 and to $1.3 trillion in 2050, while the ratio of assets to the following year’s expenditures is projected to increase rapidly until 2025 and then decrease after that, reaching a level of about 26 by 2080.
The FAMCR is 1.98% for the year 2023 and thereafter, and the SAMCR is 7.92% for the year 2024 and thereafter. The AMCRs are lower than the legislated additional contribution rates.
In accordance with the Additional Canada Pension Plan Sustainability Regulations, the AMCRs are sufficiently close to the legislated additional contribution rates such that no immediate action is required to address the differences. Therefore, in the absence of specific action by the federal and provincial governments, the legislated additional contribution rates will remain at their scheduled values.
Base and Additional CPP
To measure the sensitivity of the long-term projected financial position of both the base and additional Plans to future changes in the demographic, economic, and investment environments, a variety of sensitivity tests were performed. Analyses of different asset allocations, the impacts of varying investment experience, and sensitivity tests on key assumptions show that the minimum contribution rates of the base and additional CPP could deviate significantly from their best-estimate values if other than best-estimate assumptions were to be realized. More details are provided in Appendix E.
The projected financial states of the base and additional Plans presented in this report are based on the assumed demographic, economic, and investment outlooks over the long term. Given the length of the projection period and the number of assumptions required, it is unlikely that the actual experience will develop precisely in accordance with the assumptions. Therefore, it remains important to assess the financial states of the two components on a regular basis by producing periodic actuarial valuation reports. For this purpose, as required by the Canada Pension Plan, the next such actuarial valuation will be as at 31 December 2021.
8. Actuarial Opinion
In our opinion, considering that this 30th Actuarial Report on the Canada Pension Plan as at 31 December 2018 was prepared pursuant to the Canada Pension Plan:
the data on which this report is based are sufficient and reliable for the purposes of this report;
the assumptions used are, individually and in aggregate, reasonable and appropriate for the purposes of this report; and
the methods employed are appropriate for the purposes of this report.
Based on the results of this valuation, we hereby certify that:
the minimum contribution rate required to finance the base CPP is 9.75% for years 2022 to 2033 and 9.72% for the year 2034 and thereafter.
the additional minimum contribution rates that result in projected contributions being sufficient, along with projected investment income, to fully pay projected expenditures of the additional CPP are determined to be:
first additional minimum contribution rate: 1.49% for the year 2022 and 1.98% for the year 2023 and thereafter, and
second additional minimum contribution rate: 7.92% for the year 2024 and thereafter.
This report has been prepared, and our opinions given, in accordance with accepted actuarial practice in Canada, in particular, the General Standards and the Practice-Specific Standards for Social Security Programs of the Standards of Practice of the Canadian Institute of Actuaries.
As of the date of the signing of this report, we have not learned of any events, other than the events already accounted for in this report, that would have a material impact on the financial states of the base and additional CPP as at 31 December 2018.
- Assia Billig, FCIA, FSA
- Chief Actuary
- Michel Montambeault, FCIA, FSA
- Senior Actuary
Ottawa, Canada
27 November 2019
Appendix A – Summary of Plan Provisions
A.1 Introduction
The Canada Pension Plan came into force on 1 January 1966. Since its inception, the CPP has been amended several times, the most recent occasions as a result of the following:
Part 1 of Bill C-26 – An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act (introduction of the additional CPP) which received Royal Assent on 15 December 2016.
Division 19 of Part 6 of Bill C-74 – Budget Implementation Act, 2018, No. 1 (removal of age-related reductions in survivor benefits, introduction of child-rearing and disability drop-ins for the additional CPP, introduction of the post-retirement disability benefit for the base CPP, change in base CPP death benefit to flat-rate $2,500, authorization of making of sustainability regulations for the additional CPP) which received Royal Assent on 21 June 2018.
Division 2 of Part 4 of Bill C-86 – Budget Implementation Act, 2018, No. 2 (technical amendment regarding calculation of child-rearing drop-in amount under the additional CPP) which received Royal Assent on 13 December 2018.
Division 6 of Part 4 of Bill C-97 – Budget Implementation Act, 2019, No. 1 (application for CPP retirement pension is waived upon reaching age 70, effective 1 January 2020, as well as administrative amendments regarding overpayments of salaries and wages) which received Royal Assent on 21 June 2019.
The details of the cost impacts of the first two Bills listed above can be found respectively in the 28th Actuarial Report supplementing the 27th Actuarial Report on the Canada Pension Plan as at 31 December 2015, and the 29th Actuarial Report supplementing the 27th and 28th Actuarial Reports on the Canada Pension Plan as at 31 December 2015. There was no actuarial report in respect of the amendments under the third Bill listed above (Bill C-86) since the cost impact on the CPP was deemed small to negligible. As for the fourth Bill listed above (Bill C-97), it is considered to be a subsequent event for the purpose of this report, since it became known to the Chief Actuary after the valuation date but before the report. date and was determined to have an effect on the financial state of the CPP.
In addition, amendments to the regulations regarding the calculation of the CPP contribution rates were proposed in 2018 to clarify the determination of full funding rates and introduce the calculation of the additional CPP minimum contribution rates. These regulations as well as proposed regulations regarding the sustainability of the additional CPP, namely the Calculation of Contribution Rates Regulations, 2018 and the Additional Canada Pension Plan Sustainability Regulations are awaiting formal consent by the provinces.
Effective January 1, 2019, an enhancement of the CPP (the additional CPP) is implemented, such that the CPP consists of two components: the base CPP and additional CPP.
This Appendix presents a summary of the provisions of the Plan inclusive of all amendments. The legislation shall prevail if there is a discrepancy between it and this summary.
A.2 Participation
The CPP includes virtually all members of the labour force in Canada, including both employees and self-employed persons between the ages of 18 and 70 with employment earnings, other than those covered by the Québec Pension Plan (QPP). The main exceptions are persons with annual earnings lower than $3,500 (the Year’s Basic Exemption, defined below), members of certain religious groups, and other persons who qualify under excepted employment. It should be noted that the CPP covers all members of the Canadian Forces and the Royal Canadian Mounted Police, including those residing in the province of Québec. The persons to whom a CPP disability benefit is payable are not required to contribute.
A.3 Definitions
A.3.1 Base and Additional CPP
The base CPP or base Plan refers to that part of the CPP other than the part relating to the additional CPP. Prior to 1 January 2019, the CPP consisted only of the base Plan.
The additional CPP or additional Plan refers to the enhancement to the CPP introduced in An Act to Amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act. The additional CPP is implemented as of 1 January 2019. The additional CPP has two (first and second) parts, and the corresponding first and second additional contribution rates and pensionable earnings on which contributions are made will be phased in over the seven-year period 2019 to 2025, described below.
As of 1 January 2019, the CPP comprises the base and additional Plans.
A.3.2 Year’s Maximum Pensionable Earnings (YMPE) and Year’s Additional Maximum Pensionable Earnings (YAMPE)
The YMPE for a calendar year is the limit to which employment and self-employment earnings are subject to contributions and first additional contributions for purposes of the base Plan and additional Plan, respectively. The YMPE increases each year to the extent warranted by the percentage increase, as at 30 June of the preceding year, in the 12-month average of the average weekly earnings of the Industrial Aggregate (as published by Statistics Canada). If the amount so calculated is not a multiple of $100, the next lower multiple of $100 is used. The YMPE is set at $57,400 in 2019.
The YAMPE for a calendar year is the limit to which employment and self-employment earnings are subject to second additional contributions above the YMPE for the purposes of the additional Plan. The YAMPE will be introduced in the year 2024. The YAMPE will first be set at 107% of the YMPE in 2024, and then at 114% of the YMPE in 2025 and thereafter. The YAMPE is thus set to increase in tandem with the YMPE after 2025. If the YAMPE so calculated is not a multiple of $100, the next lower multiple of $100 is used.
In this report, the YMPE and YAMPE in the year 2025 are projected to be $67,100 and $76,400 respectively.
A.3.3 Year’s Basic Exemption (YBE)
The YBE for a calendar year is the minimum employment earnings required to participate in the Plan. As well, contributions are waived on earnings up to the YBE. The YBE is $3,500 in 2019.
A.3.4 Contributory Period and Additional Contributory Periods of the CPP
The contributory period is in respect of the base CPP and is the number of months from attainment of age 18 or from 1 January 1966, if later, to the earliest of the month in which the contributor dies, the month before the one in which the retirement pension commences and the month before the one in which the contributor reaches 70 years of age, less the number of months during which the contributor received a CPP or QPP disability benefit (including the three-month waiting period), or during which the contributor had at least one eligible child under seven years of age and had earnings for that year lower than the YBE. The contributory period excludes periods on or after 1 January 2012 during which beneficiaries contribute while in receipt of a retirement pension.
The first additional contributory period in respect of the additional CPP is the number of months from attainment of age 18 or from 1 January 2019, if later, to the earliest of the month in which the contributor dies, the month before the one in which the retirement pension commences and the month before the one in which the contributor reaches 70 years of age.
The second additional contributory period in respect of the additional CPP is the number of months from attainment of age 18 or from 1 January 2024, if later, to the earliest of the month in which the contributor dies, the month before the one in which the retirement pension commences and the month before the one in which the contributor reaches 70 years of age.
A.3.5 Pension Index
The Pension Index for a given calendar year is equal to the Consumer Price Index averaged over the 12-month period ending with October of the preceding year; however, the Pension Index of a given year may not be less than the previous year’s Pension Index.
A.4 Contribution Rate and Additional Contribution Rates of the CPP
In respect of the base CPP, from 1966 to 1986, the annual contribution rate applicable to contributory earnings was 1.8% for employees (and the same amount for their employers) and 3.6% in respect of self-employed earnings. This combined employer-employee contribution rate of 3.6% was subject to an annual increase of 0.2 percentage points from 1987 to 1996, attaining 5.6% in the last year of that period. From 1997 to 2003, the combined employer-employee contribution rate for the base CPP then increased in steps to reach a rate of 9.9% by 2003, with no subsequent increases scheduled thereafter.
The first additional contribution rate of the additional CPP applies to earnings between the YBE and the YMPE. The first additional combined employer-employee contribution rate will be phased in over the 5-year period 2019 to 2023 and will be equal to 2.0% from the year 2023 onward. The first additional contribution rate during the phase-in period from 2019 to 2023 is shown in Table 15 shows the progression of the MCR over time under the best estimate assumptions of this report.
The second additional contribution rate of the additional CPP applies to earnings between the YMPE and YAMPE and will be applied starting in the year 2024. The second additional combined employer-employee contribution rate is equal to 8.0% for the year 2024 and thereafter.
Employees and employers pay equal shares of the base and additional contribution rates of the CPP, and the self-employed pay the full rates.
Table 30 shows the legislated contribution rates for the CPP.
Table 30 Legislated Contribution Rates
(self-employed and combined employer-employee) (%)
Year |
Pensionable Earnings above YBE up to YMPE |
Pensionable Earnings above YMPE up to YAMPE |
Base Contribution Rate |
First Additional Contribution Rate |
Second Additional Contribution Rate |
2003-2018 |
9.9 |
– |
– |
2019 |
9.9 |
0.3 |
– |
2020 |
9.9 |
0.6 |
– |
2021 |
9.9 |
1.0 |
– |
2022 |
9.9 |
1.5 |
– |
2023 |
9.9 |
2.0 |
– |
2024+ |
9.9 |
2.0 |
8.0 |
The CPP statute gives the federal and provincial ministers of finance the authority to make changes to the Plan’s contribution rates through regulation, in connection with a triennial review. However, year-over-year rate increases cannot exceed 0.2 percentage points; beyond that, legislation is required.
For the base Plan, if a triennial CPP actuarial report projects a minimum contribution rate in excess of the scheduled (legislated) rate and the finance ministers do not make a recommendation to either increase the legislated rate or maintain it, the insufficient rates provisions of the Canada Pension Plan would apply. The base CPP contribution rate would then be increased in stages and a possible temporary freeze on inflation adjustments to benefits in pay would apply.
For the additional Plan, if a triennial CPP actuarial report projects that the minimum additional contribution rates deviate to a certain extent from their respective legislated additional rates and the finance ministers do not agree on how to address the deviation, then sustainability Regulations in respect of the additional Plan would provide the actions to take: changes to benefits and possibly the additional contributions rates. The proposed sustainability Regulations – the Additional Canada Pension Plan Sustainability Regulations, were pre-published in the Canada Gazette, Part I, Volume 152, Issue No. 42, October 20, 2018. The technical aspects of the methodology used to develop the Regulations are described in detail in the Technical Paper on the Additional Canada Pension Plan Regulations: Actuarial Study No. 20, published by the Office of the Chief Actuary in November 2018.
A.5 Retirement Pension
A.5.1 Eligibility Requirements
A person aged 60 or over becomes eligible for a base CPP retirement pension, provided contributions have been made during at least one calendar year. Further, an individual must apply for a retirement pension in order to receive it. However, as of 1 January 2020, the requirement to apply is waived for an eligible person if he or she is aged 70 or older and is in receipt of another benefit from the CPP, OAS program, or a provincial plan and/or had an income tax return filed in respect of the year before the year in which the waiver is granted.
Prior to 2012, a work cessation test applied in order for a retirement pension to become payable before age 65. This test required individuals who applied to take their CPP retirement benefit early (i.e. before age 65) to either stop working or materially reduce their earnings both in the month immediately preceding and the month of benefit take-up. The month following the start of pension payment, an individual could return to work and/or earn more without affecting the eligibility for or amount of the benefit. However, no further contributions to the CPP were allowed once benefits started being paid. There was no work cessation test for those aged 65 or older.
Since 1 January 2012, the work cessation test no longer applies, and individuals younger than 65 who choose to work in Canada outside of Québec while receiving a CPP or QPP retirement pension are required, along with their employers, to contribute to the CPP. Working beneficiaries aged 65 or older are given the option of continuing to contribute to the Plan; however, employers of those opting to do so are also required to contribute. The contributions from working beneficiaries are applied only toward providing post-retirement benefits from the base and additional CPP and do not affect eligibility for other CPP benefits. Upon attaining age 70, contributions are no longer permitted under the Plan.
The eligibility requirements for the additional retirement benefit are those of the base CPP. That is, a contributor is deemed to be eligible for the additional CPP retirement benefit if they are eligible for the base CPP retirement benefit.
A.5.2 Amount of Pension
The initial amount of the monthly retirement pension payable to a contributor under the CPP is equal to the sum of his or her retirement benefits payable under the base and additional Plans.
Base CPP
The initial monthly retirement pension payable under the base Plan is based on the contributor’s entire history of pensionable earnings during the contributory period. The retirement pension under the base Plan is equal to 25% of the average of the YMPE for the year of retirement and the four previous years, referred to as the Maximum Pensionable Earnings Average (MPEA), adjusted to take into account the contributor’s pensionable earnings. For this purpose, the contributor’s pensionable earnings for any given month are indexed by the ratio of the MPEA for the year of retirement to the YMPE for the year to which the given month belongs.
Some periods with low pensionable earnings may be excluded from the calculation of benefits by reason of pensions commencing after age 65, disability, child-rearing for a child less than seven years of age, and the general drop-out provision.
The general drop-out provision allows for a number of years with low or zero earnings to be dropped from the calculation of the retirement benefit. For example, for someone who took his/her retirement benefit at age 65 in 2019, the provision allows for 17% of the number of months with the lowest earnings (up to a maximum of about eight years) to be dropped from the calculation of the benefit. The general drop-out percentage was 15% from 1966 to 2011, 16% in 2012 and 2013, and has been 17% since 2014. As a result, the maximum number of years of low or zero earnings that may be dropped from the calculation of the retirement benefit for those contributors who take their benefit at age 65 has increased from about seven to eight years. The actual drop-out percentage that applies is based on the year of benefit take-up. The increase in the general drop-out provision increases the retirement pension, as well as the CPP disability and survivor pensions, since the determination of these benefits depends on the retirement pension.
The maximum retirement benefit payable under the base CPP at age 65 in 2019 is $13,855 per year or $1,154.58 per month.
Additional CPP
The calculation of the additional CPP retirement benefit is based on the first and second additional monthly pensionable earnings. The first additional monthly pensionable earnings are equal to the total of the highest 480 months or the total number of months, if lower, in the first additional contributory period of monthly adjusted pensionable earnings up to the YMPE divided by 480. Similarly, the second additional monthly pensionable earnings are equal to the total of the highest 480 or total number of months, if lower, in the second additional contributory period of monthly adjusted pensionable earnings between the YMPE and the YAMPE divided by 480. These calculations provide for a monthly accrual of 1/480 of the total additional retirement benefit.
The additional monthly retirement benefit is calculated as the sum of 8.33% of the first additional monthly pensionable earnings and 33.33% of the second additional monthly pensionable earnings.
The pensionable earnings used for the calculation of additional retirement benefits are adjusted to the date of retirement in the same way as for the base CPP, that is, indexing by the ratio of the MPEA to the YMPE as described above. Further, to account for the lower first additional contribution rates during the first four years of the phase-in period (from 2019 to 2022), the first additional monthly pensionable earnings are multiplied by 0.15 in 2019, 0.30 in 2020, 0.50 in 2021, and 0.75 in 2022.
Unlike the base CPP, there are no drop-out provisions for the additional Plan. However, there are “drop-in” provisions for the additional CPP to protect the additional benefits from periods of low pensionable earnings resulting from disability or child-rearing for a child less than seven years of age.
Specifically, for individuals who become disabled after 1 January 2019, an imputed income will be assigned to those disability periods of low or zero earnings for the purpose of calculating the additional CPP retirement (and survivor) benefits. The drop-in amount will be equal to 70 per cent of an individual’s average earnings in the six years prior to the onset of the disability.
The disability drop-in amount is calculated based on months of earnings after 2018 and prior to the onset of disability. If, however, there are fewer than 72 months (6 years) of such earnings, then the drop-in will be calculated based on the actual number of earnings months after 2018, prior to the onset of disability.
For parents of children under the age of seven on or after 1 January 2019, an imputed income will be assigned to child-rearing periods of low or zero earnings on or after 1 January 2019 for the purpose of calculating additional CPP benefits. The drop-in amount is equal to the parent’s average earnings during the five years prior to the birth or adoption of the child if that amount is higher than their actual earnings during the period the child was younger than age seven.
The child-rearing drop-in amount is calculated based on months of earnings after 2018 and prior to birth or adoption of a child. If, however, there are fewer than 60 such months (5 years), then the drop-in is calculated based on the actual number of earnings months, but not lower than 36. If there are less than 36 such months of earnings, the drop-in will be calculated using imputed earnings of 40% of the YMPE for the number of months missing from the minimum of 36.
Additional CPP retirement benefits will initially be low in the early years of the additional Plan due to the lower accrual rates during the phase-in period and few years of contributions. Contributions made over time to the additional CPP allow individuals to accrue partial additional benefits. Full additional retirement benefits are accrued after about 40 years of making contributions.
The projected maximum additional retirement benefits are shown in Table 31. An individual, with pensionable earnings at or above the YAMPE, who contributed to the additional Plan for at least 40 years starting in the year 2025 or later, would receive the maximum additional retirement benefit payable of $7,202 per year or $600 per month, in 2019 wage-adjusted dollars. Table 31 accounts for the phase-in period of the additional Plan from 2019 to 2025. The maximum additional CPP retirement benefit represents an increase of 52% over the maximum base CPP retirement pension.
Table 31 Projected Maximum Additional CPP Retirement Benefit
Pensionable Earnings at or above YMPE before 2024, YAMPE thereafter
All amounts in 2019 wage-adjusted dollars
Maximum Basic CPP Retirement Benefit in 2019: $13,855 per year ($1,155 per month) |
Start Retirement Pension at Age 65 on January 1 |
Number of Years of Contributions to Additional CPP |
Additional CPP Retirement Benefit |
Year |
Annual |
Monthly |
2024 |
5 |
$321 |
$26 |
2029 |
10 |
$1,180 |
$98 |
2044 |
25 |
$3,881 |
$323 |
2065 |
46 |
$7,202 |
$600 |
|
A.5.3 Adjustment for Early or Postponed Retirement Benefit
The CPP retirement pension is subject to an actuarial adjustment that depends on the year and contributor’s age at commencement of the pension. As the initial monthly retirement pension is the sum of the retirement benefits under the base and additional Plans, the actuarial adjustment is applied to each component’s benefit.
The retirement pension is permanently adjusted downward or upward by a factor for each month between age 65 and the age when the pension commences or, if earlier, age 70. Prior to 2011, the adjustment factor for both pre-65 and post-65 pension take-up was 0.5% per month. Starting in 2011, the adjustment factors were changed. For contributors who take their retirement benefit early (before age 65), the adjustment factor gradually increased to 0.6% per month over the five-year period 2012 to 2016. For those who take their benefit after age 65, the factor gradually increased to 0.7% per month over the three-year period 2011 to 2013. Table 32 shows the legislated pension adjustment factors for the CPP.
Table 32 Legislated Pension Adjustment Factors (percentages)
Effective date |
Pre-65 Downward Monthly Adjustment Factor |
Post-65 Upward Monthly Adjustment Factor |
Pre-2011 |
0.50 |
0.50 |
1 January 2011 |
0.50 |
0.57 |
1 January 2012 |
0.52 |
0.64 |
1 January 2013 |
0.54 |
0.70 |
1 January 2014 |
0.56 |
0.70 |
1 January 2015 |
0.58 |
0.70 |
1 January 2016 |
0.60 |
0.70 |
The downward pension adjustment factor of 0.6% per month, applicable for the year 2016 and thereafter, results in a pension that is reduced by 36% for pension take-up at age 60. The upward factor of 0.7% per month, applicable for 2013 and thereafter, results in a pension increased by 42% for pension take-up at age 70.
In accordance with subsection 115(1.11) of the Canada Pension Plan, the Chief Actuary shall calculate the pension adjustment factors and specify them in every third triennial CPP actuarial report prepared, starting with the Actuarial Report on the Canada Pension Plan as at 31 December 2015. The Chief Actuary may also, if deems it necessary, specify the factors in any supplemental CPP actuarial report after 2015.
In accordance with the legislation, the first CPP actuarial report to specify the pension adjustment factors was the 27th CPP Actuarial Report as at 31 December 2015, which was tabled in the House of Commons on 27 September 2016. The methodology used to calculate the factors is described in the study: “Canada Pension Plan Actuarial Adjustment Factors as specified in the 27th Actuarial Report on the Canada Pension as at 31 December 2015 – Actuarial Study No. 18”, which was published by the OCA in April 2017.
A.5.4 Working Beneficiaries – Post-Retirement Benefit
Prior to 2012, those who received a CPP retirement pension and then returned to work (i.e. working beneficiaries) did not pay contributions and therefore did not continue to build their CPP pension. Commencing 1 January 2012, individuals under the age of 65 who receive either a CPP or QPP retirement pension and continue to work in Canada outside of Québec are required, along with their employers, to contribute to the Plan. Working beneficiaries aged 65 to 69 are not required to contribute, but are given the option to do so. Employers of those working beneficiaries opting to contribute are also required to contribute.
The contributions paid by working beneficiaries provide for a post-retirement benefit. The total post-retirement benefit is equal to the sum of the benefits earned during retirement under the base and additional Plans.
The post-retirement benefit is earned at a rate of 1/40 of the maximum retirement pension per year of post-retirement contributions and is adjusted for the applicable earnings level and age of the contributor.
For both the base and additional CPP, contributions paid by working beneficiaries toward accruing the post-retirement benefit do not affect eligibility for other CPP benefits, except the post-retirement disability benefit described below. Pensionable earnings and additional pensionable earnings of working beneficiaries do not qualify for credit splitting.
A post-retirement benefit becomes payable the year following the year in which contributions are made, and multiple post-retirement benefits may accumulate over time. The total pension payable resulting from the combination of the retirement pension and post-retirement benefit may be greater than the maximum CPP or QPP pension payable. As for the CPP retirement pension, the post-retirement benefit is payable for a beneficiary’s lifetime.
The maximum base CPP post-retirement benefit at age 65 in 2019 for a working beneficiary who started their retirement pension at age 64 is $346.38 per year or $28.86 per month.
The projected maximum additional CPP post-retirement benefit at age 65 in 2026 and thereafter, for a working beneficiary who started their retirement pension at age 64, is $179.90 per year or $15 per month, in 2019 wage-adjusted dollars.
A.6 Disability Pension
A.6.1 Eligibility Requirements
A person is considered disabled if he or she is suffering from a severe and prolonged mental or physical disability. A disability is considered severe if by reason of it the person is regularly incapable of pursuing any substantially gainful occupation; a disability is considered prolonged if it is likely to be long-continuing and of indefinite duration or likely to result in death.
A person who becomes disabled prior to age 65 and is not receiving a CPP retirement pension is eligible for a disability pension provided that contributions have been made, at the time of disablement, for at least four of the previous six calendar years, counting years included wholly or partly in the contributory period. Contributions must be on earnings that are not less than 10% of the YMPE rounded, if necessary, to the next lower multiple of $100. Since 2008, contributors with 25 or more years of contributions to the Plan can meet the eligibility requirement with contributions in three of the last six years.
The eligibility requirements for the additional disability benefit are those of the base CPP. That is, a contributor is deemed to be eligible for the additional CPP disability benefit if they are eligible for the base CPP disability benefit.
A.6.2 Amount of Pension
The initial amount of the monthly disability pension payable is the sum of the disability benefits payable under the base and additional Plans.
The initial base CPP monthly disability benefit is the sum of a flat-rate portion payable ($496.36 per month in 2019) depending only on the year in which the benefit is payable and an earnings-related portion equal to 75% of the base CPP retirement pension that would be payable at the onset of disability if the contributory period ended on that date and no actuarial adjustment applied.
The initial amount of the additional CPP monthly disability benefit is strictly earnings-related and is equal to 75% of the additional retirement pension that would be payable at the onset of disability if the first and second additional contributory periods ended on that date and no actuarial adjustment applied.
The automatic conversion of the CPP disability benefit into a retirement pension at age 65 is determined by base and additional pensionable earnings at the time of disablement, price-indexed to age 65. In other words, the indexing from the time of disablement to age 65, which determines the initial rate of the CPP retirement pension, is in line with increases in prices rather than wages.
The maximum base CPP disability benefit payable in 2019 is $16,347.60 per year or $1,362.30 per month.
Additional CPP disability benefits will initially be low in the early years of the additional Plan due to the lower accrual rates during the phase-in period and few years of contributions.
The projected maximum additional CPP disability benefits, in 2019 wage-adjusted dollars, are shown in Table 33. The table accounts for the phase-in period of the additional Plan from 2019 to 2025. The maximum additional disability benefit payable is $5,402 per year or $450 per month, in 2019 wage-adjusted dollars.
Table 33 Projected Maximum Additional CPP Disability Benefit
Pre-Disability Pensionable Earnings at or above YMPE before 2024, YAMPE thereafter
All amounts in 2019 wage-adjusted dollars |
As at January 1 |
Number of Years of Contributions to Additional CPP |
Additional CPP Disability Benefit |
Year |
Annual |
Monthly |
2024 |
5 |
$234 |
$19 |
2029 |
10 |
$885 |
$74 |
2044 |
25 |
$2,910 |
$243 |
2065+ |
46 |
$5,402 |
$450 |
|
A.6.3 Post-Retirement Disability Benefit (Base CPP only)
Effective 1 January 2019, disability protection is provided for base CPP retirement pension recipients under age 65. Prior to 2019, base CPP retirement beneficiaries who were deemed disabled after the start of the retirement pension could not receive the CPP disability benefit, even if they were still under age 65 and otherwise met eligibility requirements. As of 1 January 2019, a post-retirement disability benefit equal to the flat-rate amount ($496.36 per month in 2019) will be payable under the base CPP to retirement beneficiaries who are deemed disabled while under age 65. Such eligible disabled retirement beneficiaries will receive the post-retirement disability benefit in addition to their retirement pension, and the dependent children of disabled retirees will receive children’s benefits.
The post-retirement disability benefit pertains only to the base Plan. There is no additional post-retirement disability benefit payable under the additional Plan.
A.7 Survivor’s Pension
A.7.1 Eligibility Requirements
A legal spouse, a separated legal spouse not cohabiting with a common-law partner, or a common-law partner of a deceased contributor, is eligible for a survivor’s benefit if the following conditions are met as at the date of the contributor’s death:
The deceased contributor must have made contributions during the lesser of ten calendar years, or one-third of the number of years included wholly or partly in his or her contributory period, but not for less than three years.
If the surviving spouse is the separated legal spouse of the deceased contributor, there must be no cohabiting common-law partner of the contributor at the time of death. If the survivor is the common-law partner of the deceased contributor, the couple must have cohabited for not less than one year immediately before the death of the contributor. If the common-law partner is of the same sex as the deceased contributor, the death must have occurred on or after 17 April 1985.
Prior to 2019, the surviving spouse or common-law partner must have had dependent children, been disabled, or been at least 35 years of age. As of 1 January 2019, these conditions no longer apply.
The eligibility requirements for the additional survivor’s benefit are those of the base CPP. That is, a legal spouse, a separated legal spouse not cohabiting with a common-law partner, or a common-law partner of a deceased contributor, is eligible for a survivor’s additional benefit if he/she is eligible for the base CPP survivor’s benefit.
A.7.2 Amount of Pension
The initial amount of the monthly survivor’s pension payable under the CPP is equal to the sum of the survivor’s benefits payable under the base and additional Plans.
Prior to 2019, survivors who were not disabled and did not have dependent children had their survivor’s pension reduced by 10 per cent for each year they were under the age of 45 when their spouse or common-law partner died. This reduction lasted until age 65, when the survivor’s pension was then recalculated. This meant that survivors under the age of 35 who were not disabled and did not have dependent children did not receive a survivor’s pension until age 65.
As of 1 January 2019, reductions are no longer applied to the survivor’s pension for survivors under age 45 who are neither disabled nor have dependent children. A surviving spouse and common-law partner of any CPP contributor who has made sufficient contributions will receive an unreduced survivor’s pension.
The amount of the pension changes depends on whether the survivor is younger or older than age 65 as described below. Additional survivor’s benefits regardless of age will initially be low in the early years of the additional Plan due to the lower accrual rates during the phase-in period and few years of additional contributions previously made by the deceased contributor.
A.7.2.1 New Survivor under Age 65
The initial monthly survivor’s pension payable until the surviving spouse or common-law partner attains age 65 is the sum of a base CPP flat-rate benefit and base and additional CPP earnings-related benefits. There is no additional CPP flat-rate benefit.
The base CPP flat-rate survivor’s benefit depends only on the year in which the survivor’s benefit is payable ($193.66 per month in 2019).
The earnings-related benefits payable under the base and additional CPP depend initially only on the contributor’s record of pensionable and additional pensionable earnings, respectively as at the date of death. The initial earnings-related survivor’s benefit is equal to 37.5% of either the retirement pension of the deceased contributor if he or she had been receiving a pension, or the retirement pension that would have been payable to the deceased contributor if the contributory and additional contributory periods had ended at the time of death, with no actuarial adjustment in either case.
The maximum base CPP earnings-related survivor’s benefit for new survivors under age 65 is $432.97 per month in 2019.
The projected maximum additional CPP survivor’s benefits, in 2019 wage-adjusted dollars, are shown in Table 34. The table accounts for the phase-in period of the additional Plan from 2019 to 2025. The maximum additional survivor’s benefit payable for survivors younger than age 65 is $2,701 per year or $225 per month, in 2019 wage-adjusted dollars.
Table 34 Projected Maximum Additional CPP Survivor’s Benefit, Survivor under Age 65
Prior Earnings of Deceased Contributor at or above YMPE before 2024, YAMPE thereafter
All amounts in 2019 wage-adjusted dollars |
As at January 1 |
Number of Years of Prior Contributions by Deceased Contributor to Additional CPP |
Additional CPP Survivor’s Benefit |
Year |
Annual |
Monthly |
2024 |
5 |
$117 |
$10 |
2029 |
10 |
$442 |
$37 |
2044 |
25 |
$1,455 |
$121 |
2065+ |
46 |
$2,701 |
$225 |
|
A.7.2.2 Survivor Age 65 or Over
At age 65, or upon becoming widowed at a later age, an eligible surviving spouse or common-law partner is entitled to a monthly survivor’s benefit equal to 60% of either the retirement pension of the deceased contributor if he or she had been receiving a pension, or the retirement pension that would have been payable to the deceased contributor if the contributory and additional contributory periods had ended at the time of death, with no actuarial adjustment in either case.
The maximum base CPP earnings-related survivor’s benefit for new survivors aged 65 or older is $692.75 per month in 2019.
The projected additional CPP survivor’s benefits, in 2019 wage-adjusted dollars, are shown in Table 35. The table accounts for the phase-in period of the additional Plan from 2019 to 2025. The maximum additional survivor’s benefit payable for survivors aged 65 or older is $4,321 per year or $360 per month, in 2019 wage-adjusted dollars.
Table 35 Projected Maximum Additional CPP Survivor’s Benefit, Survivor Age 65 or Over
Prior Earnings of Deceased Contributor at or above YMPE before 2024, YAMPE thereafter
All amounts in 2019 wage-adjusted dollars |
As at January 1 |
Number of Years of Prior Contributions by Deceased Contributor to Additional CPP |
Additional CPP Survivor’s Benefit |
Year |
Annual |
Monthly |
2024 |
5 |
$187 |
$16 |
2029 |
10 |
$708 |
$59 |
2044 |
25 |
$2,328 |
$194 |
2065+ |
46 |
$4,321 |
$360 |
|
A.8 Death Benefit (Base CPP only)
A lump sum benefit is payable to the estate of a deceased contributor if the eligibility rules for the survivor’s benefit are met. Prior to 2019, the amount of the death benefit was equal to six times the monthly amount of the CPP retirement pension accrued or payable in the year of death, adjusted to exclude any actuarial adjustments, and subject to a maximum of ten percent of the YMPE for the year of death, prior to 1998, and $2,500 thereafter. As of 1 January 2019, the death benefit equals the flat-rate amount of $2,500. The death benefit pertains only to the base CPP.
There is no additional CPP death benefit.
A.9 Child’s Benefits (Base CPP only)
Each child under age 18 and each full-time student aged 18 to 25 who is dependent on a contributor eligible for a CPP disability benefit (the disability pension or post-retirement disability benefit) or who was dependent on a deceased contributor who satisfied the requirements for a survivor’s pension is entitled to a flat-rate monthly benefit ($250.27 in 2019). Furthermore a child may receive more than one child’s benefit simultaneously. The child’s benefits pertain only to the base CPP.
There are no additional CPP child’s benefits.
A.10 Combined Benefits
The combined benefits rules of the CPP regarding the simultaneous payment of disability and survivor’s pensions or retirement and survivor’s pensions are complex and involve calculations and comparisons of various amounts.
For combined benefits under the base CPP, if there are two flat-rate components, then the beneficiary receives the larger one. For the earnings-related components, the beneficiary receives the larger one and 60% of the smaller one. As well, the total combined earnings-related component is limited to the maximum retirement pension at age 65 for combined survivor-retirement benefits and to the maximum disability pension for combined survivor-disability benefits. In the case of combined survivor-retirement benefits where the retirement pension is taken early (before age 65), the final retirement amount is actuarially adjusted.
The combined benefits under the additional CPP follow the same rules as for the base CPP, except that there are no flat rate benefits payable, and the limits on the earnings-related amounts do not apply.
A.11 Inflation Adjustments
All monthly CPP benefits are indexed annually in accordance with inflation, as measured by the Pension Index. Benefits are multiplied on 1 January of each calendar year by the ratio of the Pension Index applicable for that calendar year to the Pension Index for the preceding year. As the Pension Index for a year is at least equal to the value of the previous year’s Pension Index, benefits are either held constant or increased from one year to the next.
A.12 Credit Splitting
Pensionable and additional pensionable earnings may be split between separated or divorced couples (legal spouses or common-law partners) for each month the couple lived together. Pensionable earnings (of the base CPP) are used to establish eligibility for CPP benefits, and both pensionable and additional pensionable earnings are used to calculate the amounts of benefits.
Contributors may obtain a credit split even if they have remarried. However, pensionable and additional pensionable earnings cannot be split for any year in which the total earnings of the former couple do not exceed twice the YBE. Credit splitting also does not apply for any period of cohabitation during which a former spouse or common-law partner received a CPP retirement pension.
A.13 Pension Sharing
Couples (legal spouses or common-law partners) in an ongoing relationship may voluntarily (at the request of one of them) share their CPP retirement pensions corresponding to the number of years during which they cohabited. This applies provided both spouses have reached the minimum age requirement to receive a retirement pension. Sharing is possible even if only one of the spouses has participated in the Plan. Pension sharing ceases upon separation, divorce, or death.
Appendix B – Data, Assumptions, and Methodology
B.1 Introduction
This section describes the data, assumptions and methodology that underlie the financial projections in the Results sections of this report.
Future cash flows for the base and additional Plans are projected over a long period of time, i.e. over more than 75 years, and depend on assumptions such as those regarding fertility, mortality, migration, labour force participation, job creation, unemployment, inflation, employment earnings, and investment returns. These assumptions form the basis for the projections of future income and expenditures of both components of the CPP.
Over the years, the cumulative difference between revenues from contributions and investment income and the expenditures of the base and additional CPP generate the respective accumulated assets. The ratio of the end-of-year assets to the following year’s expenditures (the A/E ratio) is then calculated for each component of the Plan.
For the base CPP, the A/E ratio is used to determine the steady-state contribution rate, which is the lowest contribution rate that, in the long term, would generally stabilize the A/E ratio. The steady-state contribution rate is determined in this way before the consideration of any full funding requirement for increased or new benefits. The full funding rate is determined independently of the steady-state rate. It is added to the steady-state rate to produce the minimum contribution rate.
For the additional CPP, the A/E ratio combined with a funding ratio of at least 100% on an open-group basis are used to determine the first and second additional minimum contribution rates before the consideration of any full funding requirement for increased or new benefits. The A/E ratio is also used to determine the permanent increase in the additional minimum contribution rates to fully fund any increased or new benefits. A temporary increase in the additional minimum contribution rates to fully amortize any past costs resulting from increased benefits would be determined separately.
Although the demographic, economic, and investment assumptions have been developed using available information, the resulting estimates should be interpreted with caution. These estimates are not intended to be predictions, but rather projections of the future financial states of the base and additional CPP.
B.2 Data
Table 36 lists the sources of data used for this report categorized by major assumptions. The most recent years of data are also listed.
Table 36 Data Sources
Major Assumptions |
Source of Data |
Last experience year |
Population |
|
|
Fertility |
Statistics Canada, Institut de la statistique du Québec |
2017 |
Migration |
Statistics Canada |
2018 |
Mortality |
Statistics Canada Life Tables |
2015 |
Initial population |
Statistics Canada |
2018 |
Economic |
|
|
CPI |
Statistics Canada |
2018 |
Real Wage Increases |
Statistics Canada
Records of Earnings file from Service Canada |
2018
2017 |
Labour Force (participation, employment, and unemployment rates) |
Statistics Canada |
2018 |
Total Earnings and Contributory Earnings |
Records of Earnings file from Service Canada |
2017 |
Contributions |
Service Canada
Canada Revenue Agency |
2017
2017 |
Benefits |
Administration data from Service Canada |
2018 |
Assets and Investment |
CPPIB
Canadian Institute of Actuaries’ Report on Canadian Economic Statistics 1924-2017, Final Release May 2018 |
2018 |
Operating Expenses |
ESDC and CPPIB |
2018 |
|
In addition to the data sources listed above, other data and reference sources were consulted for the development of the assumptions used in this report. These other sources include the Actuarial Valuation Report on the Québec Pension Plan as at 31 December 2015, which was used to set the assumed incidence rates in respect of the new post-retirement disability benefit, and mortality data from the United Kingdom and United States, which were used for comparison purposes.
B.3 Demographic Assumptions
Both the historical and projected populations of Canada less Québec are required for the calculation of future CPP contributions and benefits of the relevant cohorts of contributors and beneficiaries.
The populations of Canada and Québec as at 1 July 2018 are used as a starting point. The populations are then projected by age and sex from one year to the next by adding births and net migrants and subtracting deaths. Applying the fertility, migration, and mortality assumptions to the starting population develops the annual numbers of births, net migrants, and deaths. The relevant population for the CPP, which is the population of Canada less Québec, is obtained by subtracting the projected population of Québec from the projected population of Canada.
The population covered by the CPP pertains to Canada less Québec, but includes all members of the Canadian Forces (CF) and the Royal Canadian Mounted Police (RCMP). The approach used above to determine the CPP population does not make an explicit allowance for the members of the CF or RCMP residing in Québec or outside Canada. However, provision for this group is made implicitly through the development of the number of people with earnings and the proportion of contributors as described in section B.5 of this Appendix.
B.3.1 Initial Population as at 1 July 2018
The starting point for the demographic projections is based on the most recent Statistics Canada population estimates as at 1 July 2018 for Canada and Québec, by age and sex. The estimates are based on the 2016 Census. The estimates are adjusted by ungrouping ages 100 and older into individual ages using the observed distribution of Old Age Security program beneficiaries by age for ages 100 and older.
B.3.2 Fertility Rates
There are two definitions for the fertility rate: the total fertility rate and the cohort fertility rate. The total fertility rate corresponds to the average number of children born in a given calendar year. Specifically, it is the sum of fertility rates by age group for women aged 15 to 49. In comparison, the cohort fertility rate is the average number of children born to a woman in her lifetime, for women born in a specific year. It gives an idea of trends and variations between different generations over time.
Fertility rates are affected by many factors, including social attitudes, reproductive technologies, and economic conditions. It is assumed for this report that the most recent economic downturn has caused a temporary downward effect on total fertility rates, with couples choosing to postpone having any or more children until economic conditions improve. This effect was taken into consideration along with historical trends in age-specific fertility rates over the last 15 years.
The total fertility rate in Canada has declined significantly since the baby boom period, when the rate peaked at nearly 4.0 per woman in the late 1950s. The baby bust period that followed in the mid-1960s initiated a decline in total fertility rates, resulting in a record low of 1.6 children per woman by the mid-1980s. The total fertility rate rose slightly in the early 1990s, but then generally declined to a level of 1.5 by the late 1990s. Canada is one of many industrialized countries that saw their total fertility rates increase starting in the 2000s. By 2008, the total fertility rate for Canada had reached 1.68. However, in some industrialized countries, including Canada, the total fertility rate has decreased since 2008, which could be attributable to the economic downturn experienced in recent years. In 2017, the total fertility rate for Canada was 1.55.
Similar to Canada, the total fertility rate in Québec fell from a high of 4.0 per woman in the 1950s; however, the Québec rate fell to a greater degree, reaching 1.4 by the mid-1980s. The Québec rate then recovered somewhat in the early 1990s to over 1.6 and subsequently declined to below 1.5 by the late 1990s. There was a significant increase in the Québec rate after the year 2000, with the rate reaching 1.74 by 2008. In 2006, the Québec rate exceeded Canada’s level for the first time since 1958. However, similar to Canada’s fertility rate, the fertility rate for Québec has been decreasing in recent years. In 2017, the total fertility rate for Québec was 1.60.
To determine the ultimate total fertility rate for Canada, the historical fertility rate of each age group was studied and projected independently. As a result, it is assumed that the total fertility rate from 2027 onward for Canada will be 1.62 children per woman, which is lower than the ultimate rate of 1.65 assumed for the 27th CPP Actuarial Report. The ultimate rate corresponds to the average experience over the last 15 years, which captures the pre- and post-recession trends.
For Québec, the historical fertility rate and the difference between Canada’s and Québec’s fertility rates for each age group were analyzed. It is assumed that the difference in the rates will decrease until 2027 and remain stable thereafter. As a result, the total fertility rate from 2027 onward for Québec is assumed to be 1.65 children per woman, which is lower than the assumed ultimate rate of 1.68 in the 27th CPP Actuarial Report.
Although the historical total fertility rates, based on age-group rates, are used to set the assumption for the future, it is nonetheless useful and informative to consider the historical progression of the cohort fertility rates. Over time, the cohort fertility rates will converge to the total fertility rate assumption as shown in Table 37. Historically, the cohort fertility rates in Canada and Québec have steadily declined for the last 50 years. For females born in 1941, who reached the end of their childbearing years (turned age 49) in 1990, the cohort rates were 2.61 and 2.28 for Canada and Québec, respectively. However, for females reaching the end of their childbearing years in 2017 (born in 1968), the Canada and Québec cohort fertility rates were 1.78 and 1.70, respectively.
Table 37 Cohort Fertility Rates by Age and Year of Birth (Canada)
Year of Birth of Woman |
Annual Fertility Rates by Age and Year of Birth
(per 1,000 women) |
Cohort Fertility Rate per Woman |
15-19 |
20-24 |
25-29 |
30-34 |
35-39 |
40-44 |
45-49 |
1960 |
31.3 |
91.3 |
117.5 |
86.1 |
32.6 |
6.2 |
0.4 |
1.83 |
1965 |
26.0 |
76.8 |
121.2 |
84.9 |
36.4 |
7.9 |
0.5 |
1.77 |
1970 |
22.7 |
76.5 |
104.7 |
91.3 |
48.5 |
10.6 |
0.8 |
1.78 |
1975 |
25.6 |
64.6 |
97.9 |
106.1 |
53.4 |
11.7 |
0.9 |
1.80 |
1980 |
20.0 |
54.2 |
101.9 |
107.7 |
57.0 |
13.9 |
1.0 |
1.78 |
1985 |
14.9 |
52.6 |
96.3 |
107.8 |
64.2 |
16.2 |
1.0 |
1.77 |
1990 |
13.9 |
44.6 |
87.0 |
114.1 |
71.5 |
16.2 |
1.0 |
1.74 |
1995 |
12.1 |
37.0 |
84.8 |
120.4 |
71.5 |
16.2 |
1.0 |
1.71 |
2000 |
7.7 |
32.3 |
82.5 |
120.4 |
71.5 |
16.2 |
1.0 |
1.66 |
2005 |
6.2 |
27.6 |
82.5 |
120.4 |
71.5 |
16.2 |
1.0 |
1.63 |
2006 |
5.9 |
27.6 |
82.5 |
120.4 |
71.5 |
16.2 |
1.0 |
1.63 |
2007 |
5.5 |
27.6 |
82.5 |
120.4 |
71.5 |
16.2 |
1.0 |
1.62 |
2008 |
5.2 |
27.6 |
82.5 |
120.4 |
71.5 |
16.2 |
1.0 |
1.62 |
2009 |
4.9 |
27.6 |
82.5 |
120.4 |
71.5 |
16.2 |
1.0 |
1.62 |
2010+ |
4.6 |
27.6 |
82.5 |
120.4 |
71.5 |
16.2 |
1.0 |
1.62 |
|
Table 38 below shows the assumed fertility rate of each age group and the resulting assumed total fertility rate by calendar year.
Table 38 Fertility Rates for Canada
Year |
Annual Fertility Rates by Age Group
(per 1,000 women) |
Total |
15-19 |
20-24 |
25-29 |
30-34 |
35-39 |
40-44 |
45-49 |
2019 |
7.1 |
35.1 |
86.1 |
110.3 |
59.9 |
12.6 |
0.8 |
1.56 |
2020 |
6.8 |
34.2 |
85.7 |
111.6 |
61.3 |
13.0 |
0.9 |
1.57 |
2021 |
6.5 |
33.2 |
85.2 |
112.8 |
62.8 |
13.5 |
0.9 |
1.57 |
2022 |
6.2 |
32.3 |
84.8 |
114.1 |
64.2 |
13.9 |
0.9 |
1.58 |
2023 |
5.9 |
31.4 |
84.3 |
115.4 |
65.7 |
14.4 |
0.9 |
1.59 |
2024 |
5.5 |
30.4 |
83.9 |
116.6 |
67.1 |
14.8 |
0.9 |
1.60 |
2025 |
5.2 |
29.5 |
83.4 |
117.9 |
68.6 |
15.3 |
1.0 |
1.60 |
2026 |
4.9 |
28.5 |
83.0 |
119.2 |
70.0 |
15.7 |
1.0 |
1.61 |
2027+ |
4.6 |
27.6 |
82.5 |
120.4 |
71.5 |
16.2 |
1.0 |
1.62 |
Chart 3 shows the historical and projected total and cohort fertility rates for Canada.
Chart 3 - Historical and Projected Total and Cohort Fertility Rates for Canada
Description
Line chart showing the historical and projected total and cohort fertility rates for Canada, where the cohort fertility rates are based on a woman being age 30 in a given calendar year. Y axis represents the rate in number of children per women. X axis represents the year.
The Total Fertility Rate is 2.8 children per woman in 1941, increases overall to reach its highest point of 3.9 in 1959, and then decreases significantly to 1.6 by the mid-1980s. From the mid-1980s until 2017, the Total Fertility Rate has periods of growth and decline, fluctuating between 1.5 and 1.7, with a value of 1.55 in 2017. After 2017, the rate is projected to gradually increase to reach 1.62 in 2027 and remain at that level thereafter.
The cohort fertility rate is 2.8 children per woman in 1941, increases to its highest point of 3.3 in 1960, then decreases thereafter, reaching a projected value of 1.62 by 2041.
The most recent completed cohort fertility rate of 1.78 in 1998 is for those born in 1968.
Finally, in accordance with the average experience over the last 10, 20, and 30 years, the assumed ratio of male to female newborns is 1.053, which is essentially the same as for the 27th CPP Actuarial Report.
B.3.3 Mortality
For this report, the mortality rate projections start from the year 2015 mortality rates of Statistics Canada (CLT 2014-2016 Tables). According to Statistics Canada, life expectancies at birth in 2015 without any assumed future improvements in mortality (i.e. reductions in mortality) for males and females in Canada were 79.9 and 84.0 years, respectively, compared to 80.5 and 84.3 years projected under the 27th CPP Actuarial Report. At age 65 in 2015, life expectancies were 19.3 and 22.1 years according to Statistics Canada Tables compared to 19.7 and 22.3 years projected under the 27th CPP Actuarial Report for males and females, respectively.
The average annual mortality improvement rates experienced in Canada over the 15-year period from 2000 to 2015 by age and sex were used as the basis for projecting annual mortality improvement rates from 2016 onward. For ages 65 and over, the annual mortality improvement rates for 2016 to 2017 were projected using the trends derived from the administrative data on
Old Age Security (OAS) program beneficiaries, representing 98% of the general population. Improvement rates by age and sex for years 2016 to 2034 (2018 to 2034 for ages 65 and over) were determined by cubical interpolation between:
the improvement rates of year 2015 (2017 for ages 65 and over), and
the ultimate improvement rates described below in respect of the period 2035 and thereafter.
For the year 2035 and thereafter for Canada, the ultimate annual rates of mortality improvement vary by age only and not by sex or calendar year. The ultimate mortality improvement rates are derived using a combination of backward-and forward-looking approaches. The analysis of the Canadian experience over the period from 1925 to 2015, including the recent slowdown trends observed in mortality improvement rates for OAS beneficiaries, was combined with an analysis of the possible drivers of future mortality improvements. Mortality improvement rates for males at most ages are currently higher than those for females but are assumed to decrease to the same level as female rates from 2035 onward. The mortality improvement rates for Québec are assumed to be the same as for Canada from 2018 onward.
The ultimate rate for both sexes for ages 0 to 89 is set at 0.8% per year from 2035 onward for Canada and Québec. For ages above 89, the ultimate improvement rate is set to reduce from 0.5% for the age group 90-94 to 0.2% for those aged 95 and older.
Table 39 shows the initial (2016-2017), intermediate (2018-2034) and ultimate (2035+) assumed annual mortality improvement rates for Canada. The mortality improvement rates shown for 2016-2017 and 2018-2034 represent the average rates over these periods.
Table 39 Annual Mortality Improvement Rates for Canada (percentages)
Age |
Males |
Females |
2016-2017 |
2018-2034 |
2035+ |
2016-2017 |
2018-2034 |
2035+ |
0 |
1.1 |
1.0 |
0.8 |
0.7 |
0.8 |
0.8 |
1-14 |
3.3 |
2.0 |
0.8 |
1.6 |
1.2 |
0.8 |
15-44 |
1.9 |
1.3 |
0.8 |
1.0 |
0.9 |
0.8 |
45-64 |
1.9 |
1.4 |
0.8 |
1.4 |
1.1 |
0.8 |
65-74 |
2.3 |
1.5 |
0.8 |
1.6 |
1.2 |
0.8 |
75-84 |
2.3 |
1.5 |
0.8 |
1.6 |
1.2 |
0.8 |
85-89 |
2.1 |
1.5 |
0.8 |
1.8 |
1.3 |
0.8 |
90-94 |
1.5 |
1.1 |
0.5 |
1.4 |
1.0 |
0.5 |
95+ |
0.5 |
0.4 |
0.2 |
0.5 |
0.4 |
0.2 |
|
The resulting projected mortality rates in Table 40 indicate a continuous decrease in mortality rates over the long term. For example, the mortality rate at age 65 for males is expected to decrease from about 10 deaths per thousand people in 2019 to 6 deaths per thousand people by 2075. The gap in mortality rates between males and females at each age is also expected to decrease over the projection period.
Table 40 Mortality Rates for Canada (annual deaths per 1,000 people)
Age |
Males |
Females |
2019 |
2025 |
2050 |
2075 |
2019 |
2025 |
2050 |
2075 |
0 |
4.56 |
4.28 |
3.48 |
2.84 |
4.13 |
3.95 |
3.23 |
2.64 |
10 |
0.08 |
0.07 |
0.05 |
0.04 |
0.08 |
0.07 |
0.06 |
0.05 |
20 |
0.56 |
0.48 |
0.37 |
0.31 |
0.27 |
0.26 |
0.21 |
0.17 |
30 |
0.86 |
0.80 |
0.65 |
0.53 |
0.41 |
0.39 |
0.32 |
0.26 |
40 |
1.18 |
1.08 |
0.87 |
0.71 |
0.73 |
0.67 |
0.54 |
0.44 |
50 |
2.79 |
2.56 |
2.06 |
1.69 |
1.89 |
1.78 |
1.45 |
1.19 |
60 |
6.51 |
5.77 |
4.58 |
3.75 |
4.28 |
3.90 |
3.13 |
2.56 |
65 |
10.34 |
9.18 |
7.29 |
5.96 |
6.81 |
6.21 |
4.98 |
4.08 |
70 |
16.77 |
14.98 |
11.92 |
9.75 |
11.19 |
10.30 |
8.31 |
6.80 |
75 |
27.47 |
24.54 |
19.53 |
15.98 |
18.78 |
17.34 |
14.00 |
11.45 |
80 |
45.68 |
40.77 |
32.44 |
26.54 |
32.13 |
29.52 |
23.78 |
19.45 |
85 |
77.33 |
69.10 |
55.02 |
45.01 |
56.24 |
51.15 |
41.03 |
33.57 |
90 |
134.88 |
122.24 |
101.81 |
87.15 |
102.53 |
93.70 |
78.33 |
67.05 |
100 |
341.45 |
330.34 |
305.88 |
285.33 |
298.22 |
287.87 |
266.29 |
248.40 |
Chart 4 and Chart 5 show the historical and projected life expectancies at birth and age 65, respectively since the Plan’s inception in 1966, based on each given year’s mortality rates (i.e. without future mortality improvements). Table 41 shows the projected Canadian life expectancies at various ages for the specified calendar years, also based on each given year’s mortality rates (without future improvements). Table 42 is similar to Table 41, the only difference being that it takes into account the assumed mortality improvements after the specified calendar years (with future improvements).
Given the continuing trend in increased longevity, Table 42 is considered to be more realistic than Table 41, especially for the older ages. At the same time, the extended length of the projection period increases the uncertainty of the results presented in Table 42 for younger ages.
From 2019 to 2075, Canadian life expectancy at age 65 (with assumed future mortality improvements) is projected to grow from 21.4 to 24.7 years for males and from 23.9 to 26.8 years for females, as shown in Table 42. The yearly increase in life expectancies at age 65 in the early years of the projection reflects the significant increase observed over the last decades. Thereafter, there is a projected slowdown in the increase in life expectancies consistent with the lower rate of improvement in mortality assumed for 2035 and thereafter.
Chart 4 - Life Expectancies at Birth for Canada, without improvements after the year shown
Description
Line chart showing the historical and projected life expectancies at birth for Canada, without improvements after the year shown. Y axis represents the life expectancy in number of years. X axis represents the year.
Life expectancy at birth for males is 68.8 years in 1966, increases to 80.2 in 2016, and is projected to increase to 86.1 years in 2076.
Life expectancy at birth for females is 75.4 years in 1966, increases to 84.2 in 2016, and is projected to increase to 89 years in 2076.
Chart 5 - Life Expectancies at Age 65 for Canada, without improvements after the year shown
Description
Line chart showing the historical and projected life expectancies at age 65 for Canada, without improvements after the year shown. Y axis represents the life expectancy in number of years. X axis represents the year.
Life expectancy at age 65 for males is 13.6 years in 1966, increases to 19.5 in 2016, and is projected to increase to 23.9 years in 2076.
Life expectancy at age 65 for females is 16.9 years in 1966, increases to 22.2 in 2016, and is projected to increase to 26 years in 2076.
Table 41 Life Expectancies for Canada, without improvements after the year shown
Age |
Males |
Females |
2019 |
2025 |
2050 |
2075 |
2019 |
2025 |
2050 |
2075 |
0 |
80.8 |
81.9 |
84.2 |
86.0 |
84.6 |
85.4 |
87.3 |
89.0 |
10 |
71.3 |
72.4 |
74.5 |
76.3 |
75.0 |
75.8 |
77.7 |
79.3 |
20 |
61.4 |
62.5 |
64.6 |
66.4 |
65.2 |
65.9 |
67.8 |
69.3 |
30 |
51.8 |
52.9 |
54.9 |
56.7 |
55.4 |
56.1 |
57.9 |
59.5 |
40 |
42.3 |
43.3 |
45.3 |
47.0 |
45.6 |
46.4 |
48.1 |
49.6 |
50 |
32.9 |
33.9 |
35.8 |
37.4 |
36.1 |
36.8 |
38.5 |
40.0 |
60 |
24.1 |
25.0 |
26.8 |
28.2 |
26.9 |
27.6 |
29.2 |
30.6 |
65 |
20.0 |
20.8 |
22.4 |
23.8 |
22.6 |
23.2 |
24.7 |
26.0 |
70 |
16.1 |
16.9 |
18.3 |
19.6 |
18.4 |
19.0 |
20.4 |
21.6 |
75 |
12.6 |
13.2 |
14.5 |
15.7 |
14.6 |
15.1 |
16.3 |
17.4 |
80 |
9.4 |
10.0 |
11.1 |
12.0 |
11.1 |
11.6 |
12.6 |
13.5 |
85 |
6.8 |
7.2 |
8.0 |
8.7 |
8.0 |
8.4 |
9.2 |
9.9 |
90 |
4.6 |
4.9 |
5.4 |
5.9 |
5.5 |
5.8 |
6.3 |
6.8 |
100 |
2.2 |
2.2 |
2.4 |
2.5 |
2.5 |
2.5 |
2.7 |
2.8 |
|
Table 42Life Expectancies for Canada, with improvements after the year shown
Age |
Males |
Females |
2019 |
2025 |
2050 |
2075 |
2019 |
2025 |
2050 |
2075 |
0 |
86.9 |
87.4 |
89.1 |
90.7 |
89.9 |
90.3 |
91.8 |
93.2 |
10 |
76.7 |
77.1 |
78.8 |
80.4 |
79.8 |
80.1 |
81.6 |
83.0 |
20 |
66.1 |
66.5 |
68.3 |
69.9 |
69.2 |
69.6 |
71.1 |
72.5 |
30 |
55.7 |
56.2 |
57.9 |
59.6 |
58.8 |
59.2 |
60.7 |
62.1 |
40 |
45.5 |
45.9 |
47.6 |
49.2 |
48.4 |
48.8 |
50.3 |
51.8 |
50 |
35.4 |
35.9 |
37.5 |
39.1 |
38.3 |
38.7 |
40.2 |
41.6 |
60 |
25.9 |
26.3 |
27.9 |
29.3 |
28.5 |
28.9 |
30.3 |
31.7 |
65 |
21.4 |
21.8 |
23.3 |
24.7 |
23.9 |
24.2 |
25.6 |
26.8 |
70 |
17.2 |
17.6 |
19.0 |
20.2 |
19.4 |
19.8 |
21.0 |
22.2 |
75 |
13.4 |
13.8 |
15.0 |
16.1 |
15.3 |
15.7 |
16.8 |
17.9 |
80 |
10.0 |
10.4 |
11.4 |
12.3 |
11.6 |
11.9 |
12.9 |
13.8 |
85 |
7.1 |
7.4 |
8.2 |
8.9 |
8.3 |
8.6 |
9.4 |
10.1 |
90 |
4.7 |
5.0 |
5.5 |
5.9 |
5.6 |
5.9 |
6.4 |
6.8 |
100 |
2.2 |
2.2 |
2.4 |
2.5 |
2.5 |
2.5 |
2.7 |
2.8 |
|
B.3.4 Net Migration
The net migration rate refers to the net effect of the number of immigrants less the number of emigrants, plus the number of returning Canadians and the net increase in the number of non-permanent residents.
Immigration and emigration are generally recognized as being volatile parameters of future population growth since they are subject to a variety of demographic, economic, social, and political factors. During the period from 1972 to 2018, annual immigration to Canada varied between 84,000 and 320,000, annual emigration from Canada fluctuated between 40,000 and 97,000, and the annual number of returning Canadians fluctuated between 14,000 and 41,000.
Over the same period, the annual net increase in the number of non-permanent residents fluctuated between -71,000 and 166,000. Since 2014, the federal government has introduced several modifications to the Temporary Foreign Workers Program making it more difficult for employers to hire temporary foreign workers. The federal government also improved its monitoring of the Temporary Foreign Workers Program in 2018. It is expected that these changes will moderate the increase in the number of non-permanent residents.
However, in the most recent years, the largest group of non-permanent residents has been international students, accounting for almost half of non-permanent residents. It is expected that the number of foreign students will stabilize over the next three years. Given the government’s policies and the expected stabilization of the number of foreign students, the annual net increase in the number of non-permanent residents is projected to fall gradually to reach zero in 2021 and to remain at that level thereafter.
The actual 2018 net migration rate of 1.11% is assumed to decrease to 0.86% in 2019, 0.73% in 2020, and 0.62% in 2021, and to remain at that level thereafter. The ultimate net migration rate of 0.62% corresponds to the average rate experienced over the ten-year period 2009-2018, excluding the net increase in non-permanent residents during that period. The assumed short-term net migration rate is higher than the ultimate rate of 0.62%, due to starting from a higher rate in 2018, the federal government’s short-term targets, and the assumed gradual decrease to zero for the net increase in the number of non-permanent residents from 2019 through 2021. Chart 6 shows the net migration experience since 1972 and the projected rates.
Chart 6 - Net Migration Rate (Canada)
Description
Line chart showing the historical and projected net migration rate for Canada, including non-permanent residents. Y axis represents the net migration rate as a percentage of the population. X axis represents the year.
The net migration rate for Canada is 0.4% in 1972, and then is shown to fluctuate over time but increase overall, reaching its highest point of 1.1% in 2018. The net migration rate is then projected to decrease between the years 2019 to 2021 to reach a value of 0.62% and to remain at that value thereafter.
To project Québec’s population, the same migration components of immigration, emigration and returning Canadians are considered. An additional component consisting of the net interprovincial emigration for Québec is also included. It is assumed that the 2018 net migration rate of 0.91% for Québec will decrease gradually to reach an ultimate level of 0.43% in 2021, assuming a decline in the net increase of non-permanent residents to zero by that year. The ultimate net migration rate for Québec of 0.43% corresponds to the average experience over the last 10 years, excluding the net increase in non-permanent residents.
For both Canada and Québec, the distributions of immigrants, emigrants, and returning Canadians by age and sex used for the demographic projections were derived from Statistics Canada data averaged over the period 2009 to 2018.
B.3.5 Projected Population and its Characteristics
The historical and projected evolution of the Canada less Québec population age distribution since the inception of the Plan is shown in Chart 7. One can easily observe that the triangular shape of the 1960s has become more rectangular over time. This is projected to continue and indicates an aging population. The effects of the baby boom, baby bust, and echo generations can be seen. The chart also reveals that the number of people aged 85 and over is expected to increase dramatically over the coming decades.
Chart 7 - Age Distribution of the Population of Canada less Québec (thousands)
Description
Succession of four bar charts showing the evolution of the age distribution of the population of Canada less Québec. Y axis represents the number of individuals in thousands. X axis represents the quinquennial age groups.
The first bar chart represents the age distribution of the population in 1966. For age groups below age 20, the baby-boom generation, the population of each group is between 1.3 and 1.6 million, with the age group 5 to 9 years being the largest. For age groups above age 19, the population gradually decreases from about 1 million to almost zero for age group 90 and older.
The second bar chart represents the age distribution of the population in 2018. For age groups 50 to 54 up to 65 to 69, the baby boomers, the population of each group is between 1.5 and 2.1 million, with the age group 55 to 59 being the largest. For ages below 50, the effects of the baby bust and echo generation are seen. The population increases from 1.5 to 2 million for groups 0 to 4 up to 25 to 29, remains at 2 million for group 30 to 34, and then decreases somewhat before rising again for the baby boomers. For age groups above 69 (older than the baby boomers), the population gradually decreases from 1.2 million to about 242,000 for age group 90 and older.
The third bar chart represents the age distribution of the population in 2025. For age groups 60 to 79, the baby boomers, the population decreases from 2.1 to 1.2 million. For age groups below age 60, the effects of the baby bust and echo generation are seen. The population increases from about 1.7 to 2.2 million for groups 0 to 4 up to 30 to 34 and then decreases to 1.9 million before rising again for the baby boomers. For age groups above age 79 (older than the boomers), the population gradually decreases from about 765,000 to 317,000 for age group 90 and older.
Lastly, the fourth bar chart represents the age distribution of the population in 2050. For age groups 85 and over, the baby boomers, the population decreases from 1.2 and 1 million. The population increases from 1.8 to 2.5 million for age groups 0 to 4 up to 50 to 54, and then decreases to 1.4 million for age group 80 to 84.
The population of Canada as at 1 July 2018 is 37.1 million, while the population of Canada less Québec is 28.7 million. Table 43 and Table 44 present the projected populations of Canada and Canada less Québec as at 1 July for selected age groups and years, while Chart 8 shows the evolution of the population of Canada less Québec, split by ages groups 0 to 19, 20 to 64, and 65 and above, from 1975 to 2095. Table 45 shows the variations in the relative proportions of various age groups for Canada less Québec throughout the projection period.
The proportion of people aged 65 and over for Canada less Québec is expected to increase significantly from 17.1% of the total population in 2019 to 27.6% by 2095. The number of people aged 65 and older as a proportion of the number of people aged 20 to 64 also increases over the same period, from 28.0% in 2019 to 52.1% by 2095. This proportion affects the ratio of benefits to contributions under the CPP.
Table 43Population of Canada by Age (thousands)
Year |
0-17 |
18-69 |
70+ |
0-19 |
20-64 |
65+ |
Total |
2019 |
7,235 |
25,757 |
4,507 |
8,115 |
22,780 |
6,604 |
37,499 |
2020 |
7,292 |
25,912 |
4,694 |
8,144 |
22,892 |
6,862 |
37,899 |
2021 |
7,346 |
26,028 |
4,885 |
8,175 |
22,961 |
7,122 |
38,259 |
2022 |
7,405 |
26,138 |
5,079 |
8,226 |
23,005 |
7,390 |
38,621 |
2023 |
7,471 |
26,232 |
5,283 |
8,292 |
23,031 |
7,663 |
38,986 |
2024 |
7,536 |
26,315 |
5,500 |
8,361 |
23,054 |
7,937 |
39,351 |
2025 |
7,594 |
26,395 |
5,728 |
8,437 |
23,065 |
8,215 |
39,717 |
2030 |
7,838 |
26,762 |
6,901 |
8,726 |
23,248 |
9,528 |
41,502 |
2035 |
8,061 |
27,063 |
7,984 |
8,957 |
23,828 |
10,323 |
43,108 |
2040 |
8,212 |
27,764 |
8,536 |
9,157 |
24,520 |
10,836 |
44,512 |
2045 |
8,274 |
28,667 |
8,828 |
9,265 |
25,258 |
11,245 |
45,769 |
2050 |
8,362 |
29,517 |
9,069 |
9,357 |
25,864 |
11,727 |
46,948 |
2055 |
8,544 |
30,140 |
9,440 |
9,534 |
26,308 |
12,282 |
48,124 |
2060 |
8,785 |
30,632 |
9,946 |
9,790 |
26,585 |
12,988 |
49,362 |
2065 |
9,028 |
31,020 |
10,633 |
10,059 |
26,954 |
13,669 |
50,682 |
2075 |
9,418 |
32,370 |
11,592 |
10,513 |
28,332 |
14,535 |
53,381 |
2085 |
9,779 |
34,013 |
12,223 |
10,919 |
29,777 |
15,320 |
56,016 |
2095 |
10,271 |
35,591 |
12,952 |
11,452 |
31,036 |
16,326 |
58,814 |
Table 44Population of Canada less Québec by Age (thousands)
Year |
0-17 |
18-69 |
70+ |
0-19 |
20-64 |
65+ |
Total |
2019 |
5,646 |
19,995 |
3,383 |
6,351 |
17,707 |
4,967 |
29,025 |
2020 |
5,688 |
20,140 |
3,525 |
6,368 |
17,821 |
5,165 |
29,354 |
2021 |
5,729 |
20,259 |
3,670 |
6,389 |
17,903 |
5,365 |
29,657 |
2022 |
5,773 |
20,372 |
3,818 |
6,428 |
17,965 |
5,570 |
29,963 |
2023 |
5,826 |
20,471 |
3,975 |
6,479 |
18,013 |
5,780 |
30,272 |
2024 |
5,881 |
20,560 |
4,142 |
6,533 |
18,059 |
5,991 |
30,583 |
2025 |
5,932 |
20,646 |
4,318 |
6,596 |
18,092 |
6,208 |
30,896 |
2030 |
6,168 |
21,038 |
5,226 |
6,860 |
18,320 |
7,251 |
32,432 |
2035 |
6,394 |
21,356 |
6,092 |
7,096 |
18,825 |
7,921 |
33,841 |
2040 |
6,536 |
21,986 |
6,571 |
7,286 |
19,428 |
8,380 |
35,094 |
2045 |
6,589 |
22,785 |
6,852 |
7,382 |
20,121 |
8,724 |
36,227 |
2050 |
6,660 |
23,585 |
7,058 |
7,458 |
20,686 |
9,158 |
37,302 |
2055 |
6,814 |
24,172 |
7,394 |
7,609 |
21,099 |
9,674 |
38,381 |
2060 |
7,035 |
24,622 |
7,859 |
7,839 |
21,390 |
10,286 |
39,516 |
2065 |
7,267 |
25,004 |
8,445 |
8,093 |
21,716 |
10,907 |
40,716 |
2075 |
7,637 |
26,192 |
9,335 |
8,525 |
22,937 |
11,702 |
43,164 |
2085 |
7,961 |
27,727 |
9,868 |
8,892 |
24,291 |
12,372 |
45,555 |
2095 |
8,414 |
29,188 |
10,495 |
9,381 |
25,459 |
13,257 |
48,097 |
Chart 8 - Population of Canada less Québec (millions)
Description
Stacked area chart showing the historical and projected population of Canada less Québec by age group. Y axis represents the number of individuals in millions. X axis represents the year.
The population aged 0 to 19 years is 6.1 million in 1975, reaches 6.3 in 2018, and is projected to increase to 9.4 million in 2095. The population aged 0 to 19 represents 36% of the total population in 1975, 22% in 2018, and 20% in 2095.
The population aged 20 to 64 is 9.2 million in 1975, reaches 17.6 in 2018, and is projected to increase to 25.5 million in 2095. The population aged 20 to 64 represents 55% of the total population in 1975, 61% in 2018, and 53% in 2095.
The population aged 65 and over is 1.5 million in 1975, reaches 4.8 in 2018, and is projected to increase to 13.3 million in 2095. The population aged 65 and over represents 9% of the total population in 1975, 17% in 2018, and 28% in 2095.
Table 45Analysis of Population of Canada less Québec by Age
Year |
% of Total Population |
% of Total Population |
Age 65 + as % of Age 20‑64 |
0-17 |
18-69 |
70+ |
0-19 |
20-64 |
65+ |
2019 |
19.5 |
68.9 |
11.7 |
21.9 |
61.0 |
17.1 |
28.0 |
2020 |
19.4 |
68.6 |
12.0 |
21.7 |
60.7 |
17.6 |
29.0 |
2021 |
19.3 |
68.3 |
12.4 |
21.5 |
60.4 |
18.1 |
30.0 |
2022 |
19.3 |
68.0 |
12.7 |
21.5 |
60.0 |
18.6 |
31.0 |
2023 |
19.2 |
67.6 |
13.1 |
21.4 |
59.5 |
19.1 |
32.1 |
2024 |
19.2 |
67.2 |
13.5 |
21.4 |
59.0 |
19.6 |
33.2 |
2025 |
19.2 |
66.8 |
14.0 |
21.3 |
58.6 |
20.1 |
34.3 |
2030 |
19.0 |
64.9 |
16.1 |
21.2 |
56.5 |
22.4 |
39.6 |
2035 |
18.9 |
63.1 |
18.0 |
21.0 |
55.6 |
23.4 |
42.1 |
2040 |
18.6 |
62.7 |
18.7 |
20.8 |
55.4 |
23.9 |
43.1 |
2045 |
18.2 |
62.9 |
18.9 |
20.4 |
55.5 |
24.1 |
43.4 |
2050 |
17.9 |
63.2 |
18.9 |
20.0 |
55.5 |
24.5 |
44.3 |
2055 |
17.8 |
63.0 |
19.3 |
19.8 |
55.0 |
25.2 |
45.8 |
2060 |
17.8 |
62.3 |
19.9 |
19.8 |
54.1 |
26.0 |
48.1 |
2065 |
17.8 |
61.4 |
20.7 |
19.9 |
53.3 |
26.8 |
50.2 |
2075 |
17.7 |
60.7 |
21.6 |
19.7 |
53.1 |
27.1 |
51.0 |
2085 |
17.5 |
60.9 |
21.7 |
19.5 |
53.3 |
27.2 |
50.9 |
2095 |
17.5 |
60.7 |
21.8 |
19.5 |
52.9 |
27.6 |
52.1 |
|
Table 46 shows the projected components of population growth, which is defined as the projected number of births plus net migrants less the projected number of deaths for Canada less Québec from 2019 to 2095, and Chart 9 presents these figures graphically. For Canada less Québec, the number of births is projected to exceed deaths until 2041. Thereafter, all population growth is expected to come from migration.
Over the period 2019 to 2025, the population of Canada less Québec is projected to grow by about 1.0% per year. The annual growth slows to about 0.7% between the late 2030s and early 2040s and to 0.6% thereafter. The population of Canada less Québec is expected to reach 48.1 million by 2095.
Table 46 Births, Net Migrants, and Deaths for Canada less Québec (thousands)
Year |
Population 1st July |
Births |
Net Migrants |
Deaths |
Change in Population |
Annual Percentage Change |
20-64 |
65+ |
Total |
(%) |
(%) |
(%) |
2019 |
29,025 |
303 |
260 |
207 |
356 |
0.9 |
3.9 |
1.2 |
2020 |
29,354 |
312 |
228 |
210 |
329 |
0.6 |
4.0 |
1.1 |
2021 |
29,657 |
317 |
200 |
214 |
303 |
0.5 |
3.9 |
1.0 |
2022 |
29,963 |
322 |
202 |
217 |
306 |
0.3 |
3.8 |
1.0 |
2023 |
30,272 |
326 |
204 |
221 |
309 |
0.3 |
3.8 |
1.0 |
2024 |
30,583 |
330 |
206 |
226 |
311 |
0.3 |
3.6 |
1.0 |
2025 |
30,896 |
334 |
208 |
230 |
312 |
0.2 |
3.6 |
1.0 |
2030 |
32,432 |
340 |
218 |
259 |
300 |
0.3 |
2.7 |
0.9 |
2035 |
33,841 |
336 |
227 |
294 |
269 |
0.5 |
1.6 |
0.8 |
2040 |
35,094 |
336 |
236 |
333 |
239 |
0.7 |
0.9 |
0.7 |
2045 |
36,227 |
344 |
243 |
367 |
220 |
0.7 |
0.8 |
0.6 |
2050 |
37,302 |
355 |
250 |
392 |
213 |
0.5 |
1.1 |
0.6 |
2055 |
38,381 |
369 |
257 |
408 |
219 |
0.3 |
1.2 |
0.6 |
2060 |
39,516 |
382 |
264 |
414 |
233 |
0.2 |
1.3 |
0.6 |
2065 |
40,716 |
390 |
272 |
418 |
244 |
0.4 |
1.1 |
0.6 |
2075 |
43,164 |
402 |
288 |
448 |
242 |
0.5 |
0.7 |
0.6 |
2085 |
45,555 |
426 |
304 |
488 |
241 |
0.5 |
0.6 |
0.5 |
2095 |
48,097 |
451 |
320 |
502 |
269 |
0.5 |
0.8 |
0.6 |
Chart 9 - Projected Components of Population Growth for Canada less Québec (thousands)
Description
Line chart showing the projected components of population growth for Canada less Québec. Y axis represents the number of individuals in thousands. X axis represents the year.
Births are projected to start at approximately 303,000 in 2019 and to increase to 451,000 in 2095.
Deaths are projected to start at approximately 207,000 in 2019, to increase to a value (340,000) higher than births (337,000) in 2041, and to continue increasing to 502,000 in 2095.
Births and Migration are projected to start at approximately 563,000 in 2019, to decrease somewhat until 2021 and then increase thereafter to reach 771,000 in 2095.
B.4 Economic Assumptions
The list of assumptions required to project the various economic indices, as well as CPP contributions and expenditures is quite extensive. The following sections cover the more important assumptions.
The economic outlook rests on the assumed evolution of the labour market, that is, labour force participation, employment, unemployment, inflation, and the increase in average employment earnings. Rates of return on CPP assets reflect the financial markets and are part of the investment assumptions described in section B.6 of this Appendix. All of these factors must be considered together and form part of an overall economic perspective.
B.4.1 Economic Perspective
The future revenues and expenditures of the CPP depend on many economic factors. It is important to define the individual economic assumptions in the context of a long term overall economic perspective. For this report, it is assumed that, despite an uncertain economic outlook for major economies, a moderate and sustainable growth in the Canadian economy will persist throughout the projection period.
The actuarial examination of the CPP involves the projection of its revenues and expenditures over a long period of time. Although best judgment is used regarding future economic trends, it is nonetheless difficult to anticipate all economic changes that may occur during the projection period. There will always be some degree of uncertainty. The projected aging of the population combined with the continued retirement of the baby boom generation over the next few decades will certainly create significant social and economic changes. It is possible that the evolution of the working-age population, especially the active population, will be quite different from what has been historically observed and what has been assumed for the purpose of this report.
B.4.2 Labour Market
Chart 10 shows the main components of the labour market that are used to determine the number of earners and contributors by age, sex, and calendar year.
Chart 10 - Components of the Labour Market
Description
Flow chart showing the main components of the labour market that are used to determine the number of earners and contributors by age, sex, and calendar year.
The top box is the total population. This box splits into two boxes, the first one is the population aged 15 and over and the second box is the population 0 to 14.
The box of the population aged 15 and over is then split into two boxes, the first box is the active population or labour force, which represents those who are either employed or looking for employment. The second box is the inactive population.
The active population box is split into two boxes. The first box is for the employed and the second box is for the unemployed.
The number of earners is based on the number of employed and is defined as the number of persons who had earnings during a given calendar year. The earners become contributors if they have earnings during the year above the Year’s Basic Exemption (YBE) and they are between the ages of 18 and 70.
The proportion of earners and contributors assumptions (described in this section and section B.5.1) rely on the projected active population given in this report. The projected effect of working beneficiaries is reflected in all these assumptions.
B.4.2.1 Active Population (Canada)
The overall labour force participation rates in Canada (the active population expressed as a proportion of the population aged 15 and over) from 1976 to 2018 clearly show a narrowing of the gap between male and female rates. Although the increase in participation rates of females aged 18 to 69 has slowed down since the mid-2000s, the increase was significant over the previous decades. Furthermore, participation rates for those aged 55 and older have increased significantly over the last decade for both men and women.
In 1976, overall male participation (ages 15 and over) was about 78% compared to only 46% for females, which represents a gap of 32%. This gap has narrowed to 8.3% in 2018 (participation rates of 69.6% for males, 61.3% for females). It is assumed that females will continue to narrow the gap in participation rates but at a slower pace, with the gap gradually reducing to about 8.1% by 2035 (67.1% for males vs. 59.0% for females). In addition, over the next two decades, it is assumed that the participation of males and females aged 55 to 69 will continue to increase.
Table 47 to Table 49 provide projections of the active and employed populations and associated participation, employment, and unemployment rates for Canada.
Table 47Active population (Canada, ages 15 and over) (thousands)
Year |
Population |
Active Population |
Employed |
Males |
Females |
Total |
Males |
Females |
Total |
Males |
Females |
Total |
2019 |
15,155 |
15,568 |
30,723 |
10,533 |
9,505 |
20,038 |
9,862 |
8,994 |
18,856 |
2020 |
15,318 |
15,736 |
31,054 |
10,630 |
9,575 |
20,205 |
9,954 |
9,059 |
19,013 |
2021 |
15,464 |
15,890 |
31,354 |
10,712 |
9,635 |
20,347 |
10,028 |
9,113 |
19,141 |
2022 |
15,615 |
16,048 |
31,663 |
10,795 |
9,696 |
20,491 |
10,102 |
9,167 |
19,270 |
2023 |
15,769 |
16,211 |
31,980 |
10,875 |
9,757 |
20,632 |
10,174 |
9,222 |
19,396 |
2024 |
15,924 |
16,373 |
32,297 |
10,954 |
9,818 |
20,772 |
10,246 |
9,276 |
19,522 |
2025 |
16,077 |
16,534 |
32,611 |
11,031 |
9,877 |
20,907 |
10,314 |
9,328 |
19,642 |
2030 |
16,799 |
17,298 |
34,097 |
11,339 |
10,215 |
21,554 |
10,586 |
9,632 |
20,218 |
2035 |
17,450 |
17,994 |
35,444 |
11,706 |
10,615 |
22,321 |
10,928 |
10,009 |
20,937 |
2040 |
18,077 |
18,664 |
36,741 |
12,052 |
10,919 |
22,970 |
11,250 |
10,296 |
21,546 |
2045 |
18,653 |
19,287 |
37,940 |
12,393 |
11,221 |
23,614 |
11,567 |
10,582 |
22,149 |
2050 |
19,163 |
19,831 |
38,994 |
12,676 |
11,478 |
24,153 |
11,831 |
10,825 |
22,656 |
2055 |
19,642 |
20,323 |
39,965 |
12,894 |
11,686 |
24,580 |
12,035 |
11,021 |
23,056 |
2060 |
20,140 |
20,821 |
40,960 |
13,093 |
11,883 |
24,976 |
12,221 |
11,206 |
23,427 |
2065 |
20,678 |
21,358 |
42,036 |
13,333 |
12,113 |
25,446 |
12,446 |
11,423 |
23,869 |
2075 |
21,824 |
22,540 |
44,364 |
14,003 |
12,702 |
26,705 |
13,071 |
11,978 |
25,050 |
2085 |
22,923 |
23,706 |
46,629 |
14,700 |
13,320 |
28,019 |
13,721 |
12,561 |
26,282 |
2095 |
24,063 |
24,876 |
48,939 |
15,365 |
13,909 |
29,274 |
14,343 |
13,117 |
27,459 |
|
Table 48 Labour Force Participation, Employment and Unemployment (Canada, ages 15 and over) (percentages)
Year |
Labour Force
Participation Rate |
Employment Rate |
Unemployment Rate |
Males |
Females |
Total |
Males |
Females |
Total |
Males |
Females |
Total |
2019 |
69.5 |
61.1 |
65.2 |
65.1 |
57.8 |
61.4 |
6.4 |
5.4 |
5.9 |
2020 |
69.4 |
60.8 |
65.1 |
65.0 |
57.6 |
61.2 |
6.4 |
5.4 |
5.9 |
2021 |
69.3 |
60.6 |
64.9 |
64.8 |
57.4 |
61.0 |
6.4 |
5.4 |
5.9 |
2022 |
69.1 |
60.4 |
64.7 |
64.7 |
57.1 |
60.9 |
6.4 |
5.5 |
6.0 |
2023 |
69.0 |
60.2 |
64.5 |
64.5 |
56.9 |
60.7 |
6.4 |
5.5 |
6.0 |
2024 |
68.8 |
60.0 |
64.3 |
64.3 |
56.7 |
60.4 |
6.5 |
5.5 |
6.0 |
2025 |
68.6 |
59.7 |
64.1 |
64.2 |
56.4 |
60.2 |
6.5 |
5.6 |
6.1 |
2030 |
67.5 |
59.1 |
63.2 |
63.0 |
55.7 |
59.3 |
6.6 |
5.7 |
6.2 |
2035 |
67.1 |
59.0 |
63.0 |
62.6 |
55.6 |
59.1 |
6.6 |
5.7 |
6.2 |
2040 |
66.7 |
58.5 |
62.5 |
62.2 |
55.2 |
58.6 |
6.7 |
5.7 |
6.2 |
2045 |
66.4 |
58.2 |
62.2 |
62.0 |
54.9 |
58.4 |
6.7 |
5.7 |
6.2 |
2050 |
66.1 |
57.9 |
61.9 |
61.7 |
54.6 |
58.1 |
6.7 |
5.7 |
6.2 |
2055 |
65.6 |
57.5 |
61.5 |
61.3 |
54.2 |
57.7 |
6.7 |
5.7 |
6.2 |
2060 |
65.0 |
57.1 |
61.0 |
60.7 |
53.8 |
57.2 |
6.7 |
5.7 |
6.2 |
2065 |
64.5 |
56.7 |
60.5 |
60.2 |
53.5 |
56.8 |
6.7 |
5.7 |
6.2 |
2075 |
64.2 |
56.4 |
60.2 |
59.9 |
53.1 |
56.5 |
6.7 |
5.7 |
6.2 |
2085 |
64.1 |
56.2 |
60.1 |
59.9 |
53.0 |
56.4 |
6.7 |
5.7 |
6.2 |
2095 |
63.9 |
55.9 |
59.8 |
59.6 |
52.7 |
56.1 |
6.7 |
5.7 |
6.2 |
Table 49 Labour Force Participation Rates (Canada)
(percentages)
Age |
Males |
Females |
Age Group |
2019 |
2025 |
2035 |
2050 |
2019 |
2025 |
2035 |
15-19 |
48.8 |
50.0 |
52.0 |
52.0 |
50.9 |
52.0 |
54.0 |
54.0 |
20-24 |
76.1 |
79.0 |
80.0 |
80.0 |
74.2 |
76.0 |
78.0 |
78.0 |
25-29 |
89.3 |
91.0 |
92.0 |
92.0 |
83.7 |
84.0 |
87.0 |
87.0 |
30-34 |
92.4 |
93.0 |
94.0 |
94.0 |
81.7 |
83.0 |
85.0 |
85.0 |
35-39 |
92.7 |
94.0 |
94.0 |
94.0 |
82.6 |
84.0 |
86.0 |
86.0 |
40-44 |
92.9 |
93.0 |
94.0 |
94.0 |
84.8 |
86.0 |
87.0 |
87.0 |
45-49 |
90.9 |
93.0 |
93.0 |
93.0 |
85.1 |
86.0 |
87.0 |
87.0 |
50-54 |
88.2 |
90.0 |
91.0 |
91.0 |
82.4 |
83.0 |
85.0 |
85.0 |
55-59 |
80.0 |
82.0 |
84.0 |
84.0 |
71.7 |
73.0 |
76.0 |
76.0 |
60-64 |
62.5 |
63.0 |
65.0 |
65.0 |
50.9 |
52.0 |
54.0 |
54.0 |
65-69 |
31.9 |
34.0 |
35.0 |
35.0 |
21.8 |
22.0 |
24.0 |
24.0 |
70 and Over |
11.2 |
12.0 |
13.0 |
13.0 |
5.5 |
6.0 |
6.5 |
6.5 |
55-69 |
60.4 |
59.6 |
61.8 |
62.9 |
50.1 |
48.7 |
51.8 |
52.4 |
55 and Over |
43.0 |
40.3 |
37.0 |
38.7 |
32.7 |
30.1 |
27.8 |
28.6 |
18-69 |
79.8 |
81.0 |
82.8 |
82.0 |
72.1 |
72.7 |
75.6 |
74.9 |
15 and Over |
69.5 |
68.6 |
67.1 |
66.1 |
61.1 |
59.7 |
59.0 |
57.9 |
Given that participation rates start to decline mostly after age 50, the aging of the population will exert downward pressure on the overall labour force participation rate in Canada. If current participation rates by age and sex were to apply throughout the projection period, the effect of population aging alone would cause the overall participation rate from Table 48 to fall from 65.2% in 2019 to 59.3% in 2050, instead of 61.9% as projected under the best-estimate assumptions. However, it is expected that a number of factors will contribute toward partially offsetting the decline that results from population aging.
The main assumption underlying the future overall participation rate is a significant increase in participation rates for age groups 55 and over as a result of an expected continued trend toward longer working lives. The participation rates for those aged 55 to 59 are assumed to increase from 80.0% to 84.0% for males and from 71.7% to 76.0% for females over the period 2018 to 2050. Over the same period, the participation rates for those aged 60 to 64 are assumed to increase from 62.5% to 65.0% and from 50.9% to 54.0% for males and females, respectively, and the participation rates for those aged 65 to 69 are assumed to increase from 31.9% to 35.0% and from 21.8% to 24.0% for males and females, respectively.
Chart 11 shows the historical and projected participation rates for the three age groups 55 to 59, 60 to 64, and 65 to 69. Government policies aimed at increasing participation rates of older workers, the removal of the work cessation test to receive the CPP retirement pension prior to age 65, the increase in life expectancy, and possible insufficient retirement savings are assumed to encourage older workers to delay their retirement and exit the labour force at a later age.
Chart 11 - Labour Force Participation Rates (Canada)
Description
Line chart showing the historical and projected labour force participation rates for Canada for specific age groups. Y axis represents the labour force participation rate. X axis represents the year.
The labour force participation rate of males aged 55 to 59 is 72.1% in 1995, increases to 79.7% in 2018, and is projected to increase to 84% in 2050.
The participation rate of females aged 55 to 59 is 48.3% in 1995, increases to 71.5% in 2018, and is projected to increase to 76% in 2050.
The participation rate of males aged 60 to 64 is 43.4% in 1995, increases to 62.4% in 2018, and is projected to increase to 65% in 2050.
The participation rate of females aged 60 to 64 is 23.4% in 1995, increases to 50.7% in 2018, and is projected to increase to 54% in 2050.
The participation rate of males aged 65 to 69 is 16.7% in 1995, increases to 31.5% in 2018, and is projected to increase to 35% in 2050.
The participation rate of females aged 65 to 69 is 7.3% in 1995, increases to 21.7% in 2018, and is projected to increase to 24% in 2050.
However, despite the assumed future increase in participation rates of older workers and a reliance on skilled immigrant workers, it is still expected that there will be moderate labour shortages in the future as the working-age population expands at a slower pace and as baby boomers continue to retire and exit the labour force. The participation rates for all age groups are expected to increase due to the attractive employment opportunities resulting from labour shortages.
It is also expected that future participation rates will increase with the aging of current young cohorts that have a stronger labour force attachment compared to previous cohorts. The stronger labour force attachment of later cohorts is attributable to different reasons, including higher attained education. The aging of more educated workers with higher labour force attachment, and the exit from the workforce of less educated older workers is expected to create upward pressure on participation rates. Over the shorter term, the participation rates of younger age groups are assumed to gradually increase to their pre-recession levels. Finally, although historical increases in participation rates for women are not expected to continue in the future, their participation rates are expected to increase faster than the participation rates for men.
Based on the foregoing, the participation rates of both men and women are expected to increase over the projection period from their 2018 levels for all age groups, especially for those aged 55 and over. Nonetheless, these increases in participation rates are not sufficient to offset the decrease in the overall participation rate (ages 15 and over) due to the demographic shift.
For the purpose of projecting the participation rates, the projection period has been divided into three periods: 2019 to 2025, 2025 to 2035, and from 2035 onward. From 2019 to 2025, and from 2025 to 2035, the projected participation rates are based on the expected impact of the abovementioned factors through time for each age group and sex. From 2035 onward, the participation rates are held constant. This long-term assumption combined with a slow growth in the working-age population, results in a low rate of growth of approximately 0.5% for the Canadian active population (that is, the labour force) after 2035.
B.4.2.2 Employment (Canada)
In Canada, the annual job creation rate (i.e. the change in the number of persons employed) has been on average about 1.6% since 1976. However, this rate has varied over the years. It is assumed that the job creation rate will be 1.1% in 2019 corresponding to the unemployment rate of 5.9%, based on the most recent experience and various economic forecasts. It is further assumed that over the short term, the job creation rate will be slightly lower than the labour force growth rate, so that the unemployment rate slowly increases from its 2019 level of 5.9% to 6.2% by 2030.
Over the long term, the job creation rate is assumed to be the same as the labour force growth of 0.5%. This results in the projected unemployment rate of 6.2%, which is in line with various economic forecasts and reflects moderate economic growth.
The assumed ultimate unemployment rate of 6.2% is the same as for the 27th CPP Actuarial Report but is assumed to be reached by year 2030 instead of 2025.
Table 50 shows the projected number of employed persons, aged 18 to 69, in Canada.
Table 50 Employment of Population (Canada, ages 18 to 69)
Year |
Population |
Employed |
Employment Rate |
Males |
Females |
Males |
Females |
Males |
Females |
(thousands) |
(thousands) |
(%) |
2019 |
12,911 |
12,846 |
9,440 |
8,648 |
73.1 |
67.3 |
2020 |
12,987 |
12,925 |
9,521 |
8,709 |
73.3 |
67.4 |
2021 |
13,042 |
12,985 |
9,585 |
8,756 |
73.5 |
67.4 |
2022 |
13,095 |
13,043 |
9,645 |
8,801 |
73.7 |
67.5 |
2023 |
13,140 |
13,092 |
9,700 |
8,844 |
73.8 |
67.6 |
2024 |
13,180 |
13,135 |
9,753 |
8,886 |
74.0 |
67.6 |
2025 |
13,218 |
13,177 |
9,802 |
8,924 |
74.2 |
67.7 |
2030 |
13,392 |
13,370 |
9,987 |
9,179 |
74.6 |
68.6 |
2035 |
13,537 |
13,526 |
10,243 |
9,506 |
75.7 |
70.3 |
2040 |
13,890 |
13,874 |
10,519 |
9,761 |
75.7 |
70.4 |
2045 |
14,349 |
14,318 |
10,814 |
10,026 |
75.4 |
70.0 |
2050 |
14,780 |
14,737 |
11,067 |
10,260 |
74.9 |
69.6 |
2055 |
15,087 |
15,054 |
11,249 |
10,445 |
74.6 |
69.4 |
2060 |
15,315 |
15,317 |
11,397 |
10,612 |
74.4 |
69.3 |
2065 |
15,482 |
15,538 |
11,571 |
10,802 |
74.7 |
69.5 |
2075 |
16,150 |
16,220 |
12,122 |
11,310 |
75.1 |
69.7 |
2085 |
16,988 |
17,025 |
12,730 |
11,860 |
74.9 |
69.7 |
2095 |
17,776 |
17,815 |
13,298 |
12,381 |
74.8 |
69.5 |
B.4.2.3 Labour Market (Canada less Québec)
Given that the CPP covers contributors in all provinces except Québec, labour market assumptions were developed for Québec, and the results for Canada less Québec were derived. Table 51 and Table 52 show the projected active population, number of employed, and labour force participation rates for Canada less Québec.
Table 51 Active Population (Canada less Québec, ages 15 and over)
(thousands)
Year |
Population |
Active Population |
Employed |
Males |
Females |
Total |
Males |
Females |
Total |
Males |
Females |
Total |
2019 |
11,653 |
12,012 |
23,664 |
8,148 |
7,356 |
15,504 |
7,628 |
6,951 |
14,580 |
2020 |
11,788 |
12,153 |
23,941 |
8,234 |
7,423 |
15,657 |
7,712 |
7,016 |
14,729 |
2021 |
11,910 |
12,285 |
24,195 |
8,310 |
7,482 |
15,792 |
7,782 |
7,071 |
14,854 |
2022 |
12,036 |
12,419 |
24,455 |
8,385 |
7,543 |
15,928 |
7,852 |
7,126 |
14,979 |
2023 |
12,164 |
12,557 |
24,721 |
8,459 |
7,602 |
16,061 |
7,920 |
7,181 |
15,101 |
2024 |
12,293 |
12,693 |
24,986 |
8,531 |
7,661 |
16,192 |
7,987 |
7,235 |
15,222 |
2025 |
12,419 |
12,829 |
25,248 |
8,601 |
7,718 |
16,318 |
8,051 |
7,287 |
15,338 |
2030 |
13,023 |
13,474 |
26,497 |
8,879 |
8,030 |
16,909 |
8,305 |
7,574 |
15,879 |
2035 |
13,583 |
14,079 |
27,662 |
9,198 |
8,390 |
17,587 |
8,603 |
7,913 |
16,516 |
2040 |
14,136 |
14,675 |
28,810 |
9,507 |
8,665 |
18,172 |
8,891 |
8,173 |
17,065 |
2045 |
14,655 |
15,240 |
29,895 |
9,821 |
8,944 |
18,765 |
9,183 |
8,438 |
17,621 |
2050 |
15,124 |
15,744 |
30,869 |
10,087 |
9,186 |
19,273 |
9,432 |
8,666 |
18,098 |
2055 |
15,563 |
16,204 |
31,767 |
10,294 |
9,383 |
19,677 |
9,625 |
8,852 |
18,477 |
2060 |
16,012 |
16,661 |
32,674 |
10,479 |
9,565 |
20,044 |
9,798 |
9,023 |
18,821 |
2065 |
16,493 |
17,148 |
33,641 |
10,693 |
9,770 |
20,464 |
9,999 |
9,216 |
19,215 |
2075 |
17,524 |
18,214 |
35,738 |
11,293 |
10,308 |
21,602 |
10,559 |
9,723 |
20,282 |
2085 |
18,521 |
19,277 |
37,798 |
11,938 |
10,886 |
22,823 |
11,161 |
10,268 |
21,429 |
2095 |
19,546 |
20,340 |
39,886 |
12,548 |
11,430 |
23,978 |
11,731 |
10,781 |
22,513 |
|
Table 52 Labour Force Participation Rates (Canada less Québec)
(percentages)
Age Group |
Males |
Females |
2019 |
2025 |
2035 |
2050 |
2019 |
2025 |
2035 |
2050 |
15-19 |
48.0 |
49.1 |
51.4 |
51.5 |
49.2 |
51.1 |
53.4 |
53.5 |
20-24 |
75.4 |
78.2 |
79.1 |
79.2 |
73.3 |
75.0 |
77.1 |
77.2 |
25-29 |
88.8 |
90.7 |
91.7 |
91.7 |
82.7 |
83.2 |
87.0 |
87.0 |
30-34 |
92.7 |
93.0 |
94.0 |
94.0 |
80.7 |
82.2 |
84.5 |
84.5 |
35-39 |
93.0 |
94.0 |
94.0 |
94.0 |
81.7 |
83.2 |
85.5 |
85.5 |
40-44 |
92.7 |
92.7 |
94.0 |
94.0 |
83.3 |
84.9 |
86.2 |
86.2 |
45-49 |
91.0 |
93.3 |
93.0 |
93.0 |
84.3 |
85.1 |
86.2 |
86.3 |
50-54 |
88.3 |
90.0 |
91.0 |
91.0 |
81.5 |
82.2 |
84.5 |
84.5 |
55-59 |
79.7 |
82.0 |
84.3 |
84.3 |
71.9 |
73.3 |
77.2 |
77.0 |
60-64 |
63.4 |
63.9 |
65.9 |
65.8 |
53.0 |
54.1 |
56.1 |
56.0 |
65-69 |
33.8 |
36.2 |
36.7 |
36.7 |
23.4 |
23.6 |
25.9 |
25.8 |
70 and Over |
11.9 |
12.7 |
13.6 |
13.6 |
6.1 |
6.7 |
7.0 |
6.9 |
55-69 |
61.3 |
60.8 |
62.6 |
63.8 |
51.5 |
50.3 |
53.4 |
54.1 |
55 and Over |
43.9 |
41.5 |
38.0 |
39.8 |
34.0 |
31.6 |
29.2 |
29.9 |
18-69 |
80.0 |
81.3 |
83.1 |
82.2 |
71.9 |
72.6 |
75.7 |
75.0 |
15 and Over |
69.9 |
69.3 |
67.7 |
66.7 |
61.2 |
60.2 |
59.6 |
58.3 |
B.4.2.4 Number of Earners (Canada less Québec)
The number of earners for any given year, namely anyone who had employment earnings during the year, is always more than the employed population and sometimes even close to the labour force because it includes all individuals who had earnings at any time during the year, whereas the employed population only indicates the average number of employed in any given year.
The projected number of earners is obtained by a regression based on a highly correlated historical relationship between the number of employed persons and the number of earners over the period 1976 to 2016. Table 53 shows the projected average number of employed persons and the projected number and proportion of earners (relative to the population) aged 18 to 69, for Canada less Québec. The projected number and proportion of earners shown in Table 53 pertain to all earners, including those who are CPP retirement beneficiaries. The effect of CPP retirement beneficiaries with earnings, that is, working beneficiaries, is discussed more in detail in section B.7.6 of this Appendix.
Table 53 Employment of Population (Canada less Québec, ages 18 to 69)
Year |
Population |
Employed |
Earners |
Proportion of Earners
(earners as % of population) |
Males |
Females |
Males |
Females |
Males |
Females |
Males |
Females |
(thousands) |
(thousands) |
(thousands) |
(%) |
2019 |
9,995 |
10,001 |
7,296 |
6,678 |
8,166 |
7,563 |
81.7 |
75.6 |
2020 |
10,066 |
10,074 |
7,372 |
6,739 |
8,264 |
7,641 |
82.1 |
75.8 |
2021 |
10,122 |
10,136 |
7,434 |
6,789 |
8,346 |
7,707 |
82.5 |
76.0 |
2022 |
10,177 |
10,196 |
7,494 |
6,836 |
8,426 |
7,771 |
82.8 |
76.2 |
2023 |
10,224 |
10,247 |
7,549 |
6,881 |
8,487 |
7,822 |
83.0 |
76.3 |
2024 |
10,267 |
10,293 |
7,602 |
6,925 |
8,544 |
7,872 |
83.2 |
76.5 |
2025 |
10,308 |
10,338 |
7,651 |
6,966 |
8,597 |
7,918 |
83.4 |
76.6 |
2030 |
10,493 |
10,545 |
7,836 |
7,216 |
8,792 |
8,195 |
83.8 |
77.7 |
2035 |
10,645 |
10,711 |
8,062 |
7,513 |
9,026 |
8,519 |
84.8 |
79.5 |
2040 |
10,961 |
11,025 |
8,310 |
7,744 |
9,298 |
8,776 |
84.8 |
79.6 |
2045 |
11,368 |
11,418 |
8,580 |
7,988 |
9,616 |
9,063 |
84.6 |
79.4 |
2050 |
11,774 |
11,811 |
8,819 |
8,208 |
9,898 |
9,321 |
84.1 |
78.9 |
2055 |
12,063 |
12,110 |
8,993 |
8,384 |
10,104 |
9,525 |
83.8 |
78.7 |
2060 |
12,272 |
12,351 |
9,132 |
8,538 |
10,262 |
9,701 |
83.6 |
78.5 |
2065 |
12,439 |
12,565 |
9,288 |
8,708 |
10,425 |
9,887 |
83.8 |
78.7 |
2075 |
13,022 |
13,169 |
9,779 |
9,171 |
10,966 |
10,406 |
84.2 |
79.0 |
2085 |
13,800 |
13,926 |
10,343 |
9,685 |
11,602 |
10,992 |
84.1 |
78.9 |
2095 |
14,528 |
14,660 |
10,867 |
10,168 |
12,189 |
11,540 |
83.9 |
78.7 |
B.4.3 Annual Increase in Prices (Inflation Rate)
The increase in prices (inflation rate) assumption is needed to determine the Pension Index for any given calendar year. It is also used in the determination of the annual nominal increase in average employment earnings, the YMPE, YAMPE, and the nominal rates of return on investments.
Price increases, as measured by changes in the CPI, tend to fluctuate from year to year. Over the last 50 years, the trend was generally upward through the early 1980s and then downward until the introduction of the inflation-control targets in the early 1990s, at which point inflation began to stabilize. The average annual increases in the CPI over the 50, 20 and 10-year periods ending in 2018 were 3.7%, 1.9% and 1.6%, respectively.
In 2016, the Bank of Canada and the Government renewed their commitment to keep the inflation rate within a control range of 1% to 3%, with a target of 2%, until the end of 2021. The Senior Deputy Governor of the Bank of Canada indicated in November 2018 that the Bank was undergoing an extensive review of its monetary policy framework. A number of variants to replace the inflation target are being explored. The Bank is also looking at a possible dual mandate of targeting inflation as well as GDP growth or employment. Nevertheless, given the success of the 2% inflation target, it is considered very likely that the Bank will renew its inflation target commitment or at least that it will constitute an important part of its future mandate.
In Canada, inflation was 2.3% in 2018. Price increase forecasts from various economists indicate an average increase in prices of 2.0% for the period 2019 to 2040. To reflect these forecasts and the expectation that the Bank of Canada will renew its inflation target, the price increase assumption is set at 2.0% for the year 2019 and thereafter. The assumption of 2.0% is equal to the assumption for the 27th CPP Actuarial Report.
B.4.4 Real Wage Increases
The real wage increase can be measured using the difference between the increase in the nominal average wage and the CPI. In this case, the nominal average wage is defined as the ratio of the total nominal earnings to total civilian employment in the Canadian economy as a whole.
The real wage increase is related to the growth in total labour productivity as follows:
Real Wage Increase = |
Growth in Labour Productivity +
Growth in Compensation Ratio +
Growth in Earnings Ratio +
Growth in Average Hours Worked +
Growth in Price Differential.
|
Historically, the nominal average wage increase has been similar to the nominal average annual employment earnings (“AAE”) increase, and therefore it is assumed that they can be used interchangeably.
The assumed increase in AAE is used to project the total employment earnings of CPP contributors, while the assumed increase in Average Weekly Earnings (AWE) is used to project the increase in the YMPE from one year to the next. The difference between real increases in the AWE and the AAE (net of inflation) has been relatively small over the period from 1966 to 2017, that is, a difference of approximately 0.01% per year. For several years in the 1980s and the 1990s, this difference was more pronounced; however, the real increases in AAE and AWE have shown a tendency to converge toward each other over time. Taking these factors into consideration, the real increases in AWE and AAE are assumed to be the same for the year 2018 and thereafter.
In addition to the factors included in the equation above, labour demand has a significant impact on real wage increases. Real wages are subject to downward pressure as the demand for workers decreases. On the other hand, one could expect upward pressure on wages if the size of the labour force fails to keep pace with a growing economy.
Labour productivity in the above equation is defined as the ratio of the real Gross Domestic Product (GDP) to total hours worked in the Canadian economy. The average annual growth in labour productivity was 1.59% for the 55-year period ending in 2017, 1.18% for the 25-year period and 0.83% for the 15-year period ending in 2017. Long-term productivity is expected to increase as a result of labour shortages and the federal government’s policies aimed at enhancing productivity growth. At the same time, increasing labour force participation rates of older workers and a reliance on immigration for future labour force growth are expected to moderate the labour shortage and its impact on productivity. Labour productivity growth of 1.10% is assumed for the long term.
The compensation ratio is the ratio of the total compensation received by workers to the nominal GDP. Changes in the compensation ratio reflect the extent to which changes in productivity are shared between labour and capital. The compensation ratio has decreased on average by 0.11% per year for the 55-year period ending in 2017 with a more significant decrease between 1992 and 2005 (an average decrease of 0.7% per year). Over the last 25 and 15 years periods ending in 2017 the compensation ratio has decreased on average by 0.28% and 0.06% respectively. It is assumed that there will be no change in the compensation ratio over the long term.
The earnings ratio is the ratio of total workers’ earnings to total compensation. The total workers’ earnings is defined as the sum of total wages, salary disbursements, and total self-employment earnings. Changes in the earnings ratio reflect changes in the compensation structure offered to employees. The historical decline in the earnings ratio of 0.20% per year from 1962 to 2017 has been primarily due to the faster growth in supplementary labour income, such as employer contributions to pension plans, health benefit plans, the CPP, and the Employment Insurance program, compared to earnings. Given that a significant portion of the historical decrease in the earnings ratio can be explained by the increase in CPP contributions resulting from the increase in the contribution rate from 3.6% in 1986 to 9.9% in 2003, the earnings ratio is not expected to decline as fast as it has in the past. However, the increase in CPP contributions resulting from the new additional Plan as of 2019 is expected to reduce the earnings ratio. As well, as a result of the aging of the population, it is expected that the cost of pension plans and health programs will continue to increase in the future and exert downward pressure on the earnings ratio. Based on the foregoing, it is assumed that the long-term earnings ratio will decline by 0.05% per year.
The average hours worked is defined as the ratio of total hours worked to total employment in the Canadian economy. The average annual growth rate for average hours worked was -0.34% over the 55-year period ending in 2017. There was a significant decrease in the average hours worked between 1965 and 1983, with an average annual decrease over that period of 0.7% per year. Despite short-term fluctuations, the average hours worked stabilized after 1983, with an average decrease of 0.1% per year between 1984 and 2017. In the future, the assumed steady increases in productivity and the higher participation rates of older workers, who generally work fewer hours, could continue to apply negative pressure on the average hours worked. It is assumed that in the long term, the average hours worked will decline by 0.05% per year.
Finally, the price differential or “labour’s terms of trade” is the ratio of the GDP deflator (defined as the ratio of nominal to real GDP) to the CPI. Including this ratio is necessary because labour productivity is expressed in real terms by using real GDP, while current dollar earnings are converted to real earnings using the CPI. The average annual growth in the price differential was 0.09% between 1962 and 2017. However, during this period, the price differential experienced significant fluctuations. It increased at an average rate of 1.2% per year between 1962 and 1976 and decreased at an average rate of 0.6% per year between 1977 and 2002. In more recent years, the decline has reversed, such that between 2002 and 2017 the price differential increased by 0.27% per year. This recent trend is partially due to Canada’s improving international terms of trade. However, it is not clear for how long such growth could be sustained. It is assumed that the long term price differential will remain stable in the long term.
The result of the foregoing discussion is that the assumed real wage increase is 1.0% per year over the long term. Table 54 summarizes the historical information and the assumptions described above.
Table 54 Real Wage Increase and Related Components
|
1962-2017
Average |
1992-2017
Average |
2002-2017
Average |
Ultimate Assumption |
Labour Productivity Growth |
1.59% |
1.18% |
0.83% |
1.10% |
+ Compensation Ratio Growth |
-0.11% |
-0.28% |
-0.06% |
0.00% |
+ Earnings Ratio Growth |
-0.20% |
-0.16% |
-0.20% |
-0.05% |
+ Average Hours Worked Growth |
-0.34% |
-0.14% |
-0.23% |
-0.05% |
+ Price Differential Growth |
0.09% |
0.11% |
0.27% |
0.00% |
Real Wage Increase |
1.01% |
0.71% |
0.62% |
1.00% |
|
The average annual and weekly earnings are assumed to increase at the same pace, with real wage increases projected to gradually rise from 0.3% in 2019 to an ultimate value of 1.0% by 2025. This is consistent with the assumed moderate economic growth implicitly reflected in the assumption on the unemployment rate. Table 55 shows the assumptions regarding the annual increases in prices, real AAE, and real AWE.
Table 55 Inflation, Real AAE and AWE Increases (percentages
Year |
Price Increases |
Real Increases
Average Annual Earnings (AAE) |
Real Increases
Average Weekly Earnings (AWE), (YMPE) |
2019 |
2.00 |
0.30 |
0.30 |
2020 |
2.00 |
0.50 |
0.50 |
2021 |
2.00 |
0.60 |
0.60 |
2022 |
2.00 |
0.70 |
0.70 |
2023 |
2.00 |
0.80 |
0.80 |
2024 |
2.00 |
0.90 |
0.90 |
2025+ |
2.00 |
1.00 |
1.00 |
B.4.5 Average Annual Earnings, Total Earnings and Pensionable Earnings
Average annual earnings are projected by taking into account past and expected structural demographic changes as well as the narrowing of the gap between average female and male employment earnings. As part of these projections, the average annual earnings of working beneficiaries are also taken into account. The ratio of female to male average employment earnings stood at about 48% in 1966 and was 77% in 2016. This ratio is projected to increase to 87% by 2050. Table 56 shows the projected average annual earnings by age group and sex for selected years.
Table 56 Average Annual Earnings (Canada less Québec, ages 18 to 69) (dollars)
Age Group |
Males |
Females |
2019 |
2025 |
2050 |
2019 |
2025 |
2050 |
20-24 |
25,846 |
30,075 |
61,591 |
20,258 |
23,825 |
50,496 |
25-29 |
44,244 |
51,062 |
103,998 |
35,588 |
41,953 |
90,667 |
30-34 |
55,543 |
63,714 |
129,120 |
41,748 |
49,413 |
108,629 |
35-39 |
61,039 |
69,958 |
141,756 |
46,682 |
55,195 |
121,068 |
40-44 |
64,083 |
73,441 |
148,753 |
50,454 |
59,526 |
129,746 |
45-49 |
64,536 |
74,037 |
149,917 |
51,306 |
60,592 |
131,624 |
50-54 |
63,468 |
73,022 |
147,590 |
50,578 |
59,656 |
129,528 |
55-59 |
59,500 |
68,070 |
137,803 |
46,803 |
55,502 |
120,720 |
60-64 |
49,783 |
58,389 |
117,678 |
38,209 |
46,587 |
101,832 |
65-69 |
34,631 |
42,604 |
85,623 |
26,085 |
31,831 |
72,712 |
All Ages |
51,890 |
60,424 |
22,682 |
40,792 |
48,657 |
106,230 |
Total earnings are the product of average earnings and the number of earners. Table 57 shows the projected average earnings and number of earners for each sex, the resulting total earnings, and the annual percentage increase in total earnings for Canada less Québec. The ultimate annual increase in total earnings is set to reach about 3.5%. This nominal increase comprises an ultimate inflation rate of 2.0%, real wage growth of 1.0%, and population growth for the age group 18 to 69 of 0.5%.
Table 57 Total Earnings (Canada less Québec, ages 18 to 69)
Year |
Average Annual Earnings |
Earners |
Total Earnings |
Annual Increase in Total Earnings |
Males |
Females |
Males |
Females |
($) |
($) |
(thousands) |
(thousands) |
($ million) |
(%) |
2019 |
51,890 |
40,792 |
8,166 |
7,563 |
732,277 |
3.7 |
2020 |
53,083 |
41,915 |
8,264 |
7,641 |
758,974 |
3.6 |
2021 |
54,359 |
43,110 |
8,346 |
7,707 |
785,928 |
3.6 |
2022 |
55,729 |
44,373 |
8,426 |
7,771 |
814,427 |
3.6 |
2023 |
57,192 |
45,717 |
8,487 |
7,822 |
842,988 |
3.5 |
2024 |
58,756 |
47,143 |
8,544 |
7,872 |
873,092 |
3.6 |
2025 |
60,424 |
48,657 |
8,597 |
7,918 |
904,728 |
3.6 |
2030 |
69,551 |
57,026 |
8,792 |
8,195 |
1,078,761 |
3.6 |
2035 |
80,084 |
66,778 |
9,026 |
8,519 |
1,291,680 |
3.7 |
2040 |
92,247 |
78,042 |
9,298 |
8,776 |
1,542,660 |
3.6 |
2045 |
106,348 |
91,088 |
9,616 |
9,063 |
1,848,125 |
3.7 |
2050 |
122,682 |
106,230 |
9,898 |
9,321 |
2,204,546 |
3.5 |
2055 |
141,631 |
123,788 |
10,104 |
9,525 |
2,610,127 |
3.4 |
2060 |
163,620 |
144,135 |
10,262 |
9,701 |
3,077,219 |
3.3 |
2065 |
189,187 |
167,650 |
10,425 |
9,887 |
3,629,902 |
3.4 |
2075 |
253,853 |
225,736 |
10,966 |
10,406 |
5,132,621 |
3.6 |
2085 |
341,129 |
303,368 |
11,602 |
10,992 |
7,292,564 |
3.5 |
2095 |
458,501 |
407,629 |
12,189 |
11,540 |
10,293,046 |
3.5 |
Average pensionable earnings in respect of the base CPP are computed by removing from average annual earnings the earnings of those earning less than the YBE and the portion of earnings in excess of the YMPE. Such removal is made using distributions of earners and earnings, which are based on individual earnings statistics. These distributions were determined using earnings statistics from 2014 to 2016 and are assumed to remain constant in the future. The average pensionable earnings by age, sex, and calendar year correspond to the average portion of individual employment earnings below the YMPE for a cohort of earners earning more than the YBE.
For the additional CPP, the same methodology as mentioned above applies but the average portion of individual employment earnings used goes up to the YAMPE. In 2019, the YMPE and YBE are respectively $57,400 and $3,500. The YAMPE is set at 107% of the YMPE in 2024 ($69,700 as projected in this report), and at 114% of the YMPE in 2025 ($76,400 as projected in this report) and thereafter, as per the CPP statute. The YMPE and the YAMPE are increased annually based on the average industrial aggregate wage in Canada as published by Statistics Canada. The projected average pensionable earnings by age and sex for selected years up to the YMPE and YAMPE are shown in Table 58 and Table 59, respectively.
Table 58 Average Pensionable Earnings up to YMPE (Canada less Québec) (dollars)
Age Group |
Males |
Females |
2019 |
2025 |
2050 |
2019 |
2025 |
2050 |
20-24 |
26,557 |
30,588 |
60,579 |
21,975 |
25,458 |
51,496 |
25-29 |
38,742 |
44,761 |
90,536 |
34,096 |
39,709 |
82,288 |
30-34 |
43,772 |
50,620 |
103,102 |
37,232 |
43,455 |
90,715 |
35-39 |
45,585 |
52,779 |
107,917 |
39,385 |
45,982 |
96,002 |
40-44 |
46,394 |
53,749 |
110,094 |
41,029 |
47,897 |
99,998 |
45-49 |
46,487 |
53,867 |
110,335 |
41,563 |
48,567 |
101,431 |
50-54 |
46,186 |
53,563 |
109,482 |
41,361 |
48,312 |
100,791 |
55-59 |
44,352 |
51,251 |
104,147 |
39,477 |
46,148 |
95,777 |
60-64 |
41,380 |
47,928 |
96,031 |
36,273 |
42,746 |
87,750 |
65-69 |
37,374 |
43,457 |
86,529 |
31,185 |
36,190 |
75,094 |
All Ages |
41,330 |
48,167 |
97,515 |
36,181 |
42,438 |
87,902 |
YMPE |
57,400 |
67,100 |
140,500 |
57,400 |
67,100 |
140,500 |
Table 59 Average Pensionable Earnings up to YAMPE (Canada less Québec) (dollars)
Age Group |
Males |
Females |
2019 |
2025 |
2050 |
2019 |
2025 |
2050 |
20-24 |
- |
31,328 |
61,976 |
- |
25,762 |
52,140 |
25-29 |
- |
47,285 |
95,454 |
- |
41,363 |
85,971 |
30-34 |
- |
54,448 |
110,683 |
- |
45,910 |
96,254 |
35-39 |
- |
57,229 |
116,818 |
- |
48,944 |
102,583 |
40-44 |
- |
58,514 |
119,675 |
- |
51,187 |
107,222 |
45-49 |
- |
58,676 |
119,978 |
- |
51,907 |
108,750 |
50-54 |
- |
58,266 |
118,898 |
- |
51,554 |
107,908 |
55-59 |
- |
55,528 |
112,650 |
- |
49,084 |
102,212 |
60-64 |
- |
51,683 |
103,391 |
- |
45,169 |
93,027 |
65-69 |
- |
46,886 |
93,307 |
- |
38,120 |
79,702 |
All Ages |
- |
51,869 |
104,877 |
- |
44,905 |
93,343 |
YAMPE |
- |
76,400 |
160,100 |
- |
76,400 |
160,100 |
The ratios of average pensionable earnings for males and females as a percentage of the YMPE and the YAMPE are slowly decreasing over time. This is due to the freezing of the YBE which has the effect that, over time, fewer and fewer workers are exempt from participating in the CPP. This, in turn, has the effect of increasing the number of earners with low earnings participating in the Plan. The ratio reduces over time for males mainly due to this YBE effect. The ratio also reduces for females, but to a smaller extent and thus is relatively stable as the YBE effect is mostly offset by the increase in their average pensionable earnings.
B.5 Contributions
Contributions are determined by multiplying together the number of contributors, average contributory earnings, and the contribution rate.
B.5.1 Proportion of Contributors
In order to be considered a contributor to the CPP in any given calendar year, one must have employment earnings exceeding the YBE. Accordingly, the proportion of contributors (in respect of the population) is determined by multiplying the proportion of all earners by the proportion of earners earning more than the YBE. This last proportion is determined for each age, sex, and calendar year by expressing the YBE as a percentage of average employment earnings and using distributions of earners and their earnings. The proportion of contributors is adjusted to reflect working beneficiaries. Table 60 presents the proportion of contributors by selected age groups and years for males and females.
Table 60 Proportion of Contributors to the CPP, by Age Group (percentages)
|
Males |
Females |
Age Group |
2019 |
2025 |
2050 |
2019 |
2025 |
2050 |
20-24 |
76.3 |
81.1 |
84.2 |
75.7 |
78.6 |
84.1 |
25-29 |
86.4 |
87.7 |
91.2 |
80.4 |
81.7 |
88.1 |
30-34 |
88.7 |
90.3 |
92.5 |
78.8 |
81.6 |
86.6 |
35-39 |
88.3 |
91.1 |
92.2 |
78.5 |
82.4 |
86.6 |
40-44 |
87.1 |
88.0 |
89.8 |
79.5 |
80.8 |
84.2 |
45-49 |
86.5 |
89.4 |
90.8 |
80.8 |
82.0 |
85.3 |
50-54 |
82.8 |
84.9 |
86.7 |
77.9 |
79.4 |
83.1 |
55-59 |
74.9 |
78.6 |
81.6 |
67.9 |
71.0 |
75.9 |
60-64 |
59.0 |
61.6 |
65.7 |
49.4 |
51.4 |
56.3 |
65-69 |
24.6 |
29.1 |
31.6 |
17.4 |
19.5 |
23.1 |
All Ages |
76.1 |
78.3 |
80.8 |
69.2 |
70.8 |
75.5 |
B.5.2 Average Contributory Earnings
Average contributory earnings, which include contributory earnings of working beneficiaries, are determined for each age, sex, and year by subtracting the YBE from the average pensionable earnings shown in Table 58 and Table 59. The resulting average contributory earnings by age group and sex for selected years up to the YMPE and YAMPE are shown in Table 61 and Table 62, respectively.
Table 61 Average Contributory Earnings for Pensionable Earnings up to YMPE (dollars)
Age Group |
Males |
Females |
2019 |
2025 |
2050 |
2019 |
2025 |
2050 |
20-24 |
23,057 |
27,088 |
57,079 |
18,475 |
21,958 |
47,996 |
25-29 |
35,242 |
41,261 |
87,036 |
30,596 |
36,209 |
78,788 |
30-34 |
40,272 |
47,120 |
99,602 |
33,732 |
39,955 |
87,215 |
35-39 |
42,085 |
49,279 |
104,417 |
35,885 |
42,482 |
92,502 |
40-44 |
42,894 |
50,249 |
106,594 |
37,529 |
44,397 |
96,498 |
45-49 |
42,987 |
50,367 |
106,835 |
38,063 |
45,067 |
97,931 |
50-54 |
42,686 |
50,063 |
105,982 |
37,861 |
44,812 |
97,291 |
55-59 |
40,852 |
47,751 |
100,647 |
35,977 |
42,648 |
92,277 |
60-64 |
37,880 |
44,428 |
92,531 |
32,773 |
39,246 |
84,250 |
65-69 |
33,874 |
39,957 |
83,029 |
27,685 |
32,690 |
71,594 |
All Ages |
37,830 |
44,667 |
94,015 |
32,681 |
38,938 |
84,402 |
YMPE |
57,400 |
67,100 |
140,500 |
57,400 |
67,100 |
140,500 |
Table 62 Average Contributory Earnings for Pensionable Earnings up to YAMPE (dollars)
Age Group |
Males |
Females |
2019 |
2025 |
2050 |
2019 |
2025 |
2050 |
20-24 |
– |
27,828 |
58,476 |
– |
22,262 |
48,640 |
25-29 |
– |
43,785 |
91,954 |
– |
37,863 |
82,471 |
30-34 |
– |
50,948 |
107,183 |
– |
42,410 |
92,754 |
35-39 |
– |
53,729 |
113,318 |
– |
45,444 |
99,083 |
40-44 |
– |
55,014 |
116,175 |
– |
47,687 |
103,722 |
45-49 |
– |
55,176 |
116,478 |
– |
48,407 |
105,250 |
50-54 |
– |
54,766 |
115,398 |
– |
48,054 |
104,408 |
55-59 |
– |
52,028 |
109,150 |
– |
45,584 |
98,712 |
60-64 |
– |
48,183 |
99,891 |
– |
41,669 |
89,527 |
65-69 |
– |
43,386 |
89,807 |
– |
34,620 |
76,202 |
All Ages |
– |
48,369 |
101,377 |
– |
41,405 |
89,843 |
YAMPE |
– |
76,400 |
160,100 |
– |
76,400 |
160,100 |
B.5.3 Total Contributory Earnings
Contributory earnings for each given age, sex, and year are calculated as the product of the proportion of contributors, average contributory earnings, and the corresponding population. Total contributory earnings for each year are obtained by summing contributory earnings for each age and sex in that year.
Total contributory earnings are then adjusted upward to take into account the non-refundable portion of employer contributions arising generally in respect of (1) employees with multiple employers during a given year, (2) employees earning less than the YBE during a given year, including those who only work part of a year. The amount of non-refundable employer contributions increases total CPP contributions, which translates into higher underlying contributory earnings. As such, contributory earnings are adjusted only for the purpose of determining the correct amount of contributions.
The records of earnings from Service Canada, statistics on contributors from the “The CPP & OAS Stats Book 2018”, published by Employment and Social Development Canada, and information from the Canada Revenue Agency on base CPP contribution refunds were used to project the adjustment for contributory earnings up to the YMPE and YAMPE. The adjustment for earnings up to YMPE is projected to be 1.56% in 2019 and decreases to 1.50% over the projection period to account for the YBE being frozen at $3,500. The adjustment for earnings up to YAMPE is projected to be 1.50% in 2024 and decreases to 1.45% over the projection period also to account for the YBE being frozen at $3,500.
These adjustments reflect the change in the administration of overcontributions with the introduction of the additional CPP. Specifically, as of 2019, both employer and employee overcontributions will be applied first to maximizing contributors’ benefits under the base Plan. Any overcontributions remaining will then be applied toward maximizing benefits under the additional Plan. If there are still overcontributions remaining once maximizing benefits under both components of the CPP, a contribution refund will be issued to the contributor and the employer non-refundable portion would be allocated between the Canada Pension Plan Account and the Additional Canada Pension Plan Account.
Annual contributions are equal to the product of adjusted contributory earnings and the contribution rate. The contribution rates are set by law. For the base Plan, the legislated contribution has been 9.9% since 2003. For the additional Plan, the legislated first additional contribution rate is 2.0% as of 2023 (phased in starting in 2019) and the legislated second additional contribution rate is 8.0% as of 2024. Table 63 and Table 64 present the projected components of total unadjusted contributory earnings, the total adjusted contributory earnings, as well as the projected YMPE and YAMPE, for pensionable earnings up to the YMPE and YAMPE, respectively.
Table 63Total Adjusted Contributory Earnings for Pensionable Earnings up to YMPE
Year |
Unadjusted Average Contributory Earnings |
YMPE |
Contributors |
Total Adjusted Contributory Earnings |
Annual Increase in Total Adjusted Contributory Earnings |
Males |
Female |
Males |
Females |
($) |
($) |
($) |
(thousands) |
(thousands) |
($ million) |
(%) |
2019 |
37,830 |
32,681 |
57,400 |
7,608 |
6,920 |
521,967 |
4.3 |
2020 |
38,764 |
33,553 |
58,700 |
7,710 |
7,003 |
542,126 |
3.9 |
2021 |
39,820 |
34,518 |
60,200 |
7,795 |
7,074 |
563,194 |
3.9 |
2022 |
40,939 |
35,537 |
61,800 |
7,880 |
7,146 |
585,498 |
4.0 |
2023 |
42,084 |
36,588 |
63,400 |
7,946 |
7,206 |
607,349 |
3.7 |
2024 |
43,341 |
37,731 |
65,200 |
8,010 |
7,264 |
630,884 |
3.9 |
2025 |
44,667 |
38,938 |
67,100 |
8,071 |
7,320 |
655,541 |
3.9 |
2030 |
51,983 |
45,634 |
77,800 |
8,299 |
7,636 |
791,884 |
3.9 |
2035 |
60,368 |
53,381 |
90,200 |
8,586 |
8,013 |
960,579 |
3.9 |
2040 |
70,028 |
62,293 |
104,600 |
8,889 |
8,313 |
1,157,737 |
3.8 |
2045 |
81,104 |
72,510 |
121,200 |
9,224 |
8,631 |
1,394,863 |
3.7 |
2050 |
94,015 |
84,402 |
140,500 |
9,510 |
8,912 |
1,671,351 |
3.6 |
2055 |
109,079 |
98,265 |
162,900 |
9,719 |
9,136 |
1,987,685 |
3.4 |
2060 |
126,605 |
114,364 |
188,900 |
9,883 |
9,332 |
2,353,547 |
3.4 |
2065 |
146,936 |
132,989 |
219,000 |
10,065 |
9,542 |
2,789,376 |
3.5 |
2075 |
197,779 |
179,204 |
294,300 |
10,643 |
10,098 |
3,973,597 |
3.6 |
2085 |
266,224 |
241,114 |
395,500 |
11,285 |
10,703 |
5,669,320 |
3.6 |
2095 |
358,483 |
324,448 |
531,600 |
11,867 |
11,259 |
8,026,025 |
3.5 |
Table 64Total Adjusted Contributory Earnings for Pensionable Earnings up to YAMPE
Year |
Unadjusted Average Contributory Earnings |
YMPE |
Contributors |
Total Adjusted Contributory Earnings |
Annual Increase in Total Adjusted Contributory Earnings |
Males |
Female |
Males |
Females |
($) |
($) |
($) |
(thousands) |
(thousands) |
($ million) |
(%) |
2024 |
45,208 |
38,994 |
69,700 |
8,010 |
7,264 |
655,074 |
N/A |
2025 |
48,369 |
41,405 |
76,400 |
8,071 |
7,320 |
703,904 |
7.5 |
2030 |
56,236 |
48,538 |
88,600 |
8,299 |
7,636 |
849,843 |
3.8 |
2035 |
65,265 |
56,800 |
102,800 |
8,586 |
8,013 |
1,030,611 |
4.0 |
2040 |
75,632 |
66,286 |
119,200 |
8,889 |
8,313 |
1,241,434 |
3.8 |
2045 |
87,518 |
77,172 |
138,100 |
9,224 |
8,631 |
1,495,083 |
3.7 |
2050 |
101,377 |
89,843 |
160,100 |
9,510 |
8,912 |
1,790,826 |
3.6 |
2055 |
117,571 |
104,625 |
185,700 |
9,719 |
9,136 |
2,129,468 |
3.5 |
2060 |
136,379 |
121,759 |
215,300 |
9,883 |
9,332 |
2,520,482 |
3.4 |
2065 |
158,208 |
141,587 |
249,600 |
10,065 |
9,542 |
2,986,430 |
3.5 |
2075 |
212,859 |
190,761 |
335,500 |
10,643 |
10,098 |
4,252,999 |
3.7 |
2085 |
286,402 |
256,572 |
450,800 |
11,285 |
10,703 |
6,065,581 |
3.6 |
2095 |
385,589 |
345,180 |
606,000 |
11,867 |
11,259 |
8,585,473 |
3.5 |
|
B.6 Investment Assumptions
The total assets of the CPP at the end of any given year throughout the projection period are simply determined by adding together the total assets at the end of the previous year, projected investment income and contribution revenues of the given year, and then subtracting the projected benefits and operating expenses of the given year.
B.6.1 Net Assets as at 31 December 2018
The following discusses only the assets of the base CPP as at 31 December 2018, since the additional CPP starts in 2019 and thus has no assets as at 31 December 2018.
The actual value of the base CPP assets on a market-value accrual basis as at 31 December 2018 was $371,700 million. This is the sum of the CPP Account ($188 million) and the CPPIB invested assets ($368,490 million) for a total of $368,678 million before being adjusted by the amounts receivable minus amounts payable.
The CPP Account was established in respect of the base Plan to record the contributions, interest, pensions, other benefits, and operating expenses. It also records the amounts transferred to and received from the CPPIB. The receivables include the contributions due but not yet deposited into the CPP Account, benefit overpayments, and net transfers between the CPP and the QPP for dual contributors. The amounts payable include operating expenses, pensions and other benefits, as well as amounts due to the CRA. Benefit and operating expenditures are described in detail in sections B.7 and B.8, respectively of this appendix.
Table 65 reconciles the assets of the base CPP as at 31 December 2018.
Table 65Net Assets as at 31 December 2018 - Base CPP ($ million)
CPP Account |
188 |
CPPIB Invested Assets |
368,490 |
Subtotal CPP Account and CPPIB Invested Assets |
368,678 |
|
Plus Amounts Receivable |
Contributions |
3,263 |
Benefit Overpayments |
72 |
Net Transfers Due from QPP |
126 |
|
Minus Amounts Payable |
Operating Expenses |
6 |
Pensions and Other Benefits |
204 |
Amounts Due to the Canada Revenue Agency |
229 |
Net Base CPP Assets |
371,700 |
B.6.2 Investment Strategy and Two-Pool Structure
The CPPIB invests funds according to its own investment policies that take into account the needs of contributors and beneficiaries, as well as financial market constraints. For the purpose of this 30th CPP Actuarial Report, the CPPIB investments have been grouped into three broad categories:
Equities, consisting of public and private equities;
Fixed income securities, consisting of nominal fixed income (marketable bonds and non-marketable bonds), credit, and cash; and
Real assets.
The foundation of the CPPIB’s investment strategy is a two-asset portfolio called the “reference portfolio”. This portfolio sets how much risk the CPPIB is willing to take in accordance with its mandate. The reference portfolio comprises a global equity benchmark and a Canadian government nominal bonds benchmark. The higher the equity share, the higher the associated risk. Since the previous triennial actuarial valuation, the CPPIB has progressively shifted its asset allocation toward a reference portfolio consisting of 85% global equity and 15% Canadian government nominal bonds.
Recognizing the distinct natures of the base and additional CPP, the CPPIB Board approved two different reference portfolios applicable for each component of the Plan. The reference portfolio applicable to the base CPP is maintained at 85% global equity and 15% Canadian government nominal bonds, whereas, the reference portfolio applicable to the additional CPP consists of 50% global equity and 50% Canadian government nominal bonds.
In order to invest the base and additional CPP funds according to their respective reference portfolios, the CPPIB designed a two-pool investment structure. The base CPP’s actual assets as of 31 December 2018 constitute the Core pool and are invested according to the base CPP’s investment policy. The additional CPP assets are invested in two pools: the Core pool and the Supplementary pool. The Supplementary pool solely comprises fixed income securities. The share of the additional CPP’s assets invested in each of the Core and Supplementary pools is determined such that the overall level of risk of the additional CPP is consistent with its reference portfolio. Chart 12 presents a schematic of the two-pool investment structure for the CPP invested assets.
Chart 12 - Illustrative Two-Pool Investment Structure of the CPP
Description
Flow chart showing a schematic of the two-pool investment structure for the CPP invested assets.
On the top left, for the additional CPP, two stacked boxes represent a proportion of 50 to 70% for the bottom box and a proportion of 30 to 50% for the top box. The top box points to another box representing 100% fixed income and designated as the Supplementary Pool. The bottom box is pointing to another box representing a diversified portfolio of equities, fixed income and real assets, together designated as the Core Pool.
On the bottom left, for the base CPP, one box represents a proportion of 100%. That box points to the box designated as the Core Pool.
The CPPIB diversifies its holdings and thus sources of returns, while respecting the risk level of its reference portfolios. As a result, the base and additional CPP assets are invested in more than two types of assets. The portfolios capturing that diversification are called the strategic portfolios. The CPPIB uses the strategic portfolios to express its long-term goal for allocating assets by asset classes and geographic regions. In its 2018 and 2019 Annual Reports, the CPPIB signaled its intention to increase the CPP Fund’s exposure to emerging markets. This intention is reflected in all assumptions presented in this section.
As at 31 December 2018, the asset mix of the base CPP consisted of 56% equities, 18% fixed income securities, and 26% real assets. Table 66 further categorizes the actual assets under CPPIB management into the asset classes identified at the beginning of this section, which correspond to the strategic portfolio’s asset classes.
Table 66 Base CPP (Core Pool) Initial Asset Mix as at 31 December 2018 (percentages)
Equity |
Fixed Income Securities |
Real Assets |
Public Equities |
Private Equities |
Marketable Bonds |
Non-Marketable Bonds |
Credit |
Cash |
32 |
24 |
17 |
6 |
9 |
-14 |
26 |
|
B.6.3 Investment Income
In general, investment income from a given asset within a portfolio is the product of the market value of that asset and its projected nominal rate of return (which is obtained by adding the applicable projected real rate of return, as described in section B.6.4 below, to the projected inflation rate).
The investment income of the CPP is based on the assumed real rate of return applicable to each type of asset, projected inflation, and the projected asset mix and cash flows. In addition, the assumed real rate of return at the portfolio level includes an allowance for rebalancing and diversification (discussed in section B.6.5). Investment income is also adjusted downward to recognize investment expenses (discussed in section B.6.6).
B.6.4 Real Rates of Return
Real rates of return are required for the projection of revenue arising from investment income. They are assumed for each year of the projection period and for each of the main asset classes in which CPP assets are invested. All real rates of return described in this section are shown before reduction for assumed investment expenses.
The real rates of return were developed by looking at historical returns (expressed in Canadian dollars) and adjusting the returns upward or downward to reflect expectations that differ from the past. Both public market data and customized benchmarks prepared by the CPPIB were used to analyze the historical experience.
Future currency variations will impact the real rates of return over the projection period, creating gains and losses. However, as the projection period is over 75 years, these gains and losses are expected to offset each other over time. Thus, it is assumed that currency variations will not have an impact on the real rates of return.
The future outlook is based on the assumption that, over the short-to-medium term, federal bond yields are expected to increase, as their current levels are low by historical standards. The speed of that increase, however, is uncertain. The demand for long-term sovereign bonds, in Canada and abroad, remains strong, and central banks of developed economies are moving cautiously to increase interest rates. Nevertheless, the 75-year time horizon of this report warrants a long-term approach that is expected to be generally consistent with the historical long-term averages of federal bond yields.
B.6.4.1 Fixed Income Securities
As at 31 December 2018, the CPPIB had 18% of its portfolio invested in fixed income securities, split between nominal fixed income, credit, and cash. Nominal fixed income can be further divided into a non-marketable bond portfolio composed of bonds with various terms to maturity, representing loans made to the provinces, and a marketable bond portfolio consisting of federal and provincial bonds. Starting 1 January 2019, the CPPIB will invest part of the additional CPP’s contributions in a Supplementary pool composed of fixed income securities.
Non-Marketable Bond Portfolio and Rollover Rates (Loans to Provinces, Core Pool)
The non-marketable bond portfolio at the end of 2018 represented 6% of all CPP assets. The provinces are allowed to roll over at maturity for a further 20-year term any bonds that were purchased prior to the 1997 CPP amendments (that came into effect on 1 January 1998). In lieu of exercising their statutory rollover right, an agreement between the provinces and the CPPIB permits each province to repay a bond and contract a replacement bond or bonds for a term of at least five years, with a total principal amount not exceeding the principal amount of the maturing bond and total successive terms of not more than 30 years. During the 20-year period 1999 to 2018, 68% of provincial bonds available for rollover were rolled over at or before maturity. The rollover proportion increases to 99% when considering the five-year period from 2014 to 2018, and to 100% when considering the three-year period 2016 to 2018. Using this rollover experience, it is assumed that the rollover rate will be 98% for 2019 and thereafter. The last non-marketable bond is expected to mature in 2043.
On the basis of the average short-, medium-, and long-term experience of the spread between the annual yields on federal and provincial bonds, the current outlook of the economy, and data on rollovers since 1999, a spread over the federal yield was determined for each province. The initial spreads on rollover bonds are set at the actual market spreads at the end of 2018 for provincial bonds issued by the given province. The ultimate spreads, applicable from 2029, are set at the average spreads of provincial bonds issued by a given province during the period of 2000 to 2018, excluding 2008 and 2009. Spreads during the global financial crisis (2008-2009) were abnormally high and were thus ignored in the determination of the ultimate spreads. The weighted long-term average spread for all provinces is approximately 70 basis points. The ultimate annual long-term real federal bonds yield is assumed to be 2.6%, as discussed in the following section. Therefore, an ultimate annual real yield of approximately 3.3% for provincial rollover bonds is assumed for 2029 and thereafter.
The real rate of return of the non-marketable bond portfolio is calculated by taking into consideration any coupon payments made throughout the year, as well as the change in the market value of the portfolio due to changes in the assumed yield rates and in the term to maturity of each bond. Coupons paid and redemption values of bonds at maturity are assumed to be reinvested in the marketable bond portfolio.
Marketable Bond Portfolio (Core Pool)
As the non-marketable bond portfolio matures over the next three decades, it is assumed that the proceeds will be invested in marketable bonds and that the marketable bond portfolio will consist of federal and provincial bonds in varying proportions. The initial asset mix of the marketable bond portfolio is estimated from the CPPIB’s 31 December 2018 financial statements. In addition to Canadian federal and provincial bonds, the CPPIB’s marketable bond portfolio also includes an allocation to foreign sovereign bonds. For the purpose of this report, it was assumed that foreign sovereign bonds would be mostly from developed economies and that they could be approximated by Canadian federal bonds. Hence, the starting composition of the marketable bond portfolio is assumed to be 85% federal and 15% provincial bonds. For the previous triennial CPP actuarial report, corporate bonds were included as a part of the marketable bonds portfolio. For this report, it is assumed that corporate bond holdings of the CPPIB are part of the credit asset class.
It is assumed that the CPPIB will purchase a variety of federal and provincial bonds in proportions consistent with the CPPIB’s investment strategy. It is also assumed that maturing non-marketable bonds will be mostly reinvested in provincial bonds. It is thus assumed that the ultimate marketable bond mix applicable for 2029 and thereafter will be composed of 60% federal and 40% provincial bonds.
The real yield on long-term federal bonds as at 31 December 2018 is about 0.2% and is assumed to gradually increase to 2.6% by 2029 and remain at that level thereafter (the same ultimate value but by 2025 in the previous valuation). The real yields for federal bonds of shorter maturities, as well as for provincial bonds are based on the real yield on long-term federal bonds adjusted based on historical spreads. The initial spreads over the real yield on federal long-term bonds are based on spreads prevailing as at 31 December 2018 and reflect the current economic environment.
Since the long-term federal bond yield is assumed to increase between 2019 and 2029 and only stabilize at the end of 2029, bond returns are quite low for the first ten years of the projection. The assumed average maturity of federal and provincial bonds are estimated based on the CPPIB’s holdings as at 31 December 2018 and are assumed to remain constant throughout the projection period. The average maturity is set at 7.0 years for federal bonds and 13.5 years for provincial bonds. The assumed average ultimate real rates of return for federal and provincial bonds of various maturities are 1.9% and 2.7% respectively. The assumed real rate of return of the marketable bond portfolio, once bond yields have stabilized, is lower than the corresponding assumed real rate of return of the previous actuarial report because corporate bonds are now considered part of the credit asset class (2.2% instead of 2.7% before investment expenses).
Supplementary Pool
The Supplementary pool is expected to be composed mainly of high-quality fixed income securities such that the mix of Core pool and Supplementary pool assets provides the desired risk profile for the additional CPP. For the purpose of this report, the composition of the Supplementary pool is assumed to be similar to the ultimate composition of the marketable bond portfolio. Therefore, the pool is assumed to be composed of 60% federal and 40% provincial bonds. However, it is assumed that the Supplementary pool will have a higher proportion of long-term bonds compared to the marketable bond portfolio. Therefore, the ultimate average maturity of the Supplementary pool’s bonds is assumed to be 11.0 years compared to 9.6 years for the Core pool marketable bond portfolio. Due to this higher allocation to long-term bonds, the ultimate real rate of return for the Supplementary pool is slightly higher at 2.3% (compared to a real rate of return of 2.2% for Core pool marketable bonds). Similar to the Core pool marketable bonds portfolio, the real rates of return of the Supplementary pool are expected to be low over the first few projection years due to the projected increase in yields.
Credit
The credit asset class includes investments in corporate bonds, private debt, and private real estate debt. At the end of 2018, the CPPIB had approximately 9% of its net assets invested in this asset class. For the purpose of this report, the expected real rate of return on credit is assumed to correspond to the return on a diversified portfolio of corporate bonds, adjusted to reflect the risk of the CPPIB’s actual holdings. Such adjustments include an assumed increased exposure to emerging markets. The returns on the diversified portfolio of corporate bonds are derived from projected corporate yields, which are themselves obtained by adding a credit spread to the projected yields of a diversified portfolio of Canadian federal bonds. It is assumed that the credit spread between a diversified portfolio of corporate bonds and federal bonds will ultimately be 1.0%. The expected real rate of return of the credit portfolio is low during the first projection years, as the increase in federal bond yields (and the corresponding low returns) is expected to counter the effect of other factors such as credit spreads and increased emerging market exposure. The ultimate real rate of return is assumed to be 2.9% from 2029 onward.
CPP Account, Additional CPP Account, and Cash
The CPP Account is established in the accounts of Canada to record the transactions of the base Plan and amounts transferred to and from the CPPIB in respect of the base Plan. Historically, the CPP Account, held by the federal Department of Finance, consisted of an operating balance and short-term investments. The assets of the CPP Account not needed to meet immediate base Plan payments were transferred to the CPPIB in monthly installments between September 2004 and August 2005. As such, the balance in the CPP Account is now minimal, serving only as a flow-through account with investments solely in short-term securities.
The Additional CPP Account is a new account established in the accounts of Canada. Similar to the CPP Account, the Additional CPP Account is a flow-through account that records the transactions of the additional Plan and amounts transferred to and from the CPPIB in respect of the additional Plan.
The CPPIB uses financial leverage as part of its investment strategy. Financial leverage in the context of portfolio management consists of borrowing money to invest in additional assets with the expectation that the borrowing cost will be less than the return on the assets purchased. As at 31 December 2018, CPPIB’s external debt and financing liability represented about 14% of its net assets. While previous actuarial reports did not explicitly recognize the leverage component of the CPPIB’s investment strategy, for the purpose of this report, it was decided that the amount of leverage increased to a level that warrants explicit recognition of it in the asset allocation. The borrowing cost related to financial leverage is assumed to correspond to the expected real rate of return on cash. The initial assumed real rate of return on cash is low, reflecting the current environment, with a smooth transition assumed from the initial to the ultimate assumption of 1.0% for 2029 and thereafter.
B.6.4.2 Equity
The CPPIB assets invested in equities are currently diversified among public and private equities and across various geographies. In the derivation of the real rates of return for these equity investments, consideration was given to the long-term equity risk premium, which includes dividends and market value fluctuations. No distinction is made between realized and unrealized capital gains. Custom equity benchmarks provided by the CPPIB were considered in the derivation of real rates of return for equities.
Public equities
Public equities comprise developed and emerging markets publicly traded equities. Consistent with the assumption that risk taken must be rewarded, equity real rates of returns are developed by adding an equity risk premium to the expected real rate of return on cash. The historical equity risk premium over cash worldwide for the 119-year and 50-year periods ending in 2018 were 4.2% and 4.0% respectively. It is assumed that historical equity risk premiums were higher due to several non-repeatable factors (mainly diversification and globalization). As a result, the long-term expected equity risk premium is assumed to be lower than what was realized in the past 119 years. However, for developed markets, the equity risk premium is assumed to be higher in the first eight years of the projection, reflecting assumed low cash returns over the same period, before reaching an assumed ultimate rate of 3.1%. The equity risk premium for emerging market equities is expected to be 90 basis points higher than for developed market equities, reflecting the additional risk inherent with investments in emerging countries.
It is assumed that the exposure to emerging market public equities will increase. As a result, the expected return on public equities is assumed to increase over the projection period, as the equity risk premium is assumed to be greater for emerging market equities than for developed market equities. The real rate of return on public equities is assumed to be 3.9% at the start of the projection period and to reach 4.3% by 2025.
Private equities
Compared to public equities, private equities are less liquid and their management necessitates a higher degree of expertise. Private equities may also provide investors the opportunity to invest at an earlier stage in the development of a company, which translates into additional risk and greater potential returns. As a result, the return structure of private equities is different compared to public equities. Private equities are expected to generate an additional return in exchange for additional risk.
In general, private investments have grown in popularity over the last decade. This increase in demand has not necessarily been matched by an increase in supply. Valuations are high and a significant amount of capital is waiting to be allocated at attractive prices. As more and more investors around the globe compete for private placements, it is assumed that the additional return from investing in private equities compared to public equities will decrease. The real rate of return on private equities is assumed to be 5.7% at the start of the projection period and to gradually decrease to 4.9% by 2025.
B.6.4.3 Real Assets
Real assets such as real estate, infrastructure, and natural resources are considered to share some characteristics of fixed income and equities, as well as to have some unique features related to their specific nature (such as illiquidity). The expected real rate of return on real assets is thus influenced by these features. In addition, the ultimate real rate of return on real assets assumes a greater exposure to emerging markets than as at 31 December 2018. Combined with a low expected real rate of return on fixed income at the start of the projection period, the real rate of return on real assets is expected to increase steadily from its assumed initial value of 1.6% in 2019 to reach an ultimate value of 4.1% in 2029.
B.6.4.4 Summary of Real Rates of Return by Asset Type
Table 67 summarizes the assumed real rates of return by asset type throughout the projection period, before reduction for investment expenses. Compared to the previous triennial report, the rates of return by asset type are presented with no allocation for rebalancing and diversification (discussed in section B.6.5). The rebalancing and diversification allocation is presented at the portfolio level in Table 68 for the base CPP and Table 69 for the additional CPP.
It is important to recognize that rates of return for most assets are volatile. The real rates of return presented in Table 67 represent expected trends and assumed levels of returns to be obtained over a long horizon. As such, limited emphasis should be put on individual projection years.
Table 67 Real Rates of Return by Asset Type (before investment expenses) (percentages)
Year |
Equity |
Fixed Income Securities |
Real Assets |
Public Equities |
Private Equities |
Marketable Bonds |
Non-Marketable Bonds |
Supplementary Pool |
Credit |
Cash |
2019 |
3.9 |
5.7 |
-2.1 |
-2.2 |
-3.0 |
0.2 |
-0.4 |
1.6 |
2020 |
4.0 |
5.5 |
-2.1 |
-2.0 |
-3.1 |
0.3 |
0.0 |
1.7 |
2021 |
4.1 |
5.3 |
0.2 |
0.9 |
0.1 |
1.6 |
0.4 |
3.0 |
2022 |
4.2 |
5.2 |
0.3 |
0.6 |
0.2 |
1.7 |
0.5 |
3.1 |
2023 |
4.2 |
5.1 |
0.5 |
1.0 |
0.4 |
1.9 |
0.6 |
3.2 |
2024 |
4.3 |
5.0 |
0.6 |
1.1 |
0.6 |
2.0 |
0.7 |
3.3 |
2025 |
4.3 |
4.9 |
0.8 |
1.2 |
0.7 |
2.1 |
0.8 |
3.5 |
2026 |
4.3 |
4.9 |
1.0 |
1.5 |
0.9 |
2.2 |
0.9 |
3.5 |
2027 |
4.3 |
4.9 |
1.7 |
2.5 |
1.7 |
2.6 |
1.0 |
3.9 |
2028 |
4.3 |
4.9 |
1.7 |
2.4 |
1.8 |
2.7 |
1.0 |
3.9 |
2029 |
4.3 |
4.9 |
2.2 |
3.2 |
2.3 |
2.9 |
1.0 |
4.1 |
2030 |
4.3 |
4.9 |
2.2 |
3.3 |
2.3 |
2.9 |
1.0 |
4.1 |
2035 |
4.3 |
4.9 |
2.2 |
2.7 |
2.3 |
2.9 |
1.0 |
4.1 |
2040 |
4.3 |
4.9 |
2.2 |
1.8 |
2.3 |
2.9 |
1.0 |
4.1 |
2045 |
4.3 |
4.9 |
2.2 |
0.0 |
2.3 |
2.9 |
1.0 |
4.1 |
B.6.5 Asset Allocation and Expected Portfolio Rates of Return
This report provides a projection of over 75 years. As such, a long-term asset mix assumption is required, both for the base and additional CPP. As the base CPP matures and the Plan’s participants age, the ratio of contributors to beneficiaries will decrease, and the proportion of investment income required to pay benefits will increase. Starting in 2022, it is expected that contributions will be insufficient to cover all expenditures, and that a portion of investment income will be required to cover expenditures. The portion of investment income required to pay expenditures will be small at the beginning but will increase over time, reaching 22.7% in 2050 and 36.1% in 2090 (see Table 13 in Section 4 of the report). Therefore, the importance of reliable investment income will grow over time for the base CPP. The additional CPP will rely even more on investment income due to the difference in its financing approach compared to the base CPP. Deviations in the additional CPP portfolio’s rate of return will greatly impact the sustainability of that plan as a result of the higher reliance of the additional Plan on investment income. Given the long horizon of this report, it is important to consider how much investment risk is appropriate for the base and additional CPP over the long term, bearing in mind how each part is affected by investment returns.
For both the base and additional Plans, the expected portfolio real rates of return include an allowance for rebalancing and diversification of the assets. This allowance takes into account the beneficial effect of periodically rebalancing a diversified portfolio, thereby selling assets that have appreciated in relative value and buying assets that have declined in relative value. In other words, the expected geometric return of a portfolio is greater than the weighted average of the expected return of its components. The size of the allowance depends on the asset mix and the risk characteristics of the individual assets.
Base CPP
It is assumed that the level of risk of the base CPP investment portfolio will decrease over time. Consistent with the CPPIB’s current reference portfolio for the base CPP, a level of risk equivalent to that of a reference portfolio of about 85% equity and 15% fixed income is assumed initially. The volatility of the initial base CPP portfolio, as measured by the one-year standard deviation of return, is estimated at 13.4% annually. Thereafter, it is projected that the annual standard deviation of the rates of return will gradually decrease to 10.7%, equivalent to a hypothetical reference portfolio of about 70% equity and 30% fixed income. The decrease in portfolio risk is assumed to progress in three-year steps reflecting the triennial review of the CPP. Hence, the asset mix is projected to progress from its initial allocation (CPP assets as at 31 December 2018) to a portfolio constructed to match the level of risk of a hypothetical reference portfolio of 70% equity and 30% fixed income. Table 68 presents the projected asset allocation, the expected volatility of the portfolio, and the expected portfolio real rates of return before investment expenses.
Due to the three-year steps progression of the asset mix, the total portfolio real rates of return do not move in a linear fashion. The expected real rates of return tend to decrease each time the level of risk of the portfolio decrease towards its ultimate level. At the same time, expected returns on fixed income are expected to gradually increase up to their ultimate values once yields stabilize. The net effect is a general increasing trend in total portfolio real rates of return with periodic adjustments corresponding to periodic portfolio risk recalibration.
Table 68 Asset Mix, Portfolio Risk and Expected Rates of Return (before investment expenses) Base CPP (%)
Year |
Equity |
Fixed Income Securities |
Real Assets |
Expected One-Year standard deviation |
Total Real Rate of Return, |
Public Equities |
Private Equities |
Marketable Bonds |
Non-Marketable Bonds |
Credit |
Cash |
2019 |
32 |
24 |
17 |
6 |
9 |
-14 |
26 |
13.4 |
3.05 |
2020 |
32 |
24 |
18 |
5 |
9 |
-14 |
26 |
13.3 |
3.05 |
2021 |
32 |
24 |
18 |
5 |
9 |
-14 |
26 |
13.3 |
3.97 |
2022 |
29 |
22 |
19 |
4 |
9 |
-9 |
26 |
12.4 |
3.82 |
2023 |
29 |
22 |
19 |
4 |
9 |
-9 |
26 |
12.4 |
3.89 |
2024 |
29 |
22 |
20 |
3 |
9 |
-9 |
26 |
12.4 |
3.94 |
2025 |
26 |
21 |
20 |
3 |
10 |
-5 |
26 |
11.5 |
3.84 |
2026 |
26 |
21 |
20 |
2 |
10 |
-5 |
26 |
11.6 |
3.90 |
2027 |
26 |
21 |
20 |
2 |
10 |
-5 |
26 |
11.6 |
4.19 |
2028 |
23 |
19 |
20 |
2 |
10 |
0 |
26 |
10.7 |
4.05 |
2029 |
23 |
19 |
20 |
2 |
10 |
0 |
26 |
10.7 |
4.23 |
2030 |
23 |
19 |
20 |
2 |
10 |
0 |
26 |
10.7 |
4.23 |
2035 |
23 |
19 |
21 |
1 |
10 |
0 |
26 |
10.7 |
4.22 |
2040 |
23 |
19 |
22 |
0 |
10 |
0 |
26 |
10.7 |
4.21 |
2045 |
23 |
19 |
22 |
0 |
10 |
0 |
26 |
10.7 |
4.21 |
|
Additional CPP
The additional CPP assets are invested in both the Core and Supplementary pools. The share of the additional CPP assets invested in each pool is selected in order to match the desired level of risk of the additional CPP’s reference portfolio. To increase the total portfolio risk of the additional CPP, a higher allocation to the Core pool would be selected, and vice-versa if a lower level of risk was desired.
It is assumed that the level of risk of the additional CPP will be kept constant over the projection period at a level corresponding to the current CPPIB reference portfolio of about 50% equity and 50% fixed income. During the first few projection years, this level of risk is obtained by investing 55% of the additional CPP’s assets in the Core pool and 45% in the Supplementary pool. Because the level of risk of the Core pool’s investment returns is expected to decrease gradually, a higher share of the additional CPP’s assets is expected to be allocated to the Core pool to maintain the additional CPP’s portfolio volatility at 6.6%. As shown in Table 69, 66% of the additional CPP’s assets are assumed to be allocated to the Core pool for the year 2028 and thereafter.
Table 69 Asset Mix, Portfolio Risk and Expected Rates of Return (before investment expenses) Additional CPP (%)
Year |
Core Pool Allocation |
Supplementary Pool Allocation |
Expected One-Year standard deviation |
Total Real Rate of Return, |
2019 |
55 |
45 |
6.6 |
0.55 |
2020 |
55 |
45 |
6.6 |
0.49 |
2021 |
55 |
45 |
6.6 |
2.40 |
2022 |
58 |
42 |
6.6 |
2.50 |
2023 |
58 |
42 |
6.6 |
2.61 |
2024 |
58 |
42 |
6.6 |
2.72 |
2025 |
62 |
38 |
6.6 |
2.82 |
2026 |
62 |
38 |
6.6 |
2.92 |
2027 |
62 |
38 |
6.6 |
3.41 |
2028 |
66 |
34 |
6.6 |
3.42 |
2029 |
66 |
34 |
6.6 |
3.71 |
2030 |
66 |
34 |
6.6 |
3.71 |
|
B.6.6 Investment Expenses
Over the last three calendar years, CPPIB’s total investment expenses consisting of operating expenses, transaction costs, and investment management fees have averaged 0.95% of assets. The majority of those investment expenses were incurred through active management decisions. Considering how total investment expenses evolved over the last decade, it is assumed that, going forward, CPPIB investment expenses related to the Core pool will be 1.00% of the corresponding assets.
The active management objective is to generate returns in excess of those of the CPP reference portfolios, after reduction for the additional expenses incurred from active management. Thus, the additional returns from a successful active management program should equal at least the cost incurred to pursue active management. For the purpose of this report, it is assumed that the additional returns generated by active management will equal the additional expenses incurred from active management. Those expenses are assumed to be 0.8% for the Core pool (and thus the base CPP), which is the difference between the assumed total investment expenses of 1.0% and the investment expenses of 0.2% that would be incurred from passive management of the portfolio, given that part of the portfolio is invested in private equity and real assets. The assumed investment expenses from passive management of 0.2% represent $756 million and $1,040 million in years 2019 and 2025, respectively.
The investment expenses of the additional CPP will depend on how much of the fund is invested in the Core pool versus the Supplementary pool, and the investment expenses associated with each of these pools. The investment expenses of the Core pool were discussed above and are expected to be 0.8% and 0.2% of net assets from active and passive management, respectively. Taking into account the CPPIB’s existing infrastructures, the investment expenses of the Supplementary pool (comprising solely fixed income) are assumed to be zero both from an active and passive management point of view. Therefore, the overall investment expenses related to the additional CPP are assumed to be equal to the share of the additional CPP invested in the Core pool multiplied by the assumed investment expenses of the Core pool. Because 66% of the additional CPP assets are expected to be invested in the Core pool ultimately, the investment expenses are assumed to be 0.53% and 0.13% from active and passive management, respectively. For simplicity, this cost is assumed to be constant over the projection period (except for 2019).
For the year 2019, the additional CPP investment expenses are adjusted to reflect the implementation costs incurred by the CPPIB before 2019. Total start-up costs represent $9 million or -1.1% in terms of the adjustment to the annual rate of return.
The following section shows the overall rate of return on CPP assets net of investment expenses for the base and additional CPP.
B.6.7 Overall Rate of Return on Base and Additional CPP Assets
The best-estimate rates of return on total assets for each of the base and additional Plans are derived from the weighted average assumed rates of return on all types of assets, using the assumed asset mix proportions as weights. The best-estimate rates of return are further adjusted to incorporate an allocation for rebalancing and diversification. In addition, the best-estimate rates of return are increased to reflect additional returns due to active management and reduced to reflect all investment expenses. The ultimate net rates of return are shown in Table 70.
Table 70 Overall Rate of Return on base and additional CPP Assets (percentages)
|
Base CPP |
Additional CPP |
Nominal |
Real |
Nominal |
Real |
Weighted Average Rate of Return (before investment expenses) |
6.21 |
4.21 |
5.71 |
3.71 |
Additional Rate of Return due to Active Management |
0.80 |
0.80 |
0.53 |
0.53 |
Total Weighted Average Rates of Return before Investment Expenses |
7.01 |
5.01 |
6.24 |
4.24 |
Expected Investment Expenses |
Expenses due to Passive Management |
-0.20 |
-0.20 |
-0.13 |
-0.13 |
Additional Expenses due to Active Management |
-0.80 |
-0.80 |
-0.53 |
-0.53 |
Total Expected Investment Expenses |
-1.00 |
-1.00 |
-0.66 |
-0.66 |
Ultimate Rate of Return after Investment Expenses |
6.01 |
4.01 |
5.58 |
3.58 |
The resulting nominal and real rates of return for select projection years are shown in Table 71. The projected nominal returns are the sum of the assumed levels of inflation and real returns. The projected average annual real rate of return over the next 75 years is 3.95% for the base CPP and 3.38% for the additional CPP.
Table 71 Annual Rates of Return on CPP Assets (percentages)
Year |
Base CPP |
Additional CPP |
Nominal |
Real |
Nominal |
Real |
2019 |
4.85 |
2.85 |
1.31 |
-0.69 |
2020 |
4.85 |
2.85 |
2.36 |
0.36 |
2021 |
5.77 |
3.77 |
4.27 |
2.27 |
2022 |
5.62 |
3.62 |
4.37 |
2.37 |
2023 |
5.69 |
3.69 |
4.48 |
2.48 |
2030+ |
6.01 |
4.01 |
5.58 |
3.58 |
Average over: |
2019-2023 |
5.35 |
3.35 |
3.35 |
1.35 |
2019-2028 |
5.57 |
3.57 |
4.14 |
2.14 |
2019-2093 |
5.95 |
3.95 |
5.38 |
3.38 |
|
The 75-year (2019-2093) average annual real rate of return on investments for the base CPP is 0.03% lower compared to the previous triennial valuation. This decrease is mainly due to lower expected returns on fixed income over that period compared to the previous valuation, mitigated by a different asset mix that would otherwise produce slightly higher returns during the first ten projection years.
For the additional CPP, the 75-year (2019-2093) average annual rate of return on investments decreases by 0.17% compared to the assumption of the 28th CPP Actuarial Report. This decrease is mainly attributed to a different fixed income composition and lower assumed initial rates of return over the first ten projection years.
B.7 Benefit Expenditures
B.7.1 Benefits Payable as at 31 December 2018 and Projecting Benefits
The number of base CPP beneficiaries in pay and average monthly benefits payable as at 31 December 2018 are shown in Table 72.
Table 72 Benefits Payable as at 31 December 2018 – Base CPP
Benefit Type |
Number of Beneficiaries in pay |
Average Monthly Benefit |
Males |
Females |
Males |
Females |
|
(thousands) |
($) |
($) |
Retirement |
2,517 |
2,704 |
680 |
481 |
Post-retirement Benefit |
692 |
568 |
37 |
30 |
Survivor |
- Aged less than 65 |
50 |
164 |
359 |
421 |
- Aged 65 and over |
168 |
736 |
121 |
360 |
Disability |
152 |
185 |
959 |
883 |
Benefit Type |
Number of Beneficiaries in pay |
Average Monthly Benefit |
Males and Females |
Males and Females |
|
(thousands) |
($) |
Orphan |
58 |
244 |
Disabled Contributor’s Child |
77 |
244 |
The approach used in this report to project future benefits paid is based on macrosimulation, which means that the projections rely on grouped data. The amount of benefit expenditures is determined by taking into account the administrative agreement between the CPP and the QPP for beneficiaries who had contributed to both plans.
The retirement, survivor, disability, and children’s benefit expenditures for each year following the year of benefit take-up for a given age, sex, and cohort is computed as the product of:
benefit expenditures in the year of take-up (described later in this Appendix);
the probability of survival from the age at benefit take-up to the attained age;
the rules regarding combined retirement and survivor benefits and combined disability and survivor benefits, as applicable; and
the Pension Index, which recognizes the annual inflation adjustment to benefits each 1 January following benefit emergence.
The amounts of the benefits payable during any given calendar year are then obtained by simply summing the annual expenditures applicable for the year as described above, in respect of all age and sex cohorts having emerged in the given and all previous calendar years. The projected number of beneficiaries and amounts of benefit expenditures for the base and additional Plans are shown in various tables in the Results sections 4 and 5 of this report.
All projections of base CPP benefits start from the year 1966 instead of the beginning of the current projection period (2019). This is done for the following reasons:
The valuation methodology can be validated for the historical period up to the valuation year (1966 to 2018) by comparing the projected values (contributions, benefits, beneficiaries, etc.) with actual experience. Based on this comparison, calibration factors are obtained which are then used for the projections of the different types of benefit. For example, the calibration factors for retirement benefit experience for those starting their pension between ages 60 and 65 are 0.97 for males and 0.96 for females.
The projection of benefits already in pay as at the valuation date (31 December 2018) is fully integrated with the projection of benefits emerging after that date thus ensuring full consistency between past experience and the future.
Since the additional Plan is a new component of the CPP as of 1 January 2019, there are no additional benefits in pay as at the valuation date. As such, the same calibration factors developed for the base Plan benefits are assumed to apply to the additional Plan projected benefits except in the case of the additional retirement benefits, where microsimulation was used to estimate the calibration factors. As experience develops for the additional Plan, more precise calibration factors for each type of benefit will be determined separately for that CPP component.
B.7.2 Benefit Eligibility Rates
As described in Appendix A (Summary of Plan Provisions) of this report, eligibility for benefits varies according to the type of benefit. The eligibility rules for the survivor benefit are the same as for the death benefit. The eligibility rules for base CPP benefits determine eligibility for additional CPP benefits.
Benefit eligibility rates (as a percentage of Canada less Québec population) for retirement, disability, and death/survivor benefits are projected using regression formulae that were developed to closely reproduce historical eligibility rates observed from CPP records of earnings data provided by ESDC over the period 1966 to 2016. The projected eligibility rates take into account the applicable eligibility rules for each type of benefit, the proportion of contributors, and the length of the contributory period for existing and future earners.
The disability and survivor benefit eligibility rates developed as above must be adjusted to project the earnings-related portion of these two types of benefits. Table 73 shows the resulting eligibility rates for the various benefit types by sex and age for selected years.
The retirement eligibility rates for some ages and years are greater than 100% due to individuals who contributed to the CPP and then left the country with no further information available as to their status. Since these individuals are not counted in the population, the retirement eligibility rates can be higher than 100%.
Table 73 Benefit Eligibility Rates by Type of Benefit (percentages)
Year |
Retirement Benefit Eligibility Rate at Age 65 |
Survivor/Death Benefit Eligibility Rate at Age 65 |
Males |
Females |
Males |
Females |
2019 |
105.5 |
101.4 |
100.0 |
73.7 |
2020 |
105.0 |
101.2 |
100.0 |
74.6 |
2021 |
104.6 |
101.1 |
99.9 |
75.5 |
2022 |
104.2 |
101.0 |
99.8 |
76.3 |
2023 |
103.8 |
100.9 |
99.7 |
77.0 |
2024 |
103.3 |
100.8 |
99.6 |
77.6 |
2025 |
102.9 |
100.7 |
99.4 |
78.2 |
2030 |
101.1 |
99.7 |
98.2 |
80.4 |
2035 |
100.1 |
99.3 |
97.4 |
81.6 |
2040 |
100.9 |
100.2 |
96.9 |
82.4 |
2045 |
101.7 |
101.0 |
96.7 |
83.1 |
2050 |
101.6 |
100.9 |
96.8 |
83.6 |
2055 |
102.5 |
101.8 |
97.1 |
84.2 |
2060 |
102.6 |
101.9 |
97.6 |
84.7 |
2065 |
102.4 |
101.8 |
97.9 |
85.1 |
2075 |
103.0 |
102.4 |
98.5 |
85.8 |
2085 |
103.8 |
103.3 |
99.0 |
86.5 |
2095 |
103.8 |
103.4 |
99.3 |
86.9 |
Year |
Survivor/Death Benefit Eligibility Rate at Ages 20-64 |
Disability Benefit Eligibility Rate at Ages 20-64 |
Post-Retirement Disability Benefit Eligibility Rate at Ages 60-64 |
Males |
Females |
Males |
Females |
Males |
Females |
2019 |
81.0 |
72.4 |
73.7 |
66.4 |
52.4 |
45.1 |
2020 |
81.2 |
72.8 |
74.3 |
67.2 |
53.1 |
45.8 |
2021 |
81.0 |
72.8 |
74.9 |
67.7 |
53.8 |
46.3 |
2022 |
81.1 |
73.1 |
75.4 |
68.1 |
55.0 |
47.2 |
2023 |
81.5 |
73.5 |
76.2 |
68.8 |
55.4 |
47.6 |
2024 |
82.5 |
74.2 |
77.0 |
69.4 |
55.3 |
47.6 |
2025 |
82.7 |
74.5 |
77.4 |
69.7 |
55.6 |
47.8 |
2030 |
83.8 |
75.9 |
78.9 |
71.7 |
57.4 |
49.7 |
2035 |
85.2 |
77.3 |
79.9 |
73.5 |
58.6 |
50.9 |
2040 |
86.2 |
78.2 |
80.5 |
74.5 |
59.7 |
52.1 |
2045 |
86.9 |
78.9 |
80.2 |
74.5 |
59.9 |
52.5 |
2050 |
87.5 |
79.3 |
80.1 |
74.7 |
59.9 |
52.6 |
2055 |
87.9 |
79.8 |
80.2 |
74.9 |
60.1 |
53.0 |
2060 |
88.2 |
80.2 |
80.5 |
75.2 |
59.9 |
53.0 |
2065 |
88.6 |
80.7 |
81.2 |
75.8 |
60.5 |
53.3 |
2075 |
89.1 |
81.3 |
81.5 |
76.3 |
60.9 |
53.9 |
2085 |
89.5 |
81.7 |
81.5 |
76.5 |
61.0 |
53.9 |
2095 |
89.8 |
82.1 |
81.7 |
76.7 |
61.0 |
54.0 |
|
B.7.3 Adjustments to Proportion of Contributors and Pensionable Earnings for Benefit Computation Purposes
The effect of credit splitting of pensionable earnings between spouses or common-law partners in the event of divorce or separation is accounted for by adjusting the projected proportion of contributors and average pensionable earnings of the respective spouses or common-law partners.
The average pensionable earnings used to determine the initial amounts of the retirement pensions are also adjusted to exclude the earnings of working beneficiaries. Table 74 presents the resulting adjusted proportion of contributors. The average pensionable earnings up to the YMPE and the YAMPE for benefit computation purposes appear in Table 75 and Table 76, respectively.
Table 74 Proportion of Contributors to CPP (adjusted for benefit computation purposes) (percentages)
Age Group |
Males |
Females |
2019 |
2025 |
2050 |
2019 |
2025 |
2050 |
20-24 |
77.4 |
81.9 |
85.0 |
77.7 |
81.0 |
85.5 |
25-29 |
88.0 |
89.2 |
92.4 |
84.3 |
85.4 |
90.5 |
30-34 |
90.6 |
92.0 |
93.9 |
83.9 |
86.1 |
89.9 |
35-39 |
90.3 |
92.7 |
93.6 |
83.3 |
86.5 |
89.7 |
40-44 |
89.0 |
89.9 |
91.5 |
83.4 |
84.5 |
87.3 |
45-49 |
88.2 |
90.8 |
92.0 |
83.7 |
84.9 |
87.6 |
50-54 |
84.5 |
86.4 |
88.2 |
80.3 |
81.7 |
85.0 |
55-59 |
76.5 |
80.0 |
82.9 |
70.1 |
73.1 |
77.7 |
60-64 |
60.1 |
62.6 |
66.8 |
50.9 |
52.9 |
57.7 |
65-69 |
24.6 |
29.1 |
31.6 |
17.4 |
19.5 |
23.1 |
All Ages |
75.0 |
76.7 |
78.9 |
69.9 |
71.1 |
75.0 |
|
Table 75 Average Pensionable Earnings up to YMPE (adjusted for benefit computation purposes) (dollars)
Age Group |
Males |
Females |
2019 |
2025 |
2050 |
2019 |
2025 |
2050 |
20-24 |
26,034 |
30,038 |
59,730 |
21,662 |
25,114 |
51,136 |
25-29 |
37,289 |
43,181 |
88,258 |
33,370 |
38,919 |
81,370 |
30-34 |
41,515 |
48,260 |
99,310 |
36,453 |
42,728 |
89,760 |
35-39 |
43,344 |
50,552 |
104,156 |
38,504 |
45,264 |
94,917 |
40-44 |
44,457 |
51,633 |
106,447 |
40,132 |
46,914 |
98,308 |
45-49 |
44,852 |
52,159 |
107,411 |
40,821 |
47,790 |
100,084 |
50-54 |
44,696 |
51,966 |
106,737 |
40,629 |
47,522 |
99,410 |
55-59 |
42,945 |
49,790 |
101,652 |
38,693 |
45,323 |
94,373 |
60-64 |
41,379 |
47,853 |
96,441 |
36,855 |
43,147 |
88,731 |
65-69 |
37,977 |
44,362 |
88,423 |
32,722 |
38,004 |
77,990 |
All Ages |
39,910 |
46,668 |
95,163 |
35,604 |
41,857 |
87,046 |
YMPE |
57,400 |
67,100 |
140,500 |
57,400 |
67,100 |
140,500 |
|
Table 76 Average Pensionable Earnings up to YAMPE (adjusted for benefit computation purposes) (dollars)
Age Group |
Males |
Females |
2019 |
2025 |
2050 |
2019 |
2025 |
2050 |
20-24 |
– |
30,756 |
61,091 |
– |
25,436 |
51,809 |
25-29 |
– |
45,575 |
92,994 |
– |
40,600 |
85,087 |
30-34 |
– |
51,832 |
106,499 |
– |
45,260 |
95,392 |
35-39 |
– |
54,727 |
112,614 |
– |
48,307 |
101,599 |
40-44 |
– |
56,128 |
115,582 |
– |
50,248 |
105,578 |
45-49 |
– |
56,744 |
116,681 |
– |
51,170 |
107,444 |
50-54 |
– |
56,468 |
115,821 |
– |
50,781 |
106,534 |
55-59 |
– |
53,906 |
109,891 |
– |
48,253 |
100,781 |
60-64 |
– |
51,817 |
104,293 |
– |
45,944 |
94,799 |
65-69 |
– |
48,344 |
96,341 |
– |
40,800 |
84,092 |
All Ages |
– |
50,233 |
102,334 |
– |
44,409 |
92,623 |
YAMPE |
|
76,400 |
160,100 |
|
76,400 |
160,100 |
|
B.7.4 Average Earnings-Related Benefits
Base CPP
To determine base CPP benefits, the valuation model first calculates an average earnings-related benefit for all individuals born in a given calendar year, for each sex, and all relevant ages. This average earnings-related benefit is dependent on four main components:
Average pensionable earnings, adjusted for benefit computation purposes, relative to the YMPE;
Average proportion of contributors adjusted for benefit computation purposes;
25% of the MPEA for the attained year; and
the number of years in the elapsed contributory period at the attained age.
The base CPP average earnings-related benefit is then further adjusted to take into account certain provisions of the CPP statute as applicable:
Disability exclusion: the period during which an individual received a CPP disability pension is excluded from the contributory period;
Child-rearing provision (exclusion): the period during which an individual was caring for a child younger than age 7 is excluded from the contributory period if earnings during the child-rearing period were sufficiently low;
Post-65 drop-out: earnings of contributors over age 65, who are not yet retirement beneficiaries, may replace earnings before age 65 if those earnings are lower;
General drop-out provision (exclusion): 17% of the lowest earnings months up to a maximum of about 8 years may be dropped from the contributory period.
Table 77 shows the resulting projected average earnings-related benefit for the base CPP as a percentage of the maximum base CPP benefit at ages 60 and 65 by sex and year of birth for various cohorts of contributors. The average base CPP earnings-related benefit for males at age 65 as a percentage of the maximum is about 10 to 15 percentage points lower than at age 60 due to the fact that males who take their benefit at age 65 have a longer contributory period (producing lower career average earnings) and an historical lower earnings profile than those who take an early benefit at age 60. For females, the difference between age 60 and 65 is less pronounced for older cohorts of contributors but increases for younger cohorts.
The earnings-related benefits for males as a percentage of the maximum are expected to generally decrease over time because of the lower participation and pensionable earnings (as a proportion of the YMPE) of younger contributors in the early years of their contributory period. For females, this decline is offset by the expected higher earnings of future female cohorts. As a result, the gap between the male and female average base CPP earnings-related benefits is expected to decrease over time.
Table 77 Average Earnings-Related Benefit as Percentage of Maximum Benefit - Base CPP
Year of Birth |
Average Earnings-Related Benefit (%) |
Males |
Females |
Age 60 |
Age 65 |
Age 60 |
Age 65 |
1950 |
79 |
65 |
59 |
52 |
1951 |
79 |
65 |
59 |
52 |
1952 |
80 |
65 |
62 |
52 |
1953 |
79 |
64 |
62 |
52 |
1954 |
79 |
65 |
62 |
53 |
1955 |
79 |
64 |
63 |
53 |
1960 |
75 |
65 |
61 |
54 |
1965 |
72 |
62 |
60 |
53 |
1970 |
71 |
61 |
61 |
54 |
1980 |
73 |
62 |
63 |
55 |
1990 |
73 |
62 |
65 |
56 |
2000 |
73 |
62 |
66 |
57 |
2010 |
73 |
62 |
67 |
58 |
2020 |
73 |
62 |
67 |
58 |
Additional CPP
For the additional CPP, the valuation model also calculates an average earnings-related benefit based on contributors’ highest earnings over forty years for all persons of a birth cohort for each calendar year, sex, and all relevant ages. This average earnings-related additional benefit is dependent on four main components:
average additional pensionable earnings adjusted for benefits purposes relative to the YMPE;
average proportion of contributors adjusted for benefit computation purposes;
8.33% of the MPEA plus 33.33% of 14% of the MPEA for the attained year; and
the fixed contributory period of 40 years.
The additional CPP average earnings-related benefit is further adjusted to take into account certain provisions of the CPP statute as applicable:
Disability drop-in: individuals who become disabled in 2019 or later will have imputed income assigned to those disability periods; and
Child-rearing provision (drop-in): an imputed income may be assigned to periods of caring for children younger than age 7 on or after 1 January 2019.
The average additional earnings-related benefit is used in the calculation of the total emerging additional earnings related benefit expenditures for a given calendar year, for each sex, and all relevant ages.
Table 78 shows the resulting projected average additional earnings-related benefits as a percentage of the maximum additional benefit at ages 60 and 65 by sex and year of birth for various cohorts of contributors. The maximum additional benefit is the maximum benefit for both parts of the additional CPP, that is, below the YMPE, and from the YMPE up to YAMPE combined together.
The average additional earnings-related benefit for males at age 65 as a percentage of the maximum is about 3 to 5 percentage points higher than at age 60 due to the longer contributory periods, which is beneficial in the context of the additional CPP fixed forty years contributory period. For females, the difference between age 60 and 65 is less pronounced.
The additional earnings-related benefits as a percentage of the maximum are expected to increase over time for both males and females, since contributory periods are projected to increase relative to the fixed forty years. For later birth cohorts, it is projected that the gap between male and female average earnings-related benefits will stay about the same over time.
Table 78 Average Additional Earnings-Related Benefit as Percentage of Maximum Additional Benefit - Additional CPP
Year of Birth |
Average Earnings-Related Benefit (%) |
Males |
Females |
Age 60 |
Age 65 |
Age 60 |
Age 65 |
1965 |
5 |
9 |
4 |
7 |
1970 |
10 |
15 |
8 |
12 |
1980 |
25 |
28 |
21 |
24 |
1985 |
31 |
35 |
26 |
29 |
1990 |
37 |
41 |
31 |
34 |
2000 |
45 |
48 |
39 |
41 |
2010 |
45 |
48 |
39 |
42 |
2020 |
45 |
48 |
40 |
42 |
B.7.5 Retirement Pension Expenditures
Retirement expenditures result from retirement pensions paid under the base and additional CPP. The retirement pensions paid under both components of the CPP are earnings-related. The total retirement pension payable is the sum of the base and additional pension amounts.
Retirement Pension
New retirement expenditures are determined for each age 60 and older, sex, and calendar year of emergence starting from 1967. Total new retirement benefits are calculated as the product of:
the population;
the retirement pension eligibility rate;
the retirement pension take-up rate;
the actuarial adjustment factor for early or late pension take-up; and
the average earnings-related benefit previously described.
Retirement Benefit Take-up Rates
The retirement benefit take-up rates (or more simply retirement take-up rates) by age, sex, and calendar year are determined by taking into account the assumed future work patterns of earners aged 60 and over and the corresponding CPP experience from 1967 to 2018. The assumed rates correspond to the ratio of the number of emerging retirement beneficiaries to the product of the population and the retirement benefit eligibility rate (i.e. the ratio of the number of new retirement beneficiaries to the eligible population).
The unreduced pension age under the Canada Pension Plan is 65. Since 1987, a person can choose to receive a reduced retirement pension as early as age 60. This provision has had the effect of lowering the average age at pension take-up. In 1986, the average age at pension take-up was 65.2, compared to about 62.5 over the decade ending in 2018.
Chart 13 presents the evolution of the retirement take-up rates at age 60 for males and females respectively. In 2012, there was a significant increase observed in the retirement take-up rates at age 60 for the cohort reaching age 60 that year. The retirement take-up rates at age 60 in 2012 were 41% and 43% for males and females, respectively, compared to the corresponding rates of 32% and 35% in 2011. The observed increase in the retirement take-up rates at age 60 in 2012 may have resulted from two provisions of the Economic Recovery Act (stimulus) of 2009:
The work cessation test to receive the pension early (prior to age 65) was removed in 2012, so that starting that year, individuals no longer needed to lower their earnings to take an early CPP retirement pension.
Greater reductions in early retirement pensions were scheduled to be phased in over a five-year period, starting in 2012.
After 2012, the age 60 retirement take-up rates gradually decreased to below their pre-2012 levels as the higher actuarial adjustments were phased in, the effect of the removal of the work cessation test diminished and individuals stayed longer in the workforce. For cohorts reaching age 60 in 2018, the retirement take-up rates are 27.9% and 30.6% for males and females, respectively, which are the lowest rates since 1992. Take-up rates at age 60 are assumed to further decrease over the next three years such that for cohorts reaching age 60 in 2021 and thereafter, the retirement take-up rates are assumed to be 27.0% for males and 29.5% for females.
Chart 13 - Historical and Projected Retirement Pension Take-up Rates at age 60
Description
Line chart showing the historical and projected retirement pension take-up rates at age 60. Y axis represents the retirement pension take-up rate as a percentage of the eligible population. X axis represents the year.
The retirement pension take-up rate at age 60 for females is 31.9% in 1990. The rate increases up to the late 1990s and then fluctuates after until reaching its highest point of 43.4% in 2012. After 2012, the take-up rate at age 60 for females decreases to 30.6% in 2018, and then is projected to further decrease to a value of 29.5% in 2021 and remain at that value thereafter.
The retirement pension take-up rate at age 60 for males is 24.3% in 1990. The rate increases up to the late 1990s and then fluctuates after until reaching its highest point of 41.4% in 2012. After 2012, the take-up rate at age 60 for males decreases to 27.9% in 2018, and then is projected to further decrease to a value of 27% in 2021 and remain at that value thereafter.
The retirement take-up rates for ages 61 to 64 and 66 to 69 for the year 2019 and thereafter are determined using the observed averages over the last three years ending in 2018. To reflect the waiving of the requirement for an application for the retirement pension upon reaching age 70, as provided under Bill C-97 – Budget Implementation Act, 2019, No. 1, the retirement take-up rate for age 70 is set to equal the average of the last three years of the total retirement take-up rates of ages 70 and over.
The retirement take-up rates at age 65 are derived such that the sum of the retirement rates for each cohort is 100%. The resulting rates at age 65 are determined to be 46.4% in 2026 and thereafter, for both sexes. Table 79 shows the projected retirement take-up rates by age for both males and females.
The assumed retirement take-up rates result in a projected average age at retirement pension take-up of 63.4 years. This compares to an average retirement take-up age of 62.4 years in 2012.
Table 79 Retirement Pension Take-up Rates (2021+) (percentages)
Age |
Cohort aged 60 in 2021+ |
Males |
Females |
60 |
27.0 |
29.5 |
61 |
4.8 |
5.0 |
62 |
4.0 |
4.2 |
63 |
3.6 |
3.5 |
64 |
7.0 |
6.7 |
65 |
46.4 |
46.4 |
66 |
1.8 |
1.3 |
67 |
1.3 |
0.9 |
68 |
0.9 |
0.6 |
69 |
1.2 |
0.7 |
70 |
2.0 |
1.2 |
Total |
100.0 |
100.0 |
Projected New Retirement Pensions
Table 80 shows the projected number of new retirement beneficiaries and their projected average base and additional monthly retirement pensions by sex. New additional average retirement pensions are quite low in the early years due to the lower benefit accrual rates during the phase-in period and the few years of additional contributions. These averages are projected to grow rapidly as the number of years of contributions to the additional CPP increases.
Table 80 New Retirement Beneficiaries and Pensions
Year |
Base CPP |
Number of New Retirement Beneficiairies |
Average Monthly Retirement Pension |
|
Males |
Females |
Total |
Males |
Females |
Total |
|
|
|
($) |
($) |
($) |
2019 |
171,927 |
176,473 |
348,400 |
685 |
552 |
617 |
2020 |
196,774 |
209,673 |
406,447 |
647 |
500 |
571 |
2021 |
186,475 |
189,640 |
376,115 |
706 |
576 |
640 |
2022 |
191,680 |
195,064 |
386,745 |
721 |
591 |
655 |
2023 |
199,503 |
203,018 |
402,521 |
735 |
606 |
670 |
2024 |
201,344 |
205,604 |
406,948 |
764 |
632 |
697 |
2025 |
202,770 |
207,260 |
410,030 |
780 |
649 |
714 |
2030 |
193,331 |
199,477 |
392,808 |
881 |
753 |
816 |
2035 |
181,811 |
191,715 |
373,526 |
1,015 |
878 |
945 |
2040 |
184,507 |
197,431 |
381,937 |
1,181 |
1,030 |
1,103 |
2045 |
204,566 |
215,582 |
420,148 |
1,368 |
1,202 |
1,283 |
2050 |
229,679 |
235,201 |
464,881 |
1,591 |
1,414 |
1,501 |
2055 |
249,669 |
250,634 |
500,303 |
1,849 |
1,661 |
1,755 |
2060 |
254,814 |
255,530 |
510,344 |
2,154 |
1,946 |
2,050 |
2065 |
241,553 |
249,530 |
491,082 |
2,517 |
2,284 |
2,399 |
2075 |
246,442 |
258,334 |
504,776 |
3,356 |
3,081 |
3,215 |
2085 |
269,008 |
278,334 |
547,342 |
4,500 |
4,149 |
4,321 |
2095 |
286,277 |
297,839 |
584,116 |
6,068 |
5,603 |
5,831 |
Year |
Additional CPP |
Number of New Retirement Beneficiairies |
Average Monthly Retirement Pension |
|
Males |
Females |
Total |
Males |
Females |
Total |
|
|
|
($) |
($) |
($) |
2019 |
95,400 |
86,973 |
182,373 |
0 |
0 |
0 |
2020 |
119,942 |
108,055 |
227,997 |
2 |
1 |
2 |
2021 |
130,312 |
118,654 |
248,965 |
3 |
3 |
3 |
2022 |
139,245 |
127,688 |
266,934 |
6 |
5 |
6 |
2023 |
149,684 |
138,075 |
287,759 |
9 |
8 |
9 |
2024 |
156,366 |
145,526 |
301,892 |
15 |
13 |
14 |
2025 |
160,972 |
150,744 |
311,715 |
21 |
18 |
20 |
2030 |
169,216 |
166,161 |
335,377 |
66 |
54 |
60 |
2035 |
181,338 |
191,382 |
372,721 |
130 |
107 |
118 |
2040 |
184,507 |
197,431 |
381,937 |
212 |
176 |
193 |
2045 |
204,566 |
215,582 |
420,148 |
318 |
264 |
290 |
2050 |
229,679 |
235,201 |
464,881 |
451 |
375 |
412 |
2055 |
249,669 |
250,634 |
500,303 |
615 |
512 |
563 |
2060 |
254,814 |
255,530 |
510,344 |
799 |
668 |
734 |
2065 |
241,553 |
249,530 |
491,082 |
955 |
803 |
878 |
2075 |
246,442 |
258,334 |
504,776 |
1,270 |
1,088 |
1,177 |
2085 |
269,008 |
278,334 |
547,342 |
1,700 |
1,469 |
1,583 |
2095 |
286,277 |
297,839 |
584,116 |
2,299 |
1,990 |
2,142 |
Retirement Beneficiaries Mortality
Projections of retirement pensions in pay require applying survival probabilities to current and new retirement beneficiaries. The mortality rates of CPP retirement beneficiaries used in the projections vary by age, sex, calendar year, and level of emerging pension. The mortality rates were developed based on CPP retirement beneficiaries’ mortality experience for the year 2015 and the mortality improvement assumptions for the general population in this report. The resulting projected mortality rates and life expectancies of retirement beneficiaries are shown in Table 81, Table 82, and Table 83.
Table 81 Mortality Rates of Retirement Beneficiaries (annual deaths per 1,000)
Age |
Males |
Females |
2019 |
2025 |
2050 |
2075 |
2019 |
2025 |
2050 |
2075 |
60 |
5.5 |
4.8 |
3.8 |
3.1 |
2.8 |
2.6 |
2.1 |
1.7 |
65 |
11.0 |
9.7 |
7.7 |
6.3 |
6.6 |
6.0 |
4.8 |
3.9 |
70 |
16.4 |
14.6 |
11.6 |
9.5 |
11.3 |
10.4 |
8.4 |
6.9 |
75 |
27.0 |
24.1 |
19.2 |
15.7 |
18.4 |
17.0 |
13.8 |
11.3 |
80 |
45.4 |
40.5 |
32.3 |
26.4 |
32.0 |
29.4 |
23.7 |
19.4 |
85 |
82.1 |
73.4 |
58.4 |
47.8 |
58.3 |
53.0 |
42.5 |
34.8 |
90 |
146.3 |
132.6 |
110.4 |
94.5 |
107.0 |
97.8 |
81.7 |
69.9 |
|
Table 82 Life Expectancies of Retirement Beneficiaries, with improvements after the year shown,
Age |
Males |
Females |
2019 |
2025 |
2050 |
2075 |
2019 |
2025 |
2050 |
2075 |
60 |
25.7 |
26.2 |
27.7 |
29.2 |
28.5 |
28.9 |
30.3 |
31.6 |
65 |
21.2 |
21.6 |
23.1 |
24.5 |
23.7 |
24.1 |
25.5 |
26.7 |
70 |
17.0 |
17.5 |
18.8 |
20.0 |
19.3 |
19.7 |
20.9 |
22.1 |
75 |
13.2 |
13.6 |
14.7 |
15.9 |
15.2 |
15.5 |
16.7 |
17.7 |
80 |
9.7 |
10.1 |
11.1 |
12.0 |
11.4 |
11.7 |
12.7 |
13.6 |
85 |
6.8 |
7.1 |
7.9 |
8.6 |
8.1 |
8.4 |
9.2 |
9.9 |
90 |
4.5 |
4.8 |
5.3 |
5.7 |
5.5 |
5.7 |
6.2 |
6.7 |
|
Table 83 Life Expectancies of Retirement Beneficiaries by Level of Base CPP Pension (2019), with future improvements
Age |
CPP Level of Pension as % of Maximum |
Males |
Females |
< 37.5% |
37.5-75% |
75-95% |
95-100% |
< 37.5% |
37.5-75% |
75-95% |
95-100% |
60 |
24.3 |
24.8 |
25.9 |
26.7 |
27.8 |
28.5 |
29.3 |
29.5 |
65 |
20.3 |
20.5 |
21.2 |
22.0 |
23.2 |
23.7 |
24.5 |
24.6 |
70 |
16.4 |
16.4 |
17.0 |
17.6 |
18.9 |
19.3 |
19.9 |
20.0 |
75 |
12.7 |
12.7 |
13.2 |
13.5 |
14.9 |
15.2 |
15.7 |
15.7 |
80 |
9.4 |
9.4 |
9.7 |
9.9 |
11.2 |
11.4 |
11.8 |
11.8 |
85 |
6.5 |
6.5 |
6.8 |
6.8 |
8.0 |
8.1 |
8.4 |
8.4 |
90 |
4.4 |
4.4 |
4.5 |
4.5 |
5.4 |
5.5 |
5.6 |
5.6 |
|
B.7.6 Post-Retirement Benefit Expenditures
Post-retirement benefits are paid to retirement beneficiaries who continue to work and contribute to the Plan. Post-retirement benefits are payable under both the base and additional CPP.
Working retirement beneficiaries younger than 65 are required along with their employers to contribute, whereas contributions are voluntary once reaching age 65 (up to age 69). Employers of those working beneficiaries opting to contribute are required to also contribute. The post-retirement contributions paid in a year are applied toward providing post-retirement benefits in the following years. Post-retirement benefits are described in more details in Appendix A – Summary of Plan Provisions.
Table 84 presents the assumed share of CPP retirement beneficiaries who work and contribute to the CPP in the year of and years following pension take-up, by age and sex.
The assumption corresponding to the year of retirement pension take-up is kept constant after 2025, to reflect the phase-in of the additional CPP. In the year of retirement, contributions are first applied toward maximizing the base and additional retirement pensions, with remaining contributions then applied toward a post-retirement benefit. The contributions to the additional Plan increase over the phase-in period both due to the increase in the contribution rate and the introduction of the YAMPE over two years. This affects the proportion of working beneficiaries who contribute in the year of pension take-up. This proportion is assumed to remain constant once the phase-in is complete in 2025.
The assumption for the proportion of CPP retirement beneficiaries who are contributors after the year of retirement pension take-up is kept constant for the entire projection period.
The figures in the table reflect that not all working beneficiaries contribute to the CPP, due to the following:
Table 84 Proportion of CPP Retirement Beneficiaries who are Contributors (percentages)
Age |
Year of Retirement Pension Take-Up(2025+) |
After Year of Retirement Pension Take-Up |
Males |
Females |
Males |
Females |
60 |
45 |
30 |
0 |
0 |
61 |
55 |
40 |
70 |
58 |
62 |
50 |
40 |
48 |
40 |
63 |
55 |
40 |
47 |
35 |
64 |
75 |
55 |
42 |
30 |
65 |
24 |
19 |
40 |
30 |
66 |
47 |
47 |
27 |
20 |
67 |
47 |
43 |
20 |
15 |
68 |
43 |
38 |
15 |
10 |
69 |
36 |
28 |
9 |
6 |
In order to project the contributions that will result from working beneficiaries, assumptions are required with respect to their average contributory earnings (i.e., average earnings between the YBE and YAMPE on which contributions are made). For both males and females, the average contributory earnings of working beneficiaries for years after the year of retirement pension take-up are assumed to be between 20% and 35% lower than the contributory earnings of contributors who are not beneficiaries, depending on the age and sex. The resulting average annual contributory earnings of working beneficiaries up to the YMPE and YAMPE are presented respectively in Table 85 and Table 86.
Table 85 Average Contributory Earnings of Working Beneficiaries up to the YMPE (dollars)
Year |
Below Age 65 |
Age 65 and Above |
Males |
Females |
Males |
Females |
2019 |
32,480 |
25,627 |
31,419 |
24,587 |
2020 |
33,295 |
26,350 |
32,184 |
25,268 |
2021 |
34,233 |
27,214 |
33,040 |
26,010 |
2022 |
35,190 |
28,154 |
33,934 |
26,711 |
2023 |
36,157 |
29,156 |
34,856 |
27,449 |
2024 |
37,257 |
30,250 |
35,876 |
28,297 |
2025 |
38,394 |
31,364 |
36,940 |
29,217 |
2030 |
44,050 |
36,605 |
42,545 |
34,331 |
2035 |
49,646 |
41,449 |
48,294 |
39,286 |
2040 |
57,227 |
48,112 |
55,680 |
45,686 |
2045 |
66,932 |
56,826 |
65,112 |
53,936 |
2050 |
78,892 |
67,720 |
76,566 |
64,043 |
2055 |
92,491 |
79,992 |
89,489 |
75,461 |
2060 |
107,833 |
93,792 |
104,196 |
88,364 |
2065 |
124,212 |
108,303 |
120,147 |
102,262 |
2075 |
165,288 |
144,159 |
160,253 |
136,834 |
2085 |
223,206 |
194,732 |
216,039 |
184,837 |
2095 |
302,284 |
263,853 |
292,180 |
250,243 |
Table 86 Average Contributory Earnings of Working Beneficiaries up to the YAMPE (dollars)
Year |
Below Age 65 |
Age 65 and Above |
Males |
Females |
Males |
Females |
2024 |
38,481 |
30,618 |
37,242 |
28,944 |
2025 |
40,785 |
32,133 |
39,753 |
30,470 |
2030 |
46,702 |
37,481 |
45,715 |
35,856 |
2035 |
52,374 |
42,155 |
51,736 |
40,927 |
2040 |
60,260 |
48,872 |
59,583 |
47,597 |
2045 |
70,536 |
57,889 |
69,692 |
56,359 |
2050 |
83,346 |
69,342 |
82,062 |
67,165 |
2055 |
97,880 |
82,196 |
96,006 |
79,337 |
2060 |
114,184 |
96,557 |
111,810 |
93,013 |
2065 |
131,357 |
111,383 |
128,820 |
107,573 |
2075 |
174,380 |
147,850 |
171,575 |
143,773 |
2085 |
235,516 |
199,845 |
231,254 |
194,267 |
2095 |
319,287 |
271,243 |
312,914 |
263,192 |
|
Around 450,000 working beneficiaries started to contribute in 2012, generating about an extra $1.0 billion in contributions that year. The number of working beneficiaries who contribute grew to about 562,000 in 2016 with corresponding contributions representing about $1.5 billion.
The corresponding post retirement benefits started to be payable the year after contributions were made. In 2013, post-retirement benefits totaled about $63 million for contributions made in 2012. In 2017, post-retirement benefits amounted to $410 million based on contributions made in 2016 and before.
Table 87 shows the projected number of working beneficiaries with their contributions and resulting post-retirement benefits by year. Contributions and benefits are split between the base and additional CPP. Total contributions from working beneficiaries are projected to be about $1.7 billion in 2019 and $6.8 billion in 2050. Total post-retirement benefits payable are projected to be about $637 million in 2019 and $8.4 billion in 2050.
The projected number of working beneficiaries who contribute, their earnings, and contributions are reflected in all other tables in this report that present contributors, earnings, and contributions projections, unless otherwise indicated. Similarly, the post-retirement benefits are presented in combination with retirement benefits as total retirement expenditures in all other tables in this report where expenditures are shown by type of benefit, unless otherwise indicated.
Table 87 Working Beneficiaries – Contributors, Contributions, and Post-Retirement Benefits
Year |
Number of Contributing Working Beneficiaries |
Base CPP |
Additional CPP |
Contributions |
Post-Retirement Benefits |
Contributions |
Post-Retirement Benefits |
|
(thousands) |
($ million) |
($ million) |
($ million) |
($ million) |
2019 |
588 |
1,613 |
637 |
49 |
0 |
2020 |
603 |
1,695 |
760 |
103 |
6 |
2021 |
618 |
1,788 |
891 |
181 |
18 |
2022 |
633 |
1,884 |
1,032 |
286 |
39 |
2023 |
649 |
1,987 |
1,184 |
401 |
72 |
2024 |
665 |
2,101 |
1,331 |
476 |
123 |
2025 |
678 |
2,212 |
1,486 |
553 |
174 |
2030 |
661 |
2,497 |
2,342 |
623 |
499 |
2035 |
626 |
2,688 |
3,224 |
661 |
883 |
2040 |
641 |
3,181 |
4,091 |
779 |
1,294 |
2045 |
707 |
4,116 |
4,995 |
1,011 |
1,757 |
2050 |
793 |
5,451 |
6,087 |
1,351 |
2,312 |
2055 |
857 |
6,915 |
7,513 |
1,724 |
2,979 |
2060 |
892 |
8,402 |
9,364 |
2,100 |
3,782 |
2065 |
864 |
9,401 |
11,601 |
2,344 |
4,719 |
2075 |
876 |
12,694 |
16,768 |
3,143 |
6,843 |
2085 |
945 |
18,473 |
23,683 |
4,575 |
9,666 |
2095 |
1,019 |
26,944 |
34,046 |
6,692 |
13,907 |
B.7.7 Disability Benefit Expenditures
Disability expenditures result from disability benefits paid under the base and additional CPP.
Under the base CPP, disability benefits consist of the disability pension and the post-retirement disability benefit. The base CPP disability pension consists of both a flat-rate and earnings-related benefit. The post-retirement disability benefit is equal to the flat-rate benefit.
Under the additional CPP, disability benefits consist only of the additional disability pension which is an earnings-related benefit. Eligibility for the additional disability pension follows from eligibility for the base disability pension. There is no post-retirement disability benefit payable under the additional CPP.
Disability Pension
New disability pension expenditures are determined by age and sex for each year starting in 1970 as the product of:
the population;
the disability eligibility rate;
the disability incidence rate; and
the annual amount of the benefit.
The value of the emerging earnings-related benefits by age and sex is equal to the sum of 75% of the average retirement earnings-related benefits for the base and additional Plans.
Disability Incidence Rates
Chart 14 shows the historical disability incidence rates for the CPP disability pension, and Table 88 provides the assumed ultimate disability incidence rates for the disability pension (base and additional CPP) and the assumed disability incidence rates for the post-retirement disability benefit (base CPP).
Chart 14 - Historical Disability Incidence Rates (per 1,000 eligible)
Description
Line chart showing the historical disability incidence rates (the number of new CPP disability beneficiaries per 1,000 eligible contributors). Y axis represents the rate per 1,000 eligible. X axis represents the year. The disability incidence rate for males is 2.5 new beneficiaries per 1,000 eligible contributors in 1970. The rate for males has periods of growth and decline but increases overall to reach a highest point of 6.1 in 1992, then decreases to 2.6 in the late 1990s, and is relatively stable after with a value of 2.95 in 2018.
The disability incidence rate for females is 1.2 new beneficiaries per 1,000 eligible contributors in 1970. The rate for females has periods of growth and decline but increases overall to reach a highest point of 5.2 in 1992, then decreases to 2.9 in the late 1990s, and is relatively stable after with a value of 3.65 in 2018.
It can be seen from Chart 14 that the incidence of new CPP disability cases (i.e. the number of new cases as a proportion of the eligible population) generally increased from 1970 to the early 1990s. The annual rate of change in incidence rates was particularly acute between 1989 and the recession of the early 1990s. After reaching a peak in 1992, disability incidence rates then declined rapidly during the 1990s and have remained relatively stable since the early 2000s up to recently.
The decline after 1992 reflects the economic recovery that occurred following the 1990-91 recession. As well, beginning in 1994, the CPP administration initiated a range of measures designed to effectively manage the growing pressure on the disability program.
The above trends and the facts that the overall female incidence rate has been higher than the overall male incidence rate since 1996, with the female-male differential generally increasing over the period 2009 to 2015, were taken into account when setting the ultimate assumption for the aggregate disability incidence rates. The estimated rates for years 2016 to 2018, based on available data from Service Canada, were also taken into account.
Based on the above, the aggregate (all ages combined using the 2018 population for weights) incidence rates for the disability pension for 2019 and thereafter are projected to remain constant at the values in 2018 of 2.95 and 3.65 per thousand eligible males and females, respectively. These projected aggregate rates are then distributed by age in accordance with the 2018 eligible population for each sex.
Post-retirement Disability Benefit Incidence Rates
Since no CPP data were yet available as at the time of this report to develop the assumption for the incidence of disability among CPP early retirees, data from the Québec Pension Plan (QPP), which has a similar provision, have been used. Once CPP data become available, it will be used to develop this assumption for future CPP actuarial reports.
Under the QPP, there is a provision for an “additional amount for disability” payable to retirement beneficiaries younger than 65. Effective 2013, QPP retirement beneficiaries younger than 65 who are deemed disabled after the first six months of their retirement pension start date may be eligible to receive the additional amount for disability, which is added to their retirement pension. The additional amount equals the flat-rate portion of the QPP disability benefit. The additional amount ceases to be paid once an individual turns 65.
Given that the eligibility requirements for a disability benefit are similar under the CPP and QPP, and that the QPP additional amount for disability is similar to the CPP post-retirement disability benefit, the assumption for the disability incidence rates in respect of the QPP additional amount for disability were used, as given in Table 36 of the Actuarial Valuation Report on the QPP as at 31 December 2015. These incidence rates are shown in Table 88. The incidence rates are applicable to the population of in-pay retirement beneficiaries aged 61 to 64, that is, excluding new beneficiaries who emerge during the year.
Table 88 Ultimate Disability Incidence Rates (2019+) (per 1,000 eligible)
Age |
Disability Pension |
Post-retirement Disability Benefit |
Males |
Females |
Males |
Females |
25 |
0.32 |
0.30 |
– |
– |
30 |
0.64 |
0.86 |
– |
– |
35 |
1.00 |
1.69 |
– |
– |
40 |
1.52 |
2.44 |
– |
– |
45 |
2.15 |
3.32 |
– |
– |
50 |
3.56 |
5.06 |
– |
– |
55 |
6.45 |
7.40 |
– |
– |
60 |
9.16 |
9.12 |
– |
– |
61 |
9.14 |
9.07 |
2.90 |
2.20 |
62 |
9.11 |
9.03 |
5.60 |
5.20 |
63 |
9.09 |
8.98 |
8.30 |
6.10 |
64 |
9.06 |
8.93 |
8.50 |
4.60 |
All Ages |
2.95 |
3.65 |
6.23 |
4.64 |
|
Projected New Disability Benefits
Table 89 shows the projected number of new disability beneficiaries for the disability pension and post-retirement disability benefit, and Table 90 shows the projected average new disability benefits for the base disability pension, additional disability pension, and base post-retirement disability benefit by sex and year.
Table 89 New Disability Beneficiaries
Base CPP |
Number of Beneficiaries |
Year |
Disability Pension |
Post-retirement Disability Benefit |
ALL Disability Benefits |
Males |
Females |
Total |
Males |
Females |
Total |
Males |
Females |
Total |
2019 |
19,148 |
21,276 |
40,424 |
1,648 |
1,229 |
2,877 |
20,796 |
22,504 |
43,301 |
2020 |
19,348 |
21,541 |
40,888 |
923 |
646 |
1,569 |
20,271 |
22,186 |
42,458 |
2021 |
19,511 |
21,748 |
41,259 |
928 |
647 |
1,575 |
20,439 |
22,395 |
42,834 |
2022 |
19,589 |
21,854 |
41,443 |
946 |
659 |
1,605 |
20,536 |
22,512 |
43,048 |
2023 |
19,731 |
22,054 |
41,785 |
960 |
670 |
1,630 |
20,691 |
22,724 |
43,415 |
2024 |
19,856 |
22,261 |
42,117 |
967 |
675 |
1,642 |
20,823 |
22,936 |
43,759 |
2025 |
19,905 |
22,376 |
42,281 |
978 |
684 |
1,662 |
20,883 |
23,060 |
43,943 |
2030 |
20,152 |
23,148 |
43,300 |
891 |
634 |
1,525 |
21,043 |
23,782 |
44,825 |
2035 |
21,242 |
24,691 |
45,933 |
895 |
652 |
1,547 |
22,136 |
25,343 |
47,480 |
2040 |
22,896 |
26,377 |
49,272 |
918 |
685 |
1,604 |
23,814 |
27,062 |
50,876 |
2045 |
24,456 |
27,711 |
52,167 |
1,047 |
770 |
1,817 |
25,503 |
28,481 |
53,984 |
2050 |
25,404 |
28,558 |
53,962 |
1,158 |
828 |
1,986 |
26,563 |
29,385 |
55,948 |
2055 |
25,638 |
28,973 |
54,611 |
1,268 |
892 |
2,160 |
26,907 |
29,865 |
56,772 |
2060 |
25,284 |
29,162 |
54,446 |
1,300 |
913 |
2,213 |
26,584 |
30,075 |
56,660 |
2065 |
25,459 |
29,760 |
55,219 |
1,201 |
878 |
2,079 |
26,660 |
30,638 |
57,298 |
2075 |
27,303 |
31,768 |
59,071 |
1,268 |
934 |
2,202 |
28,571 |
32,702 |
61,273 |
2085 |
29,288 |
33,900 |
63,188 |
1,393 |
1,012 |
2,406 |
30,681 |
34,912 |
65,594 |
2095 |
30,462 |
35,356 |
65,818 |
1,478 |
1,082 |
2,560 |
31,940 |
36,438 |
68,378 |
Additional CPP |
Number of Beneficiaries |
Year |
Disability Pension |
Post-retirement Disability Benefit |
ALL Disability Benefits |
Males |
Females |
Total |
Males |
Females |
Total |
Males |
Females |
Total |
2019 |
12,089 |
11,675 |
23,764 |
– |
– |
– |
12,089 |
11,675 |
23,764 |
2020 |
14,071 |
13,798 |
27,869 |
– |
– |
– |
14,071 |
13,798 |
27,869 |
2021 |
15,150 |
15,113 |
30,262 |
– |
– |
– |
15,150 |
15,113 |
30,262 |
2022 |
15,975 |
16,120 |
32,094 |
– |
– |
– |
15,975 |
16,120 |
32,094 |
2023 |
16,775 |
17,110 |
33,885 |
– |
– |
– |
16,775 |
17,110 |
33,885 |
2024 |
17,631 |
18,164 |
35,795 |
– |
– |
– |
17,631 |
18,164 |
35,795 |
2025 |
18,032 |
18,774 |
36,806 |
– |
– |
– |
18,032 |
18,774 |
36,806 |
2030 |
19,218 |
21,160 |
40,378 |
– |
– |
– |
19,218 |
21,160 |
40,378 |
2035 |
21,242 |
24,691 |
45,933 |
– |
– |
– |
21,242 |
24,691 |
45,933 |
2040 |
22,896 |
26,377 |
49,272 |
– |
– |
– |
22,896 |
26,377 |
49,272 |
2045 |
24,456 |
27,711 |
52,167 |
– |
– |
– |
24,456 |
27,711 |
52,167 |
2050 |
25,404 |
28,558 |
53,962 |
– |
– |
– |
25,404 |
28,558 |
53,962 |
2055 |
25,638 |
28,973 |
54,611 |
– |
– |
– |
25,638 |
28,973 |
54,611 |
2060 |
25,284 |
29,162 |
54,446 |
– |
– |
– |
25,284 |
29,162 |
54,446 |
2065 |
25,459 |
29,760 |
55,219 |
– |
– |
– |
25,459 |
29,760 |
55,219 |
2075 |
27,303 |
31,768 |
59,071 |
– |
– |
– |
27,303 |
31,768 |
59,071 |
2085 |
29,288 |
33,900 |
63,188 |
– |
– |
– |
29,288 |
33,900 |
63,188 |
2095 |
30,462 |
35,356 |
65,818 |
– |
– |
– |
30,462 |
35,356 |
65,818 |
|
Table 90 New Disability Pensions and Post Retirement Disability Benefits (dollars)
Year |
Base CPP |
Additional CPP |
Base CPP |
Average Monthly Disability Pension |
Average Monthly Disability Pension |
Post-retirement Disability Benefit |
Males |
Females |
Total |
Males |
Females |
Total |
2019 |
995 |
932 |
962 |
0 |
0 |
0 |
496 |
2020 |
1,031 |
962 |
995 |
2 |
1 |
1 |
506 |
2021 |
1,049 |
981 |
1,014 |
4 |
3 |
3 |
516 |
2022 |
1,069 |
1,003 |
1,035 |
7 |
6 |
7 |
527 |
2023 |
1,092 |
1,027 |
1,058 |
12 |
10 |
11 |
537 |
2024 |
1,117 |
1,052 |
1,082 |
18 |
16 |
17 |
548 |
2025 |
1,143 |
1,078 |
1,109 |
26 |
22 |
24 |
559 |
2030 |
1,297 |
1,228 |
1,260 |
77 |
64 |
70 |
617 |
2035 |
1,476 |
1,401 |
1,436 |
134 |
111 |
122 |
681 |
2040 |
1,680 |
1,599 |
1,637 |
204 |
167 |
185 |
752 |
2045 |
1,906 |
1,822 |
1,862 |
287 |
234 |
258 |
831 |
2050 |
2,161 |
2,074 |
2,115 |
379 |
307 |
341 |
917 |
2055 |
2,448 |
2,360 |
2,402 |
476 |
384 |
427 |
1,013 |
2060 |
2,780 |
2,689 |
2,732 |
567 |
457 |
508 |
1,118 |
2065 |
3,168 |
3,065 |
3,113 |
651 |
530 |
586 |
1,234 |
2075 |
4,102 |
3,976 |
4,035 |
875 |
719 |
791 |
1,505 |
2085 |
5,316 |
5,158 |
5,232 |
1,179 |
974 |
1,069 |
1,834 |
2095 |
6,910 |
6,704 |
6,800 |
1,581 |
1,308 |
1,434 |
2,236 |
Disability Benefit Termination Rates
All emerging disability benefits (disability pensions and post-retirement disability benefits) are projected by age and sex for each future year until termination of disability (due to recovery, death, or attainment of age 65). The projected disability termination rates presented in Table 91 apply by age, sex, and duration of disability (i.e. the period of being in receipt of a disability benefit) on an attained calendar year basis. The average graduated experience over the 15-year period 2003 to 2017 is used to produce base year rates for 2016. The base year termination rates are then projected for 2019 and thereafter for males and females, by age of disability onset, and duration of disability using assumed recovery and mortality improvement rates.
Recovery improvement rates are assumed to trend to an ultimate level of 0% by 2023 (i.e. recovery rates are assumed to be constant after 2023), and mortality improvement rates of disability beneficiaries are assumed to trend to an ultimate level of 0.8% by the same year.
Table 91 Disability Termination Rates in 2019 and 2035 (per 1,000 people)
2019 |
Age |
Males |
Females |
1st Year |
2nd Year |
3rd Year |
4th Year |
5th Year |
6+ Year |
1st Year |
2nd Year |
3rd Year |
4th Year |
5th Year |
6+ Year |
30 |
42 |
51 |
62 |
47 |
42 |
27 |
38 |
51 |
50 |
42 |
37 |
27 |
40 |
42 |
55 |
48 |
36 |
31 |
21 |
33 |
51 |
45 |
30 |
23 |
18 |
50 |
63 |
70 |
52 |
38 |
32 |
24 |
44 |
59 |
44 |
30 |
22 |
16 |
60 |
73 |
75 |
56 |
45 |
42 |
0 |
53 |
59 |
40 |
28 |
28 |
0 |
2035 |
Age |
Males |
Females |
1st Year |
2nd Year |
3rd Year |
4th Year |
5th Year |
6+ Year |
1st Year |
2nd Year |
3rd Year |
4th Year |
5th Year |
6+ Year |
30 |
39 |
49 |
60 |
45 |
40 |
26 |
35 |
48 |
49 |
40 |
36 |
27 |
40 |
38 |
52 |
46 |
34 |
29 |
19 |
30 |
47 |
43 |
29 |
22 |
17 |
50 |
56 |
64 |
48 |
35 |
30 |
21 |
39 |
55 |
41 |
28 |
20 |
15 |
60 |
65 |
67 |
51 |
41 |
37 |
0 |
47 |
53 |
36 |
25 |
25 |
0 |
|
B.7.8 Survivor Pension Expenditures
Survivor expenditures result from survivor’s benefits paid under the base and additional CPP. Under both components of the CPP, the survivor’s pension changes form at age 65.
Under the base CPP, the survivor’s pension payable to individuals younger than 65 consists of a flat-rate and earnings-related benefit. At ages 65 and older, the pension payable is earnings-related. The additional survivor’s pension payable takes the same form as the base survivor’s pension, except that the additional survivor’s pension is strictly earnings-related with no flat-rate benefit payable.
New Survivor’s Pension
New survivor pension expenditures are determined by age and sex for each year starting in 1968 as the product of:
the number of deaths in the population;
the probability of being married or in common-law union at the time of death;
the survivor eligibility rate;
the husband and wife age distribution;
the annual amount of the benefit (flat-rate and average earnings-related benefits); and
if applicable, the appropriate factor taking into account the base CPP earnings-related benefit limits that apply to combined survivor-disability and combined survivor-retirement pensions.
For each age and sex, the actual proportions of contributors married or in a common law relationship at the time of death are determined from benefit statistics. The smoothed averages from recent experience over the years 2005 to 2017, with further adjustments for younger and older ages, are used to determine the assumed proportions for future years. On the basis of the trends shown over the period 2005 to 2017, the proportions are extrapolated to 2020 and kept constant thereafter. These proportions account for benefits payable to same-sex couples. Values are shown in Table 92.
Table 92 Proportion of Contributors Married or in Common-Law Relationship at Time of Death (percentages)
Age |
Males |
Females |
20 |
2 |
1 |
30 |
16 |
20 |
40 |
44 |
54 |
50 |
54 |
60 |
60 |
58 |
58 |
70 |
65 |
52 |
80 |
68 |
35 |
90 |
52 |
12 |
The value of the emerging earnings-related survivor benefit is equal to 37.5% or 60% of the average retirement earnings-related benefit, depending on whether the surviving spouse or common-law partner is under age 65 or aged 65 or older, respectively. It is further adjusted to account for the fact that eligibility rules are more stringent for survivor benefits than for retirement benefits.
The projected number of new survivor beneficiaries by age (below 65, and 65 and older) is shown in Table 93. The projected average monthly survivor pensions of emerging (new) benefits for the base and additional CPP by age and sex are shown in Table 94.
Table 93 New Survivor Beneficiaries
Base CPP |
Number of New Survivor Beneficiaries |
Year |
Under 65 |
65 and Over |
All Ages |
Males |
Females |
Total |
Males |
Females |
Total |
Males |
Females |
Total |
2019 |
8,403 |
41,201 |
49,604 |
15,290 |
43,610 |
58,899 |
23,692 |
84,811 |
108,503 |
2020 |
5,410 |
16,366 |
21,776 |
16,003 |
44,904 |
60,907 |
21,412 |
61,270 |
82,683 |
2021 |
5,370 |
16,282 |
21,652 |
16,569 |
46,107 |
62,675 |
21,939 |
62,389 |
84,328 |
2022 |
5,332 |
16,179 |
21,511 |
17,145 |
47,385 |
64,530 |
22,477 |
63,565 |
86,042 |
2023 |
5,297 |
16,105 |
21,402 |
17,735 |
48,747 |
66,482 |
23,032 |
64,852 |
87,884 |
2024 |
5,279 |
16,106 |
21,385 |
18,341 |
50,197 |
68,538 |
23,621 |
66,303 |
89,923 |
2025 |
5,244 |
16,034 |
21,278 |
18,950 |
51,730 |
70,680 |
24,194 |
67,764 |
91,958 |
2030 |
5,128 |
15,673 |
20,801 |
21,981 |
60,578 |
82,559 |
27,110 |
76,251 |
103,360 |
2035 |
5,142 |
15,401 |
20,543 |
24,597 |
70,266 |
94,863 |
29,739 |
85,667 |
115,407 |
2040 |
5,218 |
15,308 |
20,525 |
26,355 |
78,287 |
104,641 |
31,573 |
93,594 |
125,167 |
2045 |
5,287 |
15,460 |
20,748 |
27,293 |
83,328 |
110,621 |
32,580 |
98,788 |
131,368 |
2050 |
5,286 |
15,751 |
21,037 |
27,679 |
85,895 |
113,574 |
32,965 |
101,646 |
134,611 |
2055 |
5,209 |
15,916 |
21,125 |
27,957 |
86,678 |
114,635 |
33,166 |
102,594 |
135,760 |
2060 |
5,086 |
15,834 |
20,921 |
28,415 |
87,258 |
115,673 |
33,501 |
103,092 |
136,594 |
2065 |
4,976 |
15,508 |
20,485 |
29,045 |
89,867 |
118,912 |
34,021 |
105,376 |
139,397 |
2075 |
4,873 |
14,805 |
19,678 |
30,192 |
99,900 |
130,092 |
35,065 |
114,705 |
149,770 |
2085 |
4,799 |
14,506 |
19,304 |
30,379 |
105,844 |
136,222 |
35,177 |
120,349 |
155,527 |
2095 |
4,655 |
14,269 |
18,924 |
30,294 |
104,995 |
135,289 |
34,949 |
119,264 |
154,213 |
Additional CPP |
Number of New Survivor Beneficiaries |
Year |
Under 65 |
65 and Over |
All Ages |
Males |
Females |
Total |
Males |
Females |
Total |
Males |
Females |
Total |
2019 |
2,871 |
8,061 |
10,932 |
2,065 |
1,697 |
3,761 |
4,936 |
9,758 |
14,694 |
2020 |
3,384 |
9,759 |
13,143 |
2,958 |
2,785 |
5,743 |
6,342 |
12,544 |
18,887 |
2021 |
3,644 |
10,496 |
14,140 |
3,584 |
3,665 |
7,249 |
7,228 |
14,161 |
21,389 |
2022 |
3,832 |
11,032 |
14,865 |
4,200 |
4,647 |
8,847 |
8,032 |
15,679 |
23,712 |
2023 |
3,994 |
11,494 |
15,488 |
4,843 |
5,758 |
10,600 |
8,837 |
17,252 |
26,089 |
2024 |
4,171 |
12,012 |
16,183 |
5,532 |
7,021 |
12,553 |
9,704 |
19,033 |
28,736 |
2025 |
4,259 |
12,283 |
16,541 |
6,250 |
8,424 |
14,675 |
10,509 |
20,707 |
31,216 |
2030 |
4,571 |
13,209 |
17,780 |
10,414 |
17,976 |
28,390 |
14,985 |
31,185 |
46,170 |
2035 |
5,095 |
14,567 |
19,662 |
15,712 |
32,480 |
48,192 |
20,808 |
47,047 |
67,854 |
2040 |
5,204 |
14,960 |
20,164 |
20,137 |
49,158 |
69,294 |
25,341 |
64,118 |
89,459 |
2045 |
5,285 |
15,331 |
20,616 |
23,423 |
64,805 |
88,228 |
28,708 |
80,136 |
108,844 |
2050 |
5,286 |
15,712 |
20,998 |
25,661 |
75,416 |
101,077 |
30,947 |
91,129 |
122,076 |
2055 |
5,209 |
15,908 |
21,118 |
27,029 |
81,682 |
108,711 |
32,238 |
97,591 |
129,828 |
2060 |
5,086 |
15,834 |
20,920 |
28,081 |
85,606 |
113,687 |
33,168 |
101,439 |
134,607 |
2065 |
4,976 |
15,508 |
20,485 |
28,961 |
89,534 |
118,495 |
33,937 |
105,042 |
138,979 |
2075 |
4,873 |
14,805 |
19,678 |
30,191 |
99,900 |
130,091 |
35,065 |
114,705 |
149,769 |
2085 |
4,799 |
14,506 |
19,304 |
30,379 |
105,844 |
136,222 |
35,177 |
120,349 |
155,527 |
2095 |
4,655 |
14,269 |
18,924 |
30,294 |
104,995 |
135,289 |
34,949 |
119,264 |
154,213 |
|
Table 94 New Survivor Pensions (dollars)
Base CPP |
Average New Monthly Survivor's Pension |
Year |
Under 65 |
65 and Over |
Males |
Females |
Total |
Males |
Females |
Total |
2019 |
417 |
390 |
395 |
152 |
354 |
302 |
2020 |
388 |
465 |
446 |
154 |
354 |
302 |
2021 |
396 |
473 |
454 |
157 |
355 |
302 |
2022 |
406 |
482 |
463 |
161 |
357 |
305 |
2023 |
416 |
492 |
473 |
167 |
361 |
309 |
2024 |
426 |
502 |
483 |
174 |
366 |
314 |
2025 |
437 |
513 |
494 |
182 |
372 |
321 |
2030 |
497 |
573 |
554 |
229 |
413 |
364 |
2035 |
568 |
646 |
626 |
285 |
469 |
421 |
2040 |
|