Actuarial Report (31st) on the Canada Pension Plan

Report type
Canada Pension Plan
Published date
Tabled date

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The Honourable Chrystia Freeland, 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 Thirty-First Actuarial Report on the Canada Pension Plan, prepared as at 31 December 2021.

Yours sincerely,

Assia Billig, FCIA, FSA, PhD
Chief Actuary

Table of contents

    List of tables
    List of charts

    1 Highlights of the Report

    Main Findings 31st CPP Actuarial Report
    Contributions Base CPP Additional CPP

    Legislated contribution rate of 9.9% for year 2022 and thereafter.

    Legislated first and second additional contribution rates of 2.0% for 2023 and thereafter and 8.0% for 2024 and thereafter respectively.

    The number of CPP contributors expected to grow from 15.2 million in 2022 to 19.3 million in 2050.

    Contributions expected to increase from $61 billion in 2022 to $177 billion in 2050.

    Contributions expected to increase from $9.3 billion in 2022 to $45 billion in 2050.

    Contributions projected to be higher than expenditures up to the year 2025 inclusive.

    Contributions projected to be higher than expenditures up to the year 2057 inclusive.

    Expenditures

    The number of retirement beneficiaries expected to increase from 6.0 million in 2022 to 9.9 million in 2050.

    Total expenditures projected to grow from $56 billion in 2022 to $197 billion in 2050.

    The number of retirement beneficiaries expected to increase from 0.8 million in 2022 to 8.9 million in 2050.

    Total expenditures projected to grow from $0.3 billion in 2022 to $29 billion in 2050.

    Assets

    Total assets projected to grow from $544 billion at the end of 2021 to $791 billion by 2030 and $2.2 trillion by 2050.

    In 2050, investment income is projected to represent 42% of revenues.

    Total assets projected to grow from $11 billion at the end of 2021 to $200 billion by 2030 and $1.4 trillion by 2050.

    In 2050, investment income is projected to represent 61% of revenues.

    Minimum Contribution Rates needed to sustain the CPP

    The minimum contribution rate is 9.56% of contributory earnings for years 2025 to 2033 and 9.54% for years 2034 and thereafter.

    The first additional minimum contribution rate as a percentage of contributory earnings is 1.97% for years 2025 and thereafter.

    The second additional minimum contribution rate as a percentage of contributory earnings above the YMPE up to the YAMPE is 7.88% for years 2025 and thereafter.

    The respective legislated contribution rates are higher than the minimum contribution rates needed to sustain the Plan, and thus are sufficient to finance both the base and additional CPP over the long term.

    Uncertainty 31st CPP Actuarial ReportTable b footnote 1,Table b footnote 2
    Rate of Return Assumption Base CPP Additional CPP

    The 31st CPP Actuarial Report is based on an assumed 75-year average annual nominal rate of return of 5.79% for the base CPP and 5.37% for the additional CPP.

    If lower average returns are assumed (4.20% for the base CPP and 4.17% for the additional CPP), this would result in:

    The MCR increasing from 9.54% to 11.22%.

    The FAMCR increasing from 1.97% to 2.86%.

    If higher average returns are assumed (7.39% for the base CPP and 6.57% for the additional CPP), this would result in:

    The MCR decreasing from 9.54% to 7.89%.

    The FAMCR decreasing from 1.97% to 1.38%.

    Intervaluation Investment Experience

    Based on the best-estimate assumptions of this report, the MCR at the next valuation as at 31 December 2024 is expected to be 9.55%, and the FAMCR is expected to be 1.97%.

    However, there is a 16% probability that the MCR at the next valuation as at 31 December 2024 will exceed the legislated rate of 9.9% due to investment experience alone.

    It is very unlikely that short-term investment experience would cause the AMCRs to fall outside the “no action” ranges prescribed by the Additional Canada Pension Plan Sustainability Regulations.

    As the plan matures, it will become much more sensitive to intervaluation investment experience.

    The probability of the FAMCR as at 31 December 2048 falling outside the 1.8% to 2.1% range due to investment experience during the 2046-2048 period is 32%.

    Mortality Assumption

    The 31st 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 longevity were to improve faster than assumed (life expectancies at age 65 in 2050 that are about 2 years higher), this would result in:

    The MCR increasing from 9.54% to 9.86%.

    The FAMCR increasing from 1.97% to 2.12%.

    If longevity were to improve slower than assumed (life expectancies at age 65 in 2050 that are about 2 years lower), this would result in:

    The MCR decreasing from 9.54% to 9.17%

    The FAMCR decreasing from 1.97% to 1.79%.

    Economic Growth

    The 31st CPP Actuarial Report is based on the assumption of moderate and sustained economic growth.

    If lower economic growth is assumed with total employment earnings in 2035 being 11% lower, this would result in:

    The MCR increasing from 9.54% to 10.12%.

    The FAMCR decreasing from 1.97% to 1.73%.

    If higher economic growth is assumed with total employment earnings in 2035 being 15% higher, this would result in:

    The MCR decreasing from 9.54% to 9.11%.

    The FAMCR increasing from 1.97% to 2.34%.

    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.

    Table B footnotes

    Table B footnote 1

    Unless specified otherwise, the MCR quoted in the table are for years 2034 and thereafter. The FAMCR are for years 2025 and thereafter.

    Return to table b footnote 1

    Table B footnote 2

    The SAMCR is equal to four times the FAMCR.

    Return to table b footnote 2

    Illustrating Downside Risk 31st CPP Actuarial Report – Base CPP Table c footnote 1

    The 31st CPP Actuarial Report includes a new section that focuses on understanding and assessing downside risks due to three potential or emerging trends. Since the additional CPP is still at its early stages, it focuses on the base CPP only. Furthermore, given the purpose of the section, only adverse scenarios are presented. It is not meant to represent forecasts or predictions, and should be interpreted with caution.

    Earnings Distribution

    The 31st CPP Actuarial Report assumes the same increase in earnings at each earnings level.

    If different nominal wage increases by earnings level are assumed until 2045, with lower increases assumed for lower level earners and vice-versa (no change in overall nominal wage growth compared to the best-estimate assumption), this would result in:

    • Total contributory earnings in 2050 that are 7% lower than under the best-estimate scenario.
    • The MCR increasing to 9.88%, which on a relative basis, is 4% higher than the MCR under the best-estimate assumptions.
    Stagflation Scenario

    The 31st CPP Actuarial Report is based on the assumption that the current environment of high inflation is temporary and that the Bank of Canada will be successful in reaching its current mid-point inflation target of 2.0% by 2026.

    Elevated inflation over a long period of time can lead to stagflation, which is characterized by a simultaneous economic stagnation and increase in inflation. A hypothetical stagflation scenario was developed in which inflation and unemployment rates are higher than under the best-estimate assumptions, while real-wage growth and investment returns are lower. This hypothetical stagflation scenario would result in:

    • The MCR increasing to 9.85%, which on a relative basis, is 3% higher than the MCR under the best-estimate assumptions.
    Climate Scenarios

    Climate change can affect the CPP through various channels. The demographic, economic and investment environments can all be affected by climate change in the future. However, there is a lot of uncertainty on the direction and magnitude of these potential impacts, and the risk is evolving constantly.

    In order to illustrate the potential downside risk, three intentionally adverse hypothetical climate change scenarios were developed based on publicly available information. The scenarios focus on differences in GDP growth rates from different transition pathways. Based on the three hypothetical scenarios:

    • The MCR could vary between 9.75% and 10.06% depending on the assumed pace and timing of the transition.

    Table C Footnotes

    Table c footnote 1

    Unless specified otherwise, the MCR quoted in the table are for years 2034 and thereafter.

    Return to table c footnote 1

    2 Introduction

    2.1 Purpose of the report

    This is the 31st 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 2021. 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.

    Since 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. When not qualified, the term “CPP” or the “Plan” used in this report refers to the entire CPP, that is, to both its components.

    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 financial sustainability of the base and additional Plans over a long period, assuming that the legislation remains unchanged. Such information facilitates a better understanding of the financial states of the base and additional Plans and the factors that influence costs, and thus contributes to an informed public discussion of issues related to the finances of the two components of the CPP.

    The previous triennial report was the 30th Actuarial Report on the Canada Pension Plan as at 31 December 2018, which was tabled in the House of Commons on 10 December 2019.

    This 31st CPP Actuarial Report takes into account all amendments to date regarding the CPP statute, with the most recent listed in the following section. This CPP Actuarial Report also takes into account: recent demographic, economic, and investment experience data as described in section B.2 of Appendix B of this report; various forecasts by demographic, economic and investment experts; the continuing and evolving impacts of the COVID-19 pandemic; and the impacts of the escalation of the conflict in Ukraine, which was considered a subsequent event for the purpose of this CPP Actuarial Report, as described in section 2.3.

    The report presents projections of its revenues and expenditures for both of its components, the base and additional CPP, over a long period of time. Given the length of the projection period and the number of assumptions required, it is unlikely that actual future experience will develop precisely in accordance with the best-estimate projections.

    2.2 Recent Amendments

    The Canada Pension Plan was subject to amendments after 31 December 2018 as follows:

    • Under the Budget Implementation Act, 2019, No. 1, which received Royal Assent on 21 June 2019, the application for a CPP retirement pension is waived upon reaching age 70, effective 1 January 2020. This amendment is taken into account in this 31st CPP Actuarial Report. It was also taken into account and treated as a subsequent event in the 30th CPP Actuarial Report.Footnote 1
    • Under the Budget Implementation Act, 2022, No. 1, which received Royal Assent on 23 June 2022, technical amendments are made regarding eligibility for the base CPP post-retirement disability benefit and determination of the additional CPP drop-in provisions.Footnote 2 The amendments reflect the original intent of the given benefit and drop-in provisions and thus were included in the projections of previous CPP actuarial reports. The amendments are likewise included in the projections of this 31st CPP Actuarial Report. As such, the amendments have no impact on the projections in this report.

    2.3 Subsequent Events

    The continuing and evolving impacts of the COVID-19 pandemic were exacerbated by the conflict in Ukraine, notably its escalation as of 24 February 2022. This escalation is considered to be a subsequent event for the purpose of this 31st CPP Actuarial Report since it started subsequent to the valuation date but before the date of this report. There is much uncertainty surrounding the evolving conflict and potential impacts on the projected financial state of the CPP, in particular resulting from changing levels of inflation and volatility in the financial markets. This uncertainty was taken into account for the purpose of this 31st CPP Actuarial Report.

    There were no other events determined by the Chief Actuary to be subsequent events with material effects on the financial state of the CPP as projected under this 31st CPP Actuarial Report.

    2.4 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 Footnote 3 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.

    2.5 Scope of the Report

    Section 3 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 4. The results for the base Plan and additional Plan are presented separately in sections 5 and 6, respectively, and include for each component the projections of the revenues, expenditures, and assets over more than the next 75 years. Section 7 provides the reconciliation of the results for the base and additional Plans with those of the 30th CPP Actuarial Report, while 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 the previous report, the uncertainty of results, and acknowledgements of data providers and staff who contributed to this report.

    3 Methodology

    The actuarial examination of the CPP involves projections of the revenues and expenditures of both components (base CPP and additional CPP) over a long period of time, so that the future impact of historical and projected trends in demographic, economic and investment 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 2021,Footnote 4 historical experience data used for the starting point of the projections, and best-estimate assumptions that take into account the subsequent event described in section 2.3.

    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 average 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 portfolios of assets for the base and additional CPP, the respective projected net cash flows (contributions less expenditures), and the respective 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 returns 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 operating expenses relating to professional management of the CPP Fund by the Canada Pension Plan Investment Board (CPPIB), 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 is separate from 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 contributory 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 states 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.

    4 Best-Estimate Assumptions

    4.1 Introduction

    The information required by statute, which is presented in sections 5 and 6 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 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 or during the projection period. The continuing and evolving impacts of the COVID-19 pandemic were exacerbated by the conflict in Ukraine, notably its escalation as of 24 February 2022. For the purpose of this 31st CPP Actuarial Report, this escalation, was considered to be a subsequent event with significant impacts on the projected financial state of the CPP. The following assumptions were therefore reviewed in light of this subsequent event: inflation, real wage increases, interest rates as well as expected returns on various asset classes. These assumptions were revised to reflect updated data and forecasts available up to the end of June 2022, as well as continued short-term uncertainty.

    All past and recent amendments to the CPP statute are reflected in this CPP Actuarial Report. The most recent amendments are contained in the Budget Implementation Act, 2022, No. 1, which received Royal Assent on 23 June 2022. That Act contains technical amendments regarding eligibility for the base CPP post-retirement disability benefit and determination of the additional CPP drop-in provisions under the CPP statute.Footnote 2 The amendments reflect the original intent of the given benefit and drop-in provisions and thus were included in the projections of previous CPP actuarial reports. The amendments continue to be reflected in the projections of this 31st CPP Actuarial Report and have no impact.

    The Chief Actuary held a virtual seminar in September 2021 on the long-term demographic, economic, and investment outlook for Canada to obtain opinions from a wide range of individuals with relevant expertise. Nine experts in the fields of demographics, economics, and investments were invited to present their views. The topics discussed included short-term and long-term perspectives on mortality, immigration, the labour market and the economy, as well as the potential implications of climate change on the macroeconomic and investment outlook.

    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 virtual seminar on the demographic and economic perspectives relating to retirement held by Retraite Québec in October 2021.

    In addition to the above mentioned seminars, OCA staff sought expert perspectives on demographic, economic, and investment-related topics by attending various webinars, consulting numerous publications, and consulting with other experts. These expert perspectives were all considered in developing the best-estimate assumptions for this 31st CPP Actuarial Report.

    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 31st Report
    (as at 31 December 2021)
    30th Report
    (as at 31 December 2018)
    Total Fertility Rate 1.54 (2029+) 1.62 (2027+)
    Mortality Statistics Canada Life Tables
    (CLT 1-year table: 2019)
    with assumed future improvements
    Statistics Canada Life Tables
    (CLT 3-year average table: 2014 - 2016)
    with assumed future improvements
    Canadian Life Expectancy Males Females Males Females
    at birth in 2022
    86.7 years 90.0 years 87.1 years 90.1 years
    at age 65 in 2022
    21.3 years 23.8 years 21.6 years 24.0 years
    Net Migration Rate 0.64% of population (for 2031+) 0.62% of population (for 2021+)
    Participation Rate
    (age group 18-69)
    80.0% (2035) 79.2% (2035)
    Employment Rate
    (age group 18-69)
    75.3% (2035) 74.4% (2035)
    Unemployment Rate
    (age group 18-69)
    5.9% (2027+) 6.0% (2030+)
    Rate of Increase in Prices 2.0% (2026+) 2.0% (2019+)
    Real Wage Increase 0.9% (2026+) 1.0% (2025+)
    Real Rate of Return
    (average 2022-2096)
    Base CPP Assets 3.7% 4.0%
    Additional CPP Assets 3.3% 3.5%
    Retirement Rates for Cohort at Age 60 Males 26.0% (2022+) Males 27.0% (2021+)
    Females 28.0% (2022+) Females 29.5% (2021+)
    CPP Disability Incidence Rates (per 1,000 eligible) Males 2.90 (2026+) Males 2.97 (2019+)Table 1 Footnote 1
    Females 3.60 (2026+) Females 3.66 (2019+)Table 1 Footnote 1

    Table 1 footnote

    Table 1 footnote 1

    The ultimate disability incidence rates assumption of the 30th CPP Actuarial Report have been adjusted based on the 2021 eligible population in order to compare on the same basis with the assumption of the 31st CPP Actuarial Report.

    Return to table 1 footnote 1

    4.2 Demographic Assumptions

    The population projections start with the Canada and Québec populations on 1 July 2021, 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.

    The age distribution of the population has changed significantly since the inception of the Plan in 1966. The proportion of the Canadian population aged 65 and above has increased from 7.6% in 1966 to 18.5% in 2021, which indicates an aging population. It is assumed that the population aging will continue in the future, albeit to a more modest extent.

    4.2.1 Fertility

    The first cause of the aging of the Canadian population is the decline in the total fertility rate that has occurred over the last 60 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 largely attributable to the 2008 economic downturn and continuing economic uncertainty. The total fertility rate for Canada stood at 1.47 in 2019, and decreased further to 1.40 in 2020. The significant decrease in 2020 could be due to the high level of uncertainty and much lower immigration caused by the COVID-19 pandemic.

    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. Subsequently, Québec fertility rate increased for certain age groups with the introduction of the Québec Childcare Centres in 1997 and with the introduction of the Québec Parental Insurance Plan in 2006. There was a significant increase in the Québec fertility 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 1.57 in 2019 and 1.52 in 2020.

    The overall decrease in the total fertility rate over the last 60 years occurred as a result of changes in a variety of social, medical, economic and environmental-related 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.

    In 2021, the Government of Canada announced that it would work with provinces and territories to establish a Canada-Wide Early Learning and Child Care PlanFootnote 5. Consistent with what was experienced in Québec with the introduction of Childcare Centres, the proposed plan is assumed to result in increases in fertility rates for certain age groups following the adoption of the Early Learning and Child Care Plan.

    Given the uncertainty surrounding the effect of the COVID-19 pandemic on fertility rates for the year 2020 (the last year of available data at the time this report was prepared), the data for 2020 were excluded from the analysis for purposes of setting the fertility rates for years 2021 and beyond. A 15-year period ending in 2019 of data is used to establish a linear trending model which is also adjusted for the upcoming Canada-Wide Early Learning and Child Care Plan. The assumed age-specific fertility rates lead to an assumed total fertility rate for Canada that will increase from its 2019 level of 1.47 children per woman to an ultimate level of 1.54 in 2029. The assumed age-specific fertility rates for Québec lead to a total fertility rate for the province that will decrease from its 2019 level of 1.57 to an ultimate level of 1.55 in 2029.

    4.2.2 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 44% between 1966 and 2019, rising from 13.6 to 19.6 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 70% of the increase occurred after 1990 for males, while for females, only about 50% of the increase occurred in that period.

    Future mortality rates are determined by applying assumed mortality improvement rates to Statistics Canada’s 2019 life tables.

    Statistics Canada’s 2020 life tables published in January 2022 were used to derive the annual mortality improvement rates for 2020. These tables reflect significant rate increases related to COVID-19 deaths. In 2020, life expectancy at birth (without future mortality improvements) stood at 79.5 for males and 84.0 for females, a decrease from 2019 of 0.7 and 0.4 for males and females respectively.

    The 15-year average mortality improvement rates by age and sex for the period ending in 2019 are the starting point for the projected annual mortality improvement rates from 2021 onward. These projections disregard the impact of the COVID-19 pandemic. 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 2019. Further, it is assumed that ultimately, mortality improvement rates will be the same for males and females. The assumed mortality improvement rates are based on the analysis of the Canadian experience over the period 1921 to 2019 and of the possible drivers of future mortality improvements.

    The projected mortality improvement rates are assumed to gradually reduce to their ultimate levels in 2039, 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.

    In the short term, mortality rates were also adjusted to reflect assumed additional increases in mortality rates due to the COVID-19 pandemic. These assumed increases are related to two factors: i) direct increases in mortality due to COVID-19 deaths, affecting older age groups more and ii) indirect increases in mortality due to the impact of the pandemic on the opioids crisis, affecting mostly men in the age group 25 to 49Footnote 6.

    For the direct increases in mortality due to COVID-19 deaths in 2021, mortality rates were adjusted using data on the number of COVID-19 deaths from both Health Canada and Statistics Canada. The pandemic is assumed to have a residual effect on mortality in 2022, followed by an assumed full recovery and reversion to the projected unadjusted mortality rates for years 2023 and onward. For the indirect increases related to the opioid crisis, projected mortality rates for affected age groups are assumed to revert back to normal levels, leading to a period of high growth in mortality improvement rates.

    The resulting adjustments lead to mortality rates for the full population that are 5.5% higher on average in 2021 and 2.0% higher on average in 2022 than the rates developed using the information up to and including 2019.

    Considering the above, life expectancy (with future improvements) at age 65 in 2022 is projected to be 21.3 years for males, and 23.8 years for females.

    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.

    4.2.3 Net Migration

    Net migration corresponds to the number of immigrants less the net number of emigrants, plus the net increase in the number of non-permanent residents.

    The components of net migration were analyzed separately by looking at trends in the historical data in order to select the assumptions regarding the short-term and ultimate rates. Over the past two years, net migration for Canada decreased significantly due to various COVID-19 safety measures such as border closures and flight cancellations. As such, data for the years 2020 and 2021 were excluded from the analysis. Consideration was given to the federal government’s short-term immigration targets and to long-term perspectives of various experts regarding future immigration levels, net increases in the number of non-permanent residents, and the impacts of the COVID-19 pandemic.

    The net migration rate for Canada is projected to increase from its current (year ending June 2021) level of 0.41% of the population to 1.04% in 2022, 1.05% in 2023, 0.93% in 2024 and gradually reach an ultimate level of 0.64% of the population for the year 2031 and thereafter. The ultimate net migration rate of 0.64% corresponds to the average experience observed over the 10 years ending in 2019, 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 0.64% due to 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 2022 through 2026.

    For the Québec population, the 2031 ultimate net migration rate assumption corresponds to the 10-year average historical experience ending in 2019 for the province of 0.43%, excluding the net increase in non-permanents residents.

    4.2.4 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 an estimated value of 3.3 in 2022 to 1.9 by 2070 and remain at that level thereafter.

    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
    2022 30,074 6,335 18,203 5,536 3.3
    2023 30,519 6,429 18,344 5,746 3.2
    2024 30,937 6,510 18,471 5,957 3.1
    2025 31,333 6,581 18,579 6,173 3.0
    2026 31,708 6,644 18,674 6,390 2.9
    2027 32,073 6,705 18,768 6,600 2.8
    2028 32,426 6,759 18,851 6,815 2.8
    2029 32,764 6,814 18,929 7,022 2.7
    2030 33,087 6,866 19,012 7,209 2.6
    2035 34,557 7,105 19,580 7,873 2.5
    2040 35,854 7,328 20,191 8,335 2.4
    2045 37,008 7,474 20,836 8,699 2.4
    2050 38,078 7,494 21,402 9,182 2.3
    2055 39,128 7,548 21,797 9,783 2.2
    2060 40,229 7,706 22,020 10,504 2.1
    2065 41,398 7,932 22,211 11,255 2.0
    2070 42,581 8,167 22,665 11,750 1.9
    2080 44,799 8,531 23,763 12,505 1.9
    2090 46,894 8,829 25,021 13,045 1.9
    2100 49,228 9,267 25,996 13,966 1.9

    4.3 Economic and Investment Assumptions

    The main economic assumptions for the CPP are regarding: 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.

    4.3.1 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, changes in the age structure of the working-age population, 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 an estimated value of 65.1% in 2022 to 64.1% 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 an estimated 76.7% in 2022 to 80.0% in 2035. The increase in the participation rate for those aged 18 to 69 reflects several trends.

    For example, it is assumed that female participation rates will continue to grow at a faster pace than male participation rates thereby continuing to reduce the gap in participation rates between males and females, albeit at a slower pace than in the past. A part of this reduction comes from the expected impact on the female labour force participation due to the Early Learning and Child Care Plan initiative announced by the federal Government in 2021.

    It is also assumed that participation rates for age groups 55 and over for both genders will increase as a result of an expected continued trend toward longer working lives.

    Despite the assumed future increase in participation rates of women and older workers, it is still expected that there will be continued 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 therefore expected to increase due to the attractive employment opportunities resulting from labour shortages.

    Overall, the male participation rate of those aged 18 to 69 is expected to be 80.8% in 2022 and to increase to 83.2% in 2035, while the female participation rate for the same age group is expected to be 72.6% in 2022 and to increase to 76.8% in 2035. As such, the difference between male and female participation rates for the age group 18 to 69 is projected to be 8.2 percentage points in 2022 and decrease to 6.4 percentage points by 2035. Thereafter, the gap between males and females in the age group 18 to 69 is projected to vary between 6.3 and 6.4 percentage points.

    The job creation rate (i.e. the change in the number of persons employed) in Canada was on average 1.5% from 1976 to 2021 based on available employment data, and it is assumed that the rate will be 2.9% in 2022 as the labour market recovers from the COVID-19 pandemic. 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 decrease from 7.5% in 2021 to 6.0% in 2022, 5.7% in 2023 and then increase to reach an ultimate level of 6.1% by 2027. The assumed job creation rate for Canada, ages 15 and over, is on average about 0.8% from 2024 to 2027, which is slightly lower than the labour force growth rate. It is assumed that, starting in 2027, the job creation rate will follow the labour force growth rate, with both averaging 0.8% per year between 2027 and 2035, and 0.4% 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.

    4.3.2 Price Increases

    On December 13, 2021, the Bank of Canada and the federal Government renewed their commitment to keep inflation between 1% and 3% with a target at the mid-point of 2% until the end of 2026. They further noted that the Bank of Canada will use the flexibility of the 1% to 3% range to actively seek the maximum sustainable level of employment to an extent that is consistent with keeping medium-term inflation expectations at 2%.

    Despite the mid-point target of 2%, price increases (inflation), as measured by changes in the Consumer Price Index (CPI), tend to fluctuate from year to year. The COVID-19 pandemic had an impact on the CPI. In 2020, the CPI rose by only 0.7% as a result of a decline in consumer spending stemming from various pandemic-related measures and restrictions. However, as the pandemic evolved and restrictions were lifted, consumer demand increased and supply issues arose. As a result, the increase in CPI was 3.4% in 2021, the fastest pace since 1991. The uncertainty surrounding high inflation due to the demand and supply shocks caused by the pandemic has been exacerbated by the escalation of the conflict in Ukraine.

    This report considers the escalation of the conflict in Ukraine as a subsequent event. It is therefore assumed that inflation will be higher than the 2% target up until 2025. Increases in prices are assumed to be 6.9% in 2022, 3.0% in 2023, 2.5% in 2024, 2.25% in 2025, and 2.0% for 2026 and thereafter. These assumed price increases are based on short-term forecasts from various economistsFootnote 7 as well as on the expectation that the Bank of Canada and federal Government will continue to renew the inflation target at 2.0% and that the Bank of Canada will be successful in keeping inflation at its mid-point target in the long term.

    4.3.3 Real Wage Increases

    Wage increases affect the financial state of the CPP 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.

    Two wage measures are used in this report: the average annual earnings (AAE) and the average weekly earnings (AWE). The assumed increase in AAE is used to project the total employment earnings of CPP contributors, while the assumed increase in the AWE is used to project the increase in the YMPE from one year to the next. The average difference between both measures has been relatively small over the period 1966 to 2019, and the two measures are assumed to grow at the same pace over the long term. However, they tend to grow at different paces in times of economic expansions and slowdowns.

    Based on information up to the end of June 2022, the real AAE is projected to decrease by 2.4% in 2022 and by 0.1% in 2023. Real AAE are then projected to increase, with an ultimate real increase of 0.9% reached in 2026. The negative real AAE growth in the early years of the projection is a result of assumed wage dynamics in periods of high inflation stemming from the COVID-19 pandemic and exarcerbated by the escalation of the conflict in Ukraine, which is considered a subsequent event. The ultimate real AAE increase assumption is developed taking into account historical trends, labour productivity, labour shortages, and other contributing factors. The ultimate real AAE increase assumption combined with the ultimate price increase assumption results in an assumed nominal annual increase of 2.9% in 2026 and thereafter.

    Real AWE are projected to decrease by 3.3% in 2022 and by 0.1% in 2023. In the following years, and consistent with the historical long-term relationship between the real change in the AWE and AAE, AWE is projected to increase, with an ultimate real increase of 0.9% reached in 2026, equal to the same ultimate real increase in AAE that year.

    4.3.4 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 of each CPP component. The real rates of return on investments are net of all investment expenses, including the CPPIB operating expenses.

    The escalation of the conflict in Ukraine has had significant impacts on financial markets. In an effort to control rising inflation exacerbated by this escalation, the Bank of Canada has increased its benchmark interest rate by 225 basis points so far in 2022 (as of July 13, 2022), which has impacted returns on fixed income investments. In addition, stock market indices in the first half of 2022 have decreased significantly across geographies and sectors.

    This report considers the escalation of the conflict in Ukraine a subsequent event, and the assumed rates of return have been adjusted accordingly. More specifically, for 2022, the assumed nominal return is -9.0% for the base CPP and -7.7% for the additional CPP. In real terms, this translates into 2022 assumed returns of -15.9% and -14.6% for the base CPP and additional CPP respectively. These returns reflect actual CPPIB results up to 30 June 2022, and continued uncertainty for the remainder of the year. In addition, fixed income returns beyond 2022 are based on a revised interest rate path that reflects the significant rate hikes that occurred in the first half of 2022.

    For the period 2023 to 2032, the assumed annual real rates of return are lower than the assumed ultimate real rates of return in 2033 due to lower expected bond returns between 2023 and 2033, and high inflation in the first few years. The average real rates of return for the 5-year period 2023-2027 for the base and additional CPP are respectively 3.56% and 2.70%, while the average real rates of return for the 10-year period 2023-2032 for the base and additional CPP are respectively 3.73% and 2.98%.

    The ultimate real rates of return for the base and additional CPP are respectively 4.0% and 3.6%. The 75-year average real rate of return on the assets over the 2022-2096 projection period is assumed to be 3.69% for the base CPP and 3.27% for the additional CPP.

    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, 15+) Real Rates of Return on Investments
    Participation Rate Job Creation Rate Unemployment Rate Labour Force Annual Increase Base CPP Additional CPP
    2022 (2.4) (3.3) 6.9 65.1 2.9 6.0 1.3 (15.9) (14.6)
    2023 (0.1) (0.1) 3.0 65.0 1.5 5.7 1.1 2.9 1.9
    2024 0.4 0.4 2.5 64.8 0.9 5.8 1.0 3.4 2.5
    2025 0.6 0.6 2.3 64.6 0.8 5.9 0.9 3.6 2.8
    2026 0.9 0.9 2.0 64.5 0.8 6.0 0.9 3.9 3.1
    2027 0.9 0.9 2.0 64.4 0.8 6.1 0.9 3.9 3.2
    2028 0.9 0.9 2.0 64.3 0.8 6.1 0.8 3.9 3.2
    2029 0.9 0.9 2.0 64.2 0.8 6.1 0.8 3.9 3.2
    2030 0.9 0.9 2.0 64.1 0.7 6.1 0.7 3.9 3.3
    2035 0.9 0.9 2.0 64.1 0.7 6.1 0.7 4.0 3.6
    2040 0.9 0.9 2.0 63.7 0.5 6.1 0.5 4.0 3.6
    2045 0.9 0.9 2.0 63.2 0.5 6.1 0.5 4.0 3.6
    2050 0.9 0.9 2.0 62.8 0.4 6.1 0.4 4.0 3.6
    2055 0.9 0.9 2.0 62.2 0.2 6.1 0.2 4.0 3.6
    2060 0.9 0.9 2.0 61.5 0.2 6.1 0.2 4.0 3.6
    2065 0.9 0.9 2.0 60.8 0.3 6.1 0.3 4.0 3.6
    2070 0.9 0.9 2.0 60.4 0.4 6.1 0.4 4.0 3.6
    2080 0.9 0.9 2.0 60.1 0.4 6.1 0.4 4.0 3.6
    2090 0.9 0.9 2.0 60.1 0.4 6.1 0.4 4.0 3.6
    2100 0.9 0.9 2.0 59.7 0.4 6.1 0.4 4.0 3.6

    4.4 Other Assumptions

    This report is based on several other key assumptions, such as retirement benefit take-up rates and disability incidence rates.

    4.4.1 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. In 1987, the flexible retirement age provision became effective such that a person can choose to receive a reduced retirement pension as early as age 60 (as well as an increased pension after age 65). This provision had the overall effect of lowering the average age at pension take-up to below age 65. In 1986, the average age at pension take-up was 65.2, compared to an average age of 62.7 over the decade ending in 2019.

    Since 2012, the age 60 retirement benefit take-up rates have continually decreased. For cohorts reaching age 60 in 2019 (before the pandemic), the retirement take-up rates were 27.8% for males and 30.3% for females. For cohorts reaching age 60 in 2021, the retirement take-up rates were 23.3% for males and 25.0% for females. The 2021 take-up rate for males is the lowest one since 1989, while the 2021 take-up rate for females is a record low since the flexible retirement age provision was first introduced in 1987. At this time, it is not clear to what extent the COVID-19 pandemic contributed to the significant reduction in retirement take-up rates at age 60 during the years 2020 and 2021. The decreasing trend will be monitored for the next CPP valuation.

    The assumption reflects the pre-pandemic trend in retirement take-up rates at age 60, while giving partial credibility to the years 2020 and 2021. For cohorts reaching age 60 in 2022 and thereafter, the retirement benefit take-up rates are assumed to be 26.0% for males and 28.0% for females. 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 42.5% for males and 43.8% for females in 2031 and thereafter. These rates result in projected average ages at retirement pension take-up in 2031 of 63.6 for males and 63.4 for females. The same retirement take-up rates for the base CPP apply to the additional CPP.

    4.4.2 Disability Incidence Rates - Disability Pension and Post-Retirement Disability Benefit

    The sex-distinct disability incidence rate in respect of a disability benefit – either the disability pension or post-retirement disability benefit – at any given age is the number of new disability beneficiaries divided by the total number of people eligible for the disability benefit at that age. The disability incidence rates for the base Plan in respect of the disability pension are the same as for the additional Plan. The disability incidence rates in respect of the post-retirement disability benefit apply only to the base Plan, since the benefit pertains only to the base Plan.

    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. With the exception of more recent years (2019-2021), the incidence rates for both sexes have been relatively stable since the late 1990s as a result of administrative changes made to the disability program. Volatility was observed in the incidence rates over the period 2019 to 2021, which is attributable to administrative and COVID-19 related factors. Such volatility is not expected to continue, and as such, the years 2019 to 2021 were not considered in developing the ultimate assumptions for the disability incidence rates.

    Based on the above and experience over the period 2007 to 2018, incidence rates in respect of the disability pension are expected to increase gradually from 2021 to 2026 and are then assumed to remain constant thereafter at values of 2.90 per thousand eligible for males and 3.60 per thousand eligible for females.

    For the base CPP post-retirement disability benefit, which came into effect in 2019 and applies only to early retirement beneficiaries (before age 65) who become disabled, the incidence rates by age and sex were derived based on post-retirement disability benefit data for years 2019 and 2020 along with historical records of earnings data of early retirement beneficiaries. It is projected that, in 2026, the overall disability incidence rates in respect of the post-retirement disability benefit for early retirement beneficiaries will be 10.08 per 1,000 eligible males and 9.06 per 1,000 eligible females . As more experience data regarding post-retirement disability benefits become available, the assumptions for the incidence rates will be revised accordingly for future CPP actuarial reports.

    5 Results - Base CPP

    5.1 Overview

    The key observations and findings of the actuarial projections of the financial state of the base CPP 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 2022 to 2025. Thereafter, a portion of investment income is required to make up the difference between contributions and expenditures. In 2030, about 9% of investment income will be required to pay for expenditures. This is expected to gradually increase to about 16% by 2050 and about 34% by 2070, after which it is expected to be fairly stable.
    • With the legislated contribution rate of 9.9%, total assets of the base Plan are expected to decrease in 2022 as a result of the current financial markets environment. Assets are then expected to increase over the projection period, with more significant growth in the first few years. Total assets are expected to decrease from $544 billion at the end of 2021 to $499 billion at the end of 2022 and then grow to $791 billion by the end of 2030. Assets are then projected to reach $2.2 trillion by 2050 and $17 trillion by 2100. The ratio of assets to the following year’s expenditures is projected to increase slightly from 8.1 to 8.4 between 2022 and 2030 and to continue to grow thereafter to values of 10.7 in 2050 and 13.2 in 2100.
    • With the legislated contribution rate of 9.9%, investment income of the base Plan, which is expected to represent 32% of revenues (i.e. contributions and investment income) in 2023, is further projected to represent 34% of revenues in 2030, 42% of revenues in 2050 and 51% of revenues by 2100. 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 9.56% of contributory earnings for years 2025 to 2033 and 9.54% 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 2022-2024.
    • 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 9.53% for the year 2025 and thereafter. The second component is the full funding rate that is required to fully fund the amendments made to the Canada Pension Plan under the Budget Implementation Act, 2018, No. 1. The full funding rate is 0.03% for years 2025 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 increase slightly from 8.1 in 2025 to 8.4 in 2034 and to be the same fifty years later in 2084.
    • The MCR determined for this report is lower than the MCR of 9.72% for years 2034 and thereafter determined under the 30th CPP Actuarial Report. Experience over the period 2019 to 2021 was better than expected overall, leading to a decrease in the MCR. The main contributing factor for this was better than expected investment experience, which lowers the MCR by 0.35. This decrease is partially offset by changes in real rate of return assumptions for 2022. The net result of all changes since the 30th CPP Actuarial Report is a decrease in the MCR of 0.18 percentage points for the year 2034 and thereafter.
    • Overall, changes to the assumptions to reflect the subsequent event resulted in an increase in the MCR of 0.31. A large portion of this increase is due to reductions in the 2022 assumed nominal rate of return. The reduction in MCR due to 2019-2021 investment experience is therefore partially offset by lower assumed returns in 2022.
    • Although the pay-as-you-go rate is expected to increase over time from 9.1% in 2022 to 13.3% by 2100 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 15.2 million in 2022 to 19.3 million in 2050 and 24.0 million by 2100. Under the legislated contribution rate of 9.9%, base CPP contributions are expected to increase from $61 billion in 2022 to $177 billion in 2050 and $929 billion by 2100.
    • The number of base CPP retirement beneficiaries is expected to increase from 6.0 million in 2022 to 9.9 million in 2050 and 15.3 million by 2100.
    • Total expenditures of the base Plan are expected to grow rapidly from approximately $56 billion in 2022 to $89 billion in 2030. Thereafter, total expenditures are projected to grow at a slower pace, reaching $197 billion in 2050 and $1.2 trillion by 2100.

    5.2 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 who are not working beneficiaries is directly linked to the assumed labour force participation rates applied to the projected working-age population and the job creation rates. The number of working beneficiaries who are contributors is derived from the number of retirement beneficiaries in pay. Hence, the demographic, economic, and retirement-related 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 an estimated 15.2 million in 2022 to 16.7 million in 2030, 19.3 million in 2050, and 24.0 million by 2100. 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 an estimated $61 billion in 2022 to $86 billion in 2030, $177 billion in 2050 and to continue increasing thereafter, reaching $929 billion in 2100 as shown in Table 4. The projected YMPE is also shown, which is assumed to increase according to the increases in the average weekly earnings assumption. The YMPE for 2023 reflects actual data up to April 2022. The YMPE is projected to increase from $64,900 in 2022 to $82,200 in 2030, $145,600 in 2050, and $608,200 by 2100.

    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)
    2022 9.9 64,900 15,235 616,668 61,050
    2023 9.9 66,900 15,534 648,785 64,230
    2024 9.9 69,200 15,751 680,189 67,339
    2025 9.9 71,200 15,959 710,485 70,338
    2026 9.9 73,300 16,114 739,632 73,224
    2027 9.9 75,400 16,264 769,230 76,154
    2028 9.9 77,600 16,419 800,229 79,223
    2029 9.9 79,900 16,566 832,186 82,386
    2030 9.9 82,200 16,708 864,552 85,591
    2035 9.9 94,800 17,464 1,047,401 103,693
    2040 9.9 109,400 18,057 1,254,280 124,174
    2045 9.9 126,200 18,686 1,499,428 148,443
    2050 9.9 145,600 19,263 1,784,712 176,687
    2055 9.9 168,000 19,687 2,108,096 208,701
    2060 9.9 193,800 19,992 2,474,655 244,991
    2065 9.9 223,600 20,289 2,903,032 287,400
    2070 9.9 258,000 20,699 3,421,988 338,777
    2080 9.9 343,300 21,805 4,803,930 475,589
    2090 9.9 457,000 22,975 6,744,599 667,715
    2100 9.9 608,200 23,973 9,379,076 928,529

    5.3 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 an estimated 6.0 million in 2022 to 7.7 million by 2030 or by 27% 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 and to then further increase to 15.3 million by 2100. Female retirement beneficiaries continue to outnumber their male counterparts, and by 2050 there is projected to be 793 thousand or 17% more female than male retirement beneficiaries. By 2100, the number of female retirement beneficiaries is projected to exceed the number of male beneficiaries by 1.1 million or 15%. Over the projection period, the number of disability and survivor beneficiaries is also projected to increase but at a slower average pace than for retirement beneficiaries.

    Table 5 Beneficiaries - Base CPPTable 5 Footnote 1
    (thousands)
    Year Retirement Table 5 Footnote 2, Table 5 Footnote 3, Table 5 Footnote 4, Table 5 Footnote 5 Disability Table 5 Footnote 4, Table 5 Footnote 6 Survivor Table 5 Footnote 5, Table 5 Footnote 6 Children Death Table 5 Footnote 7
    2022 6,025 365 1,353 221 176
    2023 6,230 363 1,377 224 178
    2024 6,444 365 1,403 228 184
    2025 6,671 370 1,430 234 189
    2026 6,893 375 1,458 241 194
    2027 7,093 380 1,486 248 200
    2028 7,288 384 1,515 254 205
    2029 7,476 388 1,545 262 212
    2030 7,651 393 1,575 269 218
    2035 8,334 429 1,729 301 251
    2040 8,834 476 1,874 335 285
    2045 9,300 526 1,991 359 312
    2050 9,869 562 2,070 368 332
    2055 10,564 583 2,116 366 344
    2060 11,353 586 2,148 362 350
    2065 12,088 580 2,191 363 358
    2070 12,661 594 2,261 369 373
    2080 13,551 633 2,450 386 418
    2090 14,266 685 2,554 394 447
    2100 15,260 709 2,545 402 450

    Table 5 Footnotes

    Table 5 footnote 1

    Numbers of beneficiaries by sex in Table 6 may not sum to total numbers of beneficiaries shown in Table 5 due to rounding.

    Return to table 5 footnote 1

    Table 5 footnote 2

    The number given for retirement beneficiaries includes working beneficiaries.

    Return to table 5 footnote 2

    Table 5 footnote 3

    The number given for retirement beneficiaries does not take into account that the retirement pension can be shared between spouses.

    Return to table 5 footnote 3

    Table 5 footnote 4

    A beneficiary who receives concurrently a retirement and post-retirement disability benefit is counted in each of the retirement and disability benefit categories.

    Return to table 5 footnote 4

    Table 5 footnote 5

    A beneficiary who receives concurrently a retirement and a survivor’s benefit is counted in each category.

    Return to table 5 footnote 5

    Table 5 footnote 6

    A beneficiary who receives concurrently a disability and survivor’s benefit is counted in each category.

    Return to table 5 footnote 6

    Table 5 footnote 7

    This is the number of deceased contributors whose estates or persons or institutions as prescribed are entitled to the death benefit during the given year.

    Return to table 5 footnote 7

    Table 6 Beneficiaries by Sex - Base CPPTable 6 Footnote 1
    (thousands)
    Year Males Females
    Retirement Table 6 Footnote 2, Table 6 Footnote 3, Table 6 Footnote 4, Table 6 Footnote 5 Disability Table 6 Footnote 4, Table 6 Footnote 6 Survivor Table 6 Footnote 5, Table 6 Footnote 6 Death Table 6 Footnote 7 Retirement Table 6 Footnote 2, Table 6 Footnote 3, Table 6 Footnote 4, Table 6 Footnote 5 Disability Table 6 Footnote 4, Table 6 Footnote 6 Survivor Table 6 Footnote 5, Table 6 Footnote 6 Death Table 6 Footnote 7
    2022 2,889 163 278 104 3,136 202 1,075 73
    2023 2,982 161 287 104 3,248 201 1,090 74
    2024 3,079 162 297 107 3,365 203 1,107 77
    2025 3,182 164 306 109 3,488 207 1,124 80
    2026 3,283 166 315 112 3,611 210 1,142 82
    2027 3,372 167 325 114 3,721 213 1,161 85
    2028 3,459 168 334 117 3,829 215 1,181 89
    2029 3,542 170 344 120 3,934 219 1,201 92
    2030 3,619 171 353 123 4,033 221 1,222 95
    2035 3,904 186 396 138 4,430 244 1,333 113
    2040 4,097 205 430 152 4,738 271 1,444 132
    2045 4,281 227 453 164 5,019 299 1,537 149
    2050 4,538 243 466 171 5,331 319 1,604 161
    2055 4,878 252 473 176 5,686 331 1,643 168
    2060 5,279 252 482 178 6,074 334 1,666 172
    2065 5,646 247 495 183 6,442 333 1,695 175
    2070 5,911 253 512 191 6,750 341 1,749 182
    2080 6,296 270 538 214 7,255 363 1,912 204
    2090 6,610 293 540 227 7,655 392 2,014 220
    2100 7,090 303 536 227 8,170 406 2,009 223

    Table 6 Footnotes

    Table 6 footnote 1

    Numbers of beneficiaries by sex in Table 6 may not sum to total numbers of beneficiaries shown in Table 5 due to rounding.

    Return to table 6 footnote 1

    Table 6 footnote 2

    The number given for retirement beneficiaries includes working beneficiaries.

    Return to table 6 footnote 2

    Table 6 footnote 3

    The number given for retirement beneficiaries does not take into account that the retirement pension can be shared between spouses.

    Return to table 6 footnote 3

    Table 6 footnote 4

    A beneficiary who receives concurrently a retirement and post-retirement disability benefit is counted in each of the retirement and disability benefit categories.

    Return to table 6 footnote 4

    Table 6 footnote 5

    A beneficiary who receives concurrently a retirement and a survivor’s benefit is counted in each category.

    Return to table 6 footnote 5

    Table 6 footnote 6

    A beneficiary who receives concurrently a disability and survivor’s benefit is counted in each category.

    Return to table 6 footnote 6

    Table 6 footnote 7

    This is the number of deceased contributors whose estates or persons or institutions as prescribed are entitled to the death benefit during the given year.

    Return to table 6 footnote 7

    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 $56 billion in 2022 to $89 billion in 2030. Thereafter, total expenditures are projected to grow at a slower pace, reaching $197 billion in 2050 and $1.2 trillion by 2100. Table 8 shows the same information but in millions of 2022 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 to cover expenditures if there were no assets. Although the total pay-as-you-go rate is expected to increase significantly from approximately 9.1% in 2022 to 13.3% 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 RetirementTable 7 Footnote 1 DisabilityTable 7 Footnote 2 Survivor Children Death Operating ExpensesTable 7 Footnote 3 Total
    2022 44,846 4,397 4,975 571 440 775 56,005
    2023 49,774 4,650 5,338 617 445 768 61,592
    2024 53,281 4,768 5,514 648 459 756 65,425
    2025 56,821 4,891 5,679 680 472 787 69,330
    2026 60,460 5,034 5,845 715 485 817 73,356
    2027 63,978 5,186 6,013 750 499 847 77,273
    2028 67,526 5,335 6,197 787 513 879 81,237
    2029 71,148 5,504 6,400 825 528 912 85,318
    2030 74,802 5,694 6,623 865 544 945 89,472
    2031 78,441 5,918 6,866 906 559 979 93,670
    2032 82,040 6,172 7,129 946 575 1,015 97,877
    2033 85,635 6,443 7,409 986 592 1,052 102,118
    2034 89,272 6,729 7,707 1,029 609 1,091 106,436
    2035 92,973 7,028 8,023 1,074 626 1,130 110,853
    2036 96,745 7,338 8,355 1,120 643 1,169 115,370
    2037 100,557 7,678 8,704 1,169 660 1,210 119,977
    2038 104,408 8,043 9,067 1,221 677 1,252 124,669
    2039 108,332 8,438 9,446 1,272 694 1,296 129,478
    2040 112,382 8,843 9,839 1,323 711 1,341 134,439
    2041 116,578 9,269 10,244 1,374 726 1,387 139,577
    2042 120,925 9,707 10,658 1,423 740 1,436 144,889
    2043 125,452 10,163 11,081 1,471 754 1,487 150,409
    2044 130,197 10,627 11,515 1,520 768 1,540 156,167
    2045 135,200 11,098 11,957 1,568 780 1,595 162,197
    2046 140,488 11,570 12,404 1,613 791 1,651 168,516
    2047 146,085 12,040 12,856 1,652 801 1,709 175,143
    2048 152,016 12,511 13,312 1,690 811 1,768 182,108
    2049 158,300 12,985 13,772 1,728 820 1,830 189,435
    2050 164,967 13,462 14,237 1,765 829 1,892 197,151
    2051 172,035 13,939 14,704 1,800 836 1,956 205,269
    2052 179,500 14,423 15,171 1,834 842 2,021 213,791
    2053 187,371 14,907 15,641 1,867 848 2,088 222,722
    2054 195,698 15,381 16,115 1,900 853 2,156 232,103
    2055 204,541 15,835 16,594 1,933 858 2,226 241,987
    2060 255,758 18,027 19,116 2,112 874 2,602 298,489
    2065 317,002 20,269 22,144 2,339 894 3,038 365,685
    2070 385,069 23,475 26,057 2,631 931 3,562 441,724
    2075 461,732 27,477 31,097 2,972 985 4,203 528,466
    2080 549,340 32,208 37,189 3,350 1,043 4,971 628,102
    2085 649,803 38,098 44,038 3,750 1,089 5,882 742,661
    2090 771,028 44,855 51,349 4,169 1,116 6,950 879,465
    2095 921,488 51,845 59,097 4,634 1,122 8,188 1,046,375
    2100 1,103,304 59,859 67,667 5,180 1,123 9,634 1,246,767

    Table 7 Footnotes

    Table 7 footnote 1

    Retirement expenditures include expenditures related to post-retirement benefits for working beneficiaries.

    Return to table 7 footnote 1

    Table 7 footnote 2

    Disability expenditures include expenditures related to post-retirement disability benefits for disabled retirement beneficiaries.

    Return to table 7 footnote 2

    Table 7 footnote 3

    Plan operating expenses exclude CPPIB operating expenses, which are accounted for separately in the investment expenses assumption.

    Return to table 7 footnote 3

    Table 8 Expenditures - Base CPPTable 8 Footnote 1
    (millions of 2022 constant dollars)
    Year Retirement Table 8 Footnote 2 Disability Table 8 Footnote 3 Survivor Children Death Operating Expenses Table 8 Footnote 4 Total
    2022 44,846 4,397 4,975 571 440 775 56,005
    2023 48,324 4,515 5,182 599 432 746 59,798
    2024 50,468 4,516 5,223 613 435 716 61,970
    2025 52,637 4,531 5,260 630 437 729 64,224
    2026 54,909 4,572 5,309 650 440 742 66,621
    2027 56,965 4,617 5,354 668 444 754 68,803
    2028 58,945 4,657 5,410 687 448 767 70,914
    2029 60,889 4,710 5,477 706 452 780 73,015
    2030 62,760 4,777 5,557 726 456 793 75,069
    2031 64,523 4,868 5,648 745 460 805 77,050
    2032 66,161 4,977 5,749 763 464 819 78,932
    2033 67,706 5,094 5,858 780 468 832 80,738
    2034 69,197 5,216 5,974 797 472 845 82,502
    2035 70,653 5,341 6,097 816 476 859 84,241
    2036 72,078 5,467 6,225 835 479 871 85,954
    2037 73,449 5,608 6,357 854 482 884 87,634
    2038 74,766 5,760 6,493 874 485 897 89,275
    2039 76,056 5,924 6,632 893 488 910 90,901
    2040 77,352 6,087 6,772 911 489 923 92,534
    2041 78,666 6,254 6,912 927 490 936 94,186
    2042 80,000 6,422 7,051 941 490 950 95,853
    2043 81,368 6,592 7,187 954 489 965 97,554
    2044 82,789 6,758 7,322 966 488 979 99,303
    2045 84,284 6,919 7,454 977 486 994 101,115
    2046 85,864 7,072 7,581 986 483 1,009 102,995
    2047 87,534 7,215 7,703 990 480 1,024 104,946
    2048 89,302 7,349 7,820 993 477 1,039 106,979
    2049 91,170 7,479 7,932 995 473 1,054 109,102
    2050 93,147 7,601 8,039 996 468 1,068 111,319
    2051 95,233 7,716 8,139 996 463 1,083 113,631
    2052 97,417 7,827 8,234 995 457 1,097 116,027
    2053 99,695 7,932 8,322 993 451 1,111 118,504
    2054 102,084 8,023 8,406 991 445 1,125 121,074
    2055 104,605 8,098 8,487 989 439 1,138 123,755
    2060 118,468 8,350 8,855 978 405 1,205 138,261
    2065 132,994 8,503 9,290 981 375 1,274 153,418
    2070 146,321 8,920 9,901 1,000 354 1,353 167,849
    2075 158,912 9,457 10,703 1,023 339 1,447 181,880
    2080 171,241 10,040 11,593 1,044 325 1,550 195,793
    2085 183,463 10,756 12,433 1,059 307 1,661 209,679
    2090 197,167 11,470 13,131 1,066 285 1,777 224,897
    2095 213,429 12,008 13,688 1,073 260 1,896 242,354
    2100 231,450 12,557 14,195 1,087 236 2,021 261,546

    Table 8 Footnotes

    Table 8 footnote 1

    For a given year, the value in 2022 constant dollars is equal to the corresponding value in current dollars divided by the cumulative projected increases in prices since 2022.

    Return to table 8 footnote 1

    Table 8 footnote 2

    Retirement expenditures include expenditures related to post-retirement benefits for working beneficiaries.

    Return to table 8 footnote 2

    Table 8 footnote 3

    Disability expenditures include expenditures related to post-retirement disability benefits for disabled retirement beneficiaries.

    Return to table 8 footnote 3

    Table 8 footnote 4

    Plan operating expenses exclude CPPIB operating expenses, which are accounted for separately in the investment expenses assumption.

    Return to table 8 footnote 4

    Table 9 Expenditures as Percentage of Contributory Earnings - Base CPP
    (pay-as-you-go rates) (%)
    Year RetirementTable 9 Footnote 1 DisabilityTable 9 Footnote 2 Survivor Children Death Operating ExpensesTable 9 Footnote 3 Total
    2022 7.27 0.71 0.81 0.09 0.07 0.13 9.08
    2023 7.67 0.72 0.82 0.10 0.07 0.12 9.49
    2024 7.83 0.70 0.81 0.10 0.07 0.11 9.62
    2025 8.00 0.69 0.80 0.10 0.07 0.11 9.76
    2026 8.17 0.68 0.79 0.10 0.07 0.11 9.92
    2027 8.32 0.67 0.78 0.10 0.06 0.11 10.05
    2028 8.44 0.67 0.77 0.10 0.06 0.11 10.15
    2029 8.55 0.66 0.77 0.10 0.06 0.11 10.25
    2030 8.65 0.66 0.77 0.10 0.06 0.11 10.35
    2031 8.73 0.66 0.76 0.10 0.06 0.11 10.43
    2032 8.79 0.66 0.76 0.10 0.06 0.11 10.49
    2033 8.83 0.66 0.76 0.10 0.06 0.11 10.53
    2034 8.86 0.67 0.76 0.10 0.06 0.11 10.56
    2035 8.88 0.67 0.77 0.10 0.06 0.11 10.58
    2036 8.91 0.68 0.77 0.10 0.06 0.11 10.63
    2037 8.93 0.68 0.77 0.10 0.06 0.11 10.66
    2038 8.94 0.69 0.78 0.10 0.06 0.11 10.68
    2039 8.95 0.70 0.78 0.11 0.06 0.11 10.70
    2040 8.96 0.71 0.78 0.11 0.06 0.11 10.72
    2041 8.97 0.71 0.79 0.11 0.06 0.11 10.74
    2042 8.98 0.72 0.79 0.11 0.05 0.11 10.76
    2043 8.98 0.73 0.79 0.11 0.05 0.11 10.77
    2044 9.00 0.73 0.80 0.11 0.05 0.11 10.79
    2045 9.02 0.74 0.80 0.10 0.05 0.11 10.82
    2046 9.04 0.74 0.80 0.10 0.05 0.11 10.85
    2047 9.08 0.75 0.80 0.10 0.05 0.11 10.89
    2048 9.12 0.75 0.80 0.10 0.05 0.11 10.93
    2049 9.18 0.75 0.80 0.10 0.05 0.11 10.98
    2050 9.24 0.75 0.80 0.10 0.05 0.11 11.05
    2051 9.32 0.76 0.80 0.10 0.05 0.11 11.12
    2052 9.40 0.76 0.79 0.10 0.04 0.11 11.19
    2053 9.49 0.75 0.79 0.09 0.04 0.11 11.28
    2054 9.59 0.75 0.79 0.09 0.04 0.11 11.37
    2055 9.70 0.75 0.79 0.09 0.04 0.11 11.48
    2060 10.34 0.73 0.77 0.09 0.04 0.11 12.06
    2065 10.92 0.70 0.76 0.08 0.03 0.10 12.60
    2070 11.25 0.69 0.76 0.08 0.03 0.10 12.91
    2075 11.40 0.68 0.77 0.07 0.02 0.10 13.04
    2080 11.44 0.67 0.77 0.07 0.02 0.10 13.07
    2085 11.40 0.67 0.77 0.07 0.02 0.10 13.03
    2090 11.43 0.67 0.76 0.06 0.02 0.10 13.04
    2095 11.58 0.65 0.74 0.06 0.01 0.10 13.15
    2100 11.76 0.64 0.72 0.06 0.01 0.10 13.29

    Table 9 Footnotes

    Table 9 footnote 1

    Retirement expenditures include expenditures related to post-retirement benefits for working beneficiaries.

    Return to table 9 footnote 1

    Table 9 footnote 2

    Disability expenditures include expenditures related to post-retirement disability benefits for disabled retirement beneficiaries.

    Return to table 9 footnote 2

    Table 9 footnote 3

    Plan operating expenses exclude CPPIB operating expenses, which are accounted for separately in the investment expenses assumption.

    Return to table 9 footnote 3

    5.4 Financial Projections with Legislated Contribution Rate

    5.4.1 Market Value of Assets as at 31 December 2021

    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 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 $544 billion as at 31 December 2021.

    5.4.2 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 2022 constant dollars, respectively. The projected financial state of the base CPP using the minimum contribution rate of 9.56% for years 2025-2033, and 9.54% for 2034 and thereafter is discussed in the next section 5.5.

    Base CPP assets are projected to decrease in 2022 due to the market downturn observed in the first half of 2022 and assumed continued volatility for the remainder of 2022. They are then projected to continuously increase throughout the projection horizon. As shown in Table 10, the base CPP assets as at 31 December 2021 are $544 billion. As shown in Table 11, base CPP assets are projected to increase to $791 billion in 2030, $2.2 trillion in 2050 and $17 trillion by 2100.

    Despite projected volatility and lower returns in the first few years of the projections, the investment experience over the 2018-2021 period leads to projected base CPP assets that are higher than projected under the previous triennial actuarial report (the 30th CPP Actuarial Report as at 31 December 2018).

    Table 10 Historical Results - Base CPP
    Year PayGo Rate (%) Table 10 Footnote 1 Contribution Rate (%) Contributions ($ million) Expenditures ($ million) Net Cash Flows ($ million) Net Investment Income Table 10 Footnote 2 ($ million) Assets at 31 Dec. Table 10 Footnote 3 ($ million) Yield/Return Table 10 Footnote 2 (%) 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 7.6
    2019 9.27 9.9 52,166 48,844 3,322 47,041 422,063 12.4 8.2
    2020 9.62 9.9 52,833 51,322 1,511 51,320 474,894 12.0 9.0
    2021 9.46 9.9 55,535 53,045 2,490 66,341 543,725 13.8 9.7

    Table 10 Footnotes

    Table 10 footnote 1

    PayGo rates for years 2020 and 2021 were affected by the impact of COVID-19 on contributions and expenditures.

    Return to table 10 footnote 1

    Table 10 footnote 2

    Rates of return and Investment Income are net of all investment expenses of the CPPIB for the year 1999 and thereafter.

    Return to table 10 footnote 2

    Table 10 footnote 3

    Results for years 1966 to 1998 are on a cost basis, while results for years 1999 to 2021 are presented on a market value basis. If assets were shown at market value at the end of 1998, total assets would be $44,864 million instead of $36,535 million.

    Return to table 10 footnote 3

    Table 11 Financial Projections - Base CPP, 9.9% Legislated Contribution Rate
    Year PayGo Rate (%) Contribution Rate (%) Contributory Earnings ($ million) Contributions ($ million) Expenditures ($ million) Net Cash Flows ($ million) Net Investment Income Table 11 Footnote 1 ($ million) Assets at 31 Dec. ($ million) Net Rate of Return Footnote 1 (%) Assets/ Expenditures Ratio
    2022 9.08 9.9 616,668 61,050 56,005 5,045 (49,808) 498,962 (9.02) 8.1
    2023 9.49 9.9 648,785 64,230 61,592 2,638 29,938 531,538 5.91 8.1
    2024 9.62 9.9 680,189 67,339 65,425 1,914 31,994 565,445 5.93 8.2
    2025 9.76 9.9 710,485 70,338 69,330 1,008 33,776 600,229 5.90 8.2
    2026 9.92 9.9 739,632 73,224 73,356 (132) 35,854 635,950 5.90 8.2
    2027 10.05 9.9 769,230 76,154 77,273 (1,119) 38,111 672,942 5.93 8.3
    2028 10.15 9.9 800,229 79,223 81,237 (2,015) 39,924 710,851 5.87 8.3
    2029 10.25 9.9 832,186 82,386 85,318 (2,931) 42,343 750,262 5.90 8.4
    2030 10.35 9.9 864,552 85,591 89,472 (3,882) 44,822 791,202 5.92 8.4
    2031 10.43 9.9 898,197 88,922 93,670 (4,748) 46,868 833,322 5.87 8.5
    2032 10.49 9.9 933,295 92,396 97,877 (5,480) 49,567 877,408 5.90 8.6
    2033 10.53 9.9 969,910 96,021 102,118 (6,097) 53,397 924,709 6.04 8.7
    2034 10.56 9.9 1,007,917 99,784 106,436 (6,652) 56,231 974,287 6.04 8.8
    2035 10.58 9.9 1,047,401 103,693 110,853 (7,161) 59,198 1,026,325 6.03 8.9
    2036 10.63 9.9 1,085,658 107,480 115,370 (7,890) 62,310 1,080,745 6.03 9.0
    2037 10.66 9.9 1,125,623 111,437 119,977 (8,540) 65,575 1,137,780 6.03 9.1
    2038 10.68 9.9 1,167,224 115,555 124,669 (9,114) 69,002 1,197,668 6.03 9.2
    2039 10.70 9.9 1,210,287 119,818 129,478 (9,660) 72,592 1,260,600 6.02 9.4
    2040 10.72 9.9 1,254,280 124,174 134,439 (10,266) 76,391 1,326,725 6.02 9.5
    2041 10.74 9.9 1,299,423 128,643 139,577 (10,934) 80,378 1,396,170 6.02 9.6
    2042 10.76 9.9 1,346,635 133,317 144,889 (11,572) 84,570 1,469,168 6.02 9.8
    2043 10.77 9.9 1,396,342 138,238 150,409 (12,171) 88,998 1,545,994 6.02 9.9
    2044 10.79 9.9 1,446,964 143,249 156,167 (12,918) 93,638 1,626,714 6.02 10.0
    2045 10.82 9.9 1,499,428 148,443 162,197 (13,753) 98,509 1,711,470 6.02 10.2
    2046 10.85 9.9 1,553,431 153,790 168,516 (14,727) 103,620 1,800,363 6.02 10.3
    2047 10.89 9.9 1,608,638 159,255 175,143 (15,888) 108,975 1,893,450 6.02 10.4
    2048 10.93 9.9 1,666,000 164,934 182,108 (17,174) 114,581 1,990,858 6.02 10.5
    2049 10.98 9.9 1,724,766 170,752 189,435 (18,683) 120,443 2,092,618 6.02 10.6
    2050 11.05 9.9 1,784,712 176,687 197,151 (20,464) 126,560 2,198,713 6.02 10.7
    2051 11.12 9.9 1,846,030 182,757 205,269 (22,512) 132,931 2,309,132 6.02 10.8
    2052 11.19 9.9 1,909,767 189,067 213,791 (24,724) 139,560 2,423,968 6.02 10.9
    2053 11.28 9.9 1,974,826 195,508 222,722 (27,214) 146,449 2,543,202 6.02 11.0
    2054 11.37 9.9 2,040,986 202,058 232,103 (30,046) 153,593 2,666,750 6.02 11.0
    2055 11.48 9.9 2,108,096 208,701 241,987 (33,286) 160,987 2,794,451 6.02 11.1
    2060 12.06 9.9 2,474,655 244,991 298,489 (53,498) 201,589 3,494,394 6.02 11.2
    2065 12.60 9.9 2,903,032 287,400 365,685 (78,285) 248,302 4,298,794 6.02 11.3
    2070 12.91 9.9 3,421,988 338,777 441,724 (102,947) 302,454 5,233,283 6.02 11.4
    2075 13.04 9.9 4,051,490 401,097 528,466 (127,369) 366,783 6,345,944 6.02 11.6
    2080 13.07 9.9 4,803,930 475,589 628,102 (152,513) 444,660 7,695,451 6.02 11.8
    2085 13.03 9.9 5,697,857 564,088 742,661 (178,573) 540,461 9,358,546 6.02 12.2
    2090 13.04 9.9 6,744,599 667,715 879,465 (211,750) 659,172 11,419,461 6.02 12.5
    2095 13.15 9.9 7,958,860 787,927 1,046,375 (258,447) 804,984 13,948,338 6.02 12.9
    2100 13.29 9.9 9,379,076 928,529 1,246,767 (318,238) 982,413 17,024,497 6.02 13.2

    Table 11 Footnotes

    Table 11 footnote 1

    Rates of Return and Investment Income are net of all investment expenses.

    Return to table 11 footnote 1

    Table 12 Financial Projections – Base CPP, 9.9% Legislated Contribution Rate Table 12 Footnote 1
    (millions of 2022 constant dollars)
    Year PayGo Rate (%) Contribution Rate (%) Contributory Earnings ($ million) Contributions ($ million) Expenditures ($ million) Net Cash Flows ($ million) Net Investment Income Table 12 Footnote 2 ($ million) Assets at 31 Dec. ($ million)
    2022 9.08 9.9 616,668 61,050 56,005 5,045 (49,808) 498,962
    2023 9.49 9.9 629,888 62,359 59,798 2,561 29,066 516,056
    2024 9.62 9.9 644,270 63,783 61,970 1,813 30,304 535,587
    2025 9.76 9.9 658,158 65,158 64,224 934 31,288 556,023
    2026 9.92 9.9 671,724 66,501 66,621 (120) 32,562 577,562
    2027 10.05 9.9 684,907 67,806 68,803 (997) 33,933 599,174
    2028 10.15 9.9 698,537 69,155 70,914 (1,759) 34,850 620,517
    2029 10.25 9.9 712,189 70,507 73,015 (2,509) 36,237 642,078
    2030 10.35 9.9 725,380 71,813 75,069 (3,257) 37,607 663,838
    2031 10.43 9.9 738,833 73,144 77,050 (3,906) 38,552 685,468
    2032 10.49 9.9 752,651 74,512 78,932 (4,420) 39,973 707,581
    2033 10.53 9.9 766,842 75,917 80,738 (4,820) 42,218 731,104
    2034 10.56 9.9 781,266 77,345 82,502 (5,157) 43,586 755,198
    2035 10.58 9.9 795,952 78,799 84,241 (5,442) 44,987 779,935
    2036 10.63 9.9 808,848 80,076 85,954 (5,878) 46,423 805,187
    2037 10.66 9.9 822,179 81,396 87,634 (6,238) 47,897 831,059
    2038 10.68 9.9 835,848 82,749 89,275 (6,526) 49,412 857,649
    2039 10.70 9.9 849,692 84,119 90,901 (6,782) 50,964 885,015
    2040 10.72 9.9 863,311 85,468 92,534 (7,066) 52,579 913,175
    2041 10.74 9.9 876,846 86,808 94,186 (7,378) 54,239 942,130
    2042 10.76 9.9 890,887 88,198 95,853 (7,655) 55,948 971,950
    2043 10.77 9.9 905,658 89,660 97,554 (7,894) 57,723 1,002,722
    2044 10.79 9.9 920,089 91,089 99,303 (8,214) 59,542 1,034,388
    2045 10.82 9.9 934,755 92,541 101,115 (8,574) 61,411 1,066,944
    2046 10.85 9.9 949,432 93,994 102,995 (9,001) 63,331 1,100,353
    2047 10.89 9.9 963,896 95,426 104,946 (9,520) 65,298 1,134,555
    2048 10.93 9.9 978,694 96,891 106,979 (10,089) 67,311 1,169,531
    2049 10.98 9.9 993,349 98,342 109,102 (10,760) 69,367 1,205,206
    2050 11.05 9.9 1,007,719 99,764 111,319 (11,555) 71,461 1,241,480
    2051 11.12 9.9 1,021,904 101,168 113,631 (12,462) 73,587 1,278,262
    2052 11.19 9.9 1,036,457 102,609 116,027 (13,418) 75,741 1,315,521
    2053 11.28 9.9 1,050,751 104,024 118,504 (14,480) 77,921 1,353,168
    2054 11.37 9.9 1,064,659 105,401 121,074 (15,673) 80,120 1,391,082
    2055 11.48 9.9 1,078,104 106,732 123,755 (17,023) 82,331 1,429,114
    2060 12.06 9.9 1,146,263 113,480 138,261 (24,781) 93,376 1,618,607
    2065 12.60 9.9 1,217,925 120,575 153,418 (32,843) 104,172 1,803,497
    2070 12.91 9.9 1,300,308 128,731 167,849 (39,118) 114,928 1,988,575
    2075 13.04 9.9 1,394,382 138,044 181,880 (43,836) 126,234 2,184,053
    2080 13.07 9.9 1,497,486 148,251 195,793 (47,541) 138,610 2,398,834
    2085 13.03 9.9 1,608,706 159,262 209,679 (50,417) 152,591 2,642,249
    2090 13.04 9.9 1,724,728 170,748 224,897 (54,149) 168,563 2,920,183
    2095 13.15 9.9 1,843,378 182,494 242,354 (59,860) 186,445 3,230,621
    2100 13.29 9.9 1,967,536 194,786 261,546 (66,760) 206,090 3,571,388

    Table 12 Footnotes

    Table 12 footnote 1

    For a given year, the value in 2022 constant dollars is equal to the corresponding value in current dollars divided by the cumulative projected increases in prices since 2022.

    Return to table 12 footnote 1

    Table 12 footnote 2

    Investment Income is net of all investment expenses.

    Return to table 12 footnote 2

    Over the period 2022 to 2025, 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.

    Chart 1 shows historical and projected revenues and expenditures of the base CPP for the period 2000 to 2050 on a year 2022 constant dollar basis.

    Table 13 shows in more detail the sources of the revenues required to cover the expenditures, from which several observations can be made:

    • From 2026 onward, a portion of investment income is required to fund net cash outflows. It is project that in 2050, 16% of investment income is required to pay for expenditures.
    • Investment income, which is expected to represent 32% of revenues in 2023 is further projected to represent 42% of revenues in 2050. This clearly illustrates the importance of investment income as a source of revenues for the base Plan.
    Chart 1 Revenues and Expenditures - Base CPP, 9.9% legislated contribution rate (billions of 2022 constant dollars)

    Text description: Chart 1 Revenues and Expenditures - Base CPP, 9.9% legislated contribution rate (billions of 2022 constant dollars)
    Revenues and Expenditures - Base CPP, 9.9% legislated contribution rate
    (billions of 2022 constant dollars) (Historical)
    Year Contributions Net Investment Income Expenditures Total Revenues (Contrib. + Net Inv. Inc.)
    2000 19,977 4,446 19,683 24,423
    2001 22,469 3,154 20,515 25,623
    2002 24,955 187 21,666 25,142
    2003 27,454 6,769 22,716 34,223
    2004 28,459 6,475 23,833 34,934
    2005 29,539 11,083 24,976 40,622
    2006 31,000 14,300 26,080 45,300
    2007 33,621 3,269 27,691 36,890
    2008 36,053 -18,350 29,259 17,703
    2009 37,492 9,021 30,901 46,513
    2010 35,885 11,804 32,023 47,689
    2011 38,202 8,057 33,691 46,259
    2012 40,682 15,664 36,321 56,346
    2013 42,632 23,887 37,575 66,519
    2014 44,181 32,136 38,808 76,317
    2015 46,026 38,667 40,883 84,693
    2016 46,492 12,244 42,561 58,736
    2017 48,139 35,257 44,596 83,396
    2018 49,594 28,364 46,591 77,958
    2019 52,166 47,041 48,844 99,207
    2020 52,833 51,320 51,322 104,153
    2021 55,535 66,341 53,045 121,876
    Revenues and Expenditures - Base CPP, 9.9% legislated contribution rate
    (billions of 2022 constant dollars) (Forecast)
    Year Contributions Net Investment Income Expenditures Total Revenues (Contrib. + Net Inv. Inc.)
    2021 55,535 66,341 53,045 121,876
    2022 61,050 (49,808) 56,005 11,242
    2023 62,359 29,066 59,798 91,425
    2024 63,783 30,304 61,970 94,087
    2025 65,158 31,288 64,224 96,446
    2026 66,501 32,562 66,621 99,063
    2027 67,806 33,933 68,803 101,739
    2028 69,155 34,850 70,914 104,005
    2029 70,507 36,237 73,015 106,744
    2030 71,813 37,607 75,069 109,420
    2031 73,144 38,552 77,050 111,697
    2032 74,512 39,973 78,932 114,485
    2033 75,917 42,218 80,738 118,135
    2034 77,345 43,586 82,502 120,931
    2035 78,799 44,987 84,241 123,786
    2036 80,076 46,423 85,954 126,499
    2037 81,396 47,897 87,634 129,293
    2038 82,749 49,412 89,275 132,161
    2039 84,119 50,964 90,901 135,083
    2040 85,468 52,579 92,534 138,047
    2041 86,808 54,239 94,186 141,047
    2042 88,198 55,948 95,853 144,146
    2043 89,660 57,723 97,554 147,383
    2044 91,089 59,542 99,303 150,631
    2045 92,541 61,411 101,115 153,952
    2046 93,994 63,331 102,995 157,325
    2047 95,426 65,298 104,946 160,724
    2048 96,891 67,311 106,979 164,201
    2049 98,342 69,367 109,102 167,709
    2050 99,764 71,461 111,319 171,225
    Table 13 Sources of Revenues and Funding of Expenditures - Base CPP, 9.9% Legislated Contribution Rate
    ($ million)
    Year Contributions Net Investment Income Table 13 Footnote 1 Total Revenues Net Investment Income as % of Total Revenues (%) Expenditures Expenditures as % of Total Revenues (%) Net Cash Flows (Contributions less Expenditures) % of Net Investment Income Needed to Pay Expenditures (%)
    2022 61,050 (49,808) 11,242 (443.0) 56,005 498.2 5,045 0.0
    2023 64,230 29,938 94,168 31.8 61,592 65.4 2,638 0.0
    2024 67,339 31,994 99,332 32.2 65,425 65.9 1,914 0.0
    2025 70,338 33,776 104,114 32.4 69,330 66.6 1,008 0.0
    2026 73,224 35,854 109,077 32.9 73,356 67.3 (132) 0.4
    2027 76,154 38,111 114,264 33.4 77,273 67.6 (1,119) 2.9
    2028 79,223 39,924 119,146 33.5 81,237 68.2 (2,015) 5.0
    2029 82,386 42,343 124,729 33.9 85,318 68.4 (2,931) 6.9
    2030 85,591 44,822 130,413 34.4 89,472 68.6 (3,882) 8.7
    2031 88,922 46,868 135,789 34.5 93,670 69.0 (4,748) 10.1
    2032 92,396 49,567 141,963 34.9 97,877 68.9 (5,480) 11.1
    2033 96,021 53,397 149,418 35.7 102,118 68.3 (6,097) 11.4
    2034 99,784 56,231 156,014 36.0 106,436 68.2 (6,652) 11.8
    2035 103,693 59,198 162,891 36.3 110,853 68.1 (7,161) 12.1
    2036 107,480 62,310 169,791 36.7 115,370 67.9 (7,890) 12.7
    2037 111,437 65,575 177,012 37.0 119,977 67.8 (8,540) 13.0
    2038 115,555 69,002 184,557 37.4 124,669 67.6 (9,114) 13.2
    2039 119,818 72,592 192,410 37.7 129,478 67.3 (9,660) 13.3
    2040 124,174 76,391 200,564 38.1 134,439 67.0 (10,266) 13.4
    2041 128,643 80,378 209,021 38.5 139,577 66.8 (10,934) 13.6
    2042 133,317 84,570 217,887 38.8 144,889 66.5 (11,572) 13.7
    2043 138,238 88,998 227,235 39.2 150,409 66.2 (12,171) 13.7
    2044 143,249 93,638 236,888 39.5 156,167 65.9 (12,918) 13.8
    2045 148,443 98,509 246,952 39.9 162,197 65.7 (13,753) 14.0
    2046 153,790 103,620 257,409 40.3 168,516 65.5 (14,727) 14.2
    2047 159,255 108,975 268,230 40.6 175,143 65.3 (15,888) 14.6
    2048 164,934 114,581 279,515 41.0 182,108 65.2 (17,174) 15.0
    2049 170,752 120,443 291,195 41.4 189,435 65.1 (18,683) 15.5
    2050 176,687 126,560 303,246 41.7 197,151 65.0 (20,464) 16.2
    2051 182,757 132,931 315,688 42.1 205,269 65.0 (22,512) 16.9
    2052 189,067 139,560 328,627 42.5 213,791 65.1 (24,724) 17.7
    2053 195,508 146,449 341,956 42.8 222,722 65.1 (27,214) 18.6
    2054 202,058 153,593 355,651 43.2 232,103 65.3 (30,046) 19.6
    2055 208,701 160,987 369,688 43.5 241,987 65.5 (33,286) 20.7
    2060 244,991 201,589 446,580 45.1 298,489 66.8 (53,498) 26.5
    2065 287,400 248,302 535,702 46.4 365,685 68.3 (78,285) 31.5
    2070 338,777 302,454 641,230 47.2 441,724 68.9 (102,947) 34.0
    2075 401,097 366,783 767,880 47.8 528,466 68.8 (127,369) 34.7
    2080 475,589 444,660 920,249 48.3 628,102 68.3 (152,513) 34.3
    2085 564,088 540,461 1,104,549 48.9 742,661 67.2 (178,573) 33.0
    2090 667,715 659,172 1,326,887 49.7 879,465 66.3 (211,750) 32.1
    2095 787,927 804,984 1,592,911 50.5 1,046,375 65.7 (258,447) 32.1
    2100 928,529 982,413 1,910,942 51.4 1,246,767 65.2 (318,238) 32.4

    Table 13 Footnotes

    Table 13 footnote 1

    Investment income is net of all investment expenses.

    Return to table 13 footnote 1

    5.5 Financial Projections with Minimum Contribution Rate

    The results presented in Table 14 are based on the best-estimate assumptions, but use the MCR of 9.56% for 2025-2033 and 9.54% 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 increase slightly from 8.1 in 2025 to 8.4 in 2034 and to be the same fifty years later in 2084.

    In the case that the MCR, as determined by an actuarial report, exceeds the legislated rate, the insufficient rates provisions of the CPP statute would result in adjustments to the base CPP legislated contribution rate and possibly indexation of 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 31st 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 2022 and thereafter.

    Table 14 Financial Projections - Base CPP, Minimum Contribution Rate of 9.56% for 2025-2033, 9.54% for 2034+
    Year PayGo Rate (%) Contribution Rate (%) Contributory Earnings ($ million) Contributions ($ million) Expenditures ($ million) Net Cash Flows ($ million) Net Investment Income Table 14 Footnote 1 ($ million) Assets at 31 Dec. ($ million) Assets/ Expenditures Ratio
    2022 9.08 9.90 616,668 61,050 56,005 5,045 (49,808) 498,962 8.1
    2023 9.49 9.90 648,785 64,230 61,592 2,638 29,938 531,538 8.1
    2024 9.62 9.90 680,189 67,339 65,425 1,914 31,994 565,445 8.2
    2025 9.76 9.56 710,485 67,922 69,330 (1,408) 33,697 597,735 8.1
    2026 9.92 9.56 739,632 70,709 73,356 (2,647) 35,625 630,713 8.2
    2027 10.05 9.56 769,230 73,538 77,273 (3,735) 37,716 664,694 8.2
    2028 10.15 9.56 800,229 76,502 81,237 (4,735) 39,353 699,312 8.2
    2029 10.25 9.56 832,186 79,557 85,318 (5,761) 41,572 735,124 8.2
    2030 10.35 9.56 864,552 82,651 89,472 (6,821) 43,833 772,136 8.2
    2031 10.43 9.56 898,197 85,868 93,670 (7,802) 45,653 809,987 8.3
    2032 10.49 9.56 933,295 89,223 97,877 (8,654) 48,091 849,424 8.3
    2033 10.53 9.56 969,910 92,723 102,118 (9,394) 51,601 891,631 8.4
    2034 10.56 9.54 1,007,917 96,155 106,436 (10,281) 54,117 935,467 8.4
    2035 10.58 9.54 1,047,401 99,922 110,853 (10,931) 56,734 981,270 8.5
    2036 10.63 9.54 1,085,658 103,572 115,370 (11,798) 59,466 1,028,938 8.6
    2037 10.66 9.54 1,125,623 107,384 119,977 (12,592) 62,319 1,078,665 8.7
    2038 10.68 9.54 1,167,224 111,353 124,669 (13,316) 65,301 1,130,650 8.7
    2039 10.70 9.54 1,210,287 115,461 129,478 (14,017) 68,410 1,185,043 8.8
    2040 10.72 9.54 1,254,280 119,658 134,439 (14,781) 71,689 1,241,951 8.9
    2041 10.74 9.54 1,299,423 123,965 139,577 (15,612) 75,116 1,301,456 9.0
    2042 10.76 9.54 1,346,635 128,469 144,889 (16,420) 78,703 1,363,739 9.1
    2043 10.77 9.54 1,396,342 133,211 150,409 (17,198) 82,480 1,429,020 9.2
    2044 10.79 9.54 1,446,964 138,040 156,167 (18,127) 86,419 1,497,312 9.2
    2045 10.82 9.54 1,499,428 143,045 162,197 (19,151) 90,534 1,568,695 9.3
    2046 10.85 9.54 1,553,431 148,197 168,516 (20,319) 94,833 1,643,209 9.4
    2047 10.89 9.54 1,608,638 153,464 175,143 (21,679) 99,316 1,720,846 9.4
    2048 10.93 9.54 1,666,000 158,936 182,108 (23,171) 103,984 1,801,659 9.5
    2049 10.98 9.54 1,724,766 164,543 189,435 (24,892) 108,840 1,885,607 9.6
    2050 11.05 9.54 1,784,712 170,262 197,151 (26,889) 113,876 1,972,593 9.6
    2051 11.12 9.54 1,846,030 176,111 205,269 (29,158) 119,089 2,062,524 9.6
    2052 11.19 9.54 1,909,767 182,192 213,791 (31,599) 124,476 2,155,401 9.7
    2053 11.28 9.54 1,974,826 188,398 222,722 (34,324) 130,034 2,251,112 9.7
    2054 11.37 9.54 2,040,986 194,710 232,103 (37,393) 135,754 2,349,473 9.7
    2055 11.48 9.54 2,108,096 201,112 241,987 (40,875) 141,622 2,450,220 9.7
    2060 12.06 9.54 2,474,655 236,082 298,489 (62,407) 172,854 2,984,644 9.6
    2065 12.60 9.54 2,903,032 276,949 365,685 (88,736) 206,531 3,558,899 9.4
    2070 12.91 9.54 3,421,988 326,458 441,724 (115,266) 242,642 4,175,026 9.1
    2075 13.04 9.54 4,051,490 386,512 528,466 (141,954) 282,104 4,848,978 8.9
    2080 13.07 9.54 4,803,930 458,295 628,102 (169,807) 325,822 5,596,049 8.6
    2084 13.04 9.54 5,506,585 525,328 718,260 (192,931) 364,577 6,258,813 8.4
    2085 13.03 9.54 5,697,857 543,576 742,661 (199,085) 374,859 6,434,587 8.4
    2090 13.04 9.54 6,744,599 643,435 879,465 (236,030) 429,733 7,370,234 8.1
    2095 13.15 9.54 7,958,860 759,275 1,046,375 (287,099) 488,645 8,367,616 7.7
    2100 13.29 9.54 9,379,076 894,764 1,246,767 (352,003) 548,051 9,364,140 7.3

    Table 14 Footnotes

    Table 14 footnote 1

    Investment Income is net of all investment expenses.

    Return to table 14 footnote 1

    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 Table 15 Footnote 1 Steady-State Target Years Table 15 Footnote 2 Steady-State Target A/E Ratio Table 15 Footnote 3 Steady-State Contribution Rate Table 15 Footnote 4 Full Funding Rate Table 15 Footnote 5 Minimum Contribution Rate (MCR) Table 15 Footnote 6 Average PayGo Rate Over Target Years Period
    Prior to 2034 2034+ Prior to 2034 2034+
    2021 2034 and 2084 8.5 9.53% 0.03% 0.01% 9.56% 9.54% 11.9
    2024 2037 and 2087 8.8 9.54% 0.03% 0.01% 9.57% 9.55% 12.0
    2027 2040 and 2090 9.2 9.56% 0.02% 0.01% 9.58% 9.57% 12.2
    2030 2043 and 2093 9.6 9.60% N/A N/A Table 15 Footnote 7 N/A 9.60% 12.3
    2033 2046 and 2096 10.0 9.62% N/A N/A N/A 9.62% 12.5

    Table 15 Footnotes

    Table 15 footnote 1

    Reports are prepared as at 31 December of the valuation year.

    Return to table 15 footnote 1

    Table 15 footnote 2

    Target years refer to the beginning and end of the 50-year interval over which the steady-state contribution rate is determined. This rate is the lowest level rate that results in the assets/expenditures (A/E) ratio being the same in the two target years. For a given triennial review period of the Plan, the target years are 13 and 63 years after the valuation year. For this report, the valuation year is 2021 and thus the target years are 2034 and 2084.

    Return to table 15 footnote 2

    Table 15 footnote 3

    The steady-state target A/E ratio is the ratio obtained in the target years relating to the determination of the corresponding steady-state contribution rate. Where the ratios in the target years do not match exactly, the ratio presented pertains to the first target year.

    Return to table 15 footnote 3

    Table 15 footnote 4

    The steady-state contribution rate determined by a valuation is effective following the corresponding triennial review period. That is, for the current valuation as at 31 December 2021, the corresponding triennial review period is 2022-2024, and the steady-state rate applies from 2025 onward.

    Return to table 15 footnote 4

    Table 15 footnote 5

    The full funding rate, in respect of amendments to the Canada Pension Plan that introduce or increase benefits, is determined by a valuation such that the rate is effective following the corresponding triennial review period, or as at the effective date of the amendments if later. For the current valuation, the full funding rate is in respect of the amendments to the CPP statute under the Budget Implementation Act, 2018, No. 1, and the rate applies from 2025 onward. The full funding rates prior to 2034 shown in the table decrease over time due to rounding of the rates as per the regulations.

    Return to table 15 footnote 5

    Table 15 footnote 6

    The minimum contribution rate equals the sum of the rounded steady-state contribution rate and the rounded full funding rate.

    Return to table 15 footnote 6

    Table 15 footnote 7

    The full funding rate for the 2030 valuation applies for the year 2034 and onward and as such consists only of the permanent rate with the temporary rate no longer applying, since the amortization of benefit improvements under the Budget Implementation Act, 2018, No. 1 in respect of past Plan participation ends in 2033. The permanent full funding rate is determined to be 0.01%, which falls below the de minimis rate of 0.02% as set out in the regulations. As such, the rate is deemed to equal 0%, the benefit improvements of the Budget Implementation Act, 2018, No. 1 in respect of future Plan participation are financed entirely by the steady-state contribution rate, and the MCR for 2034 and onward equals the steady-state contribution rate.

    Return to table 15 footnote 7

    6 Results – Additional CPP

    6.1 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. Thereafter, a portion of investment income is required to make up the difference between contributions and expenditures.
    • 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 $11 billion at the end of 2021 to $200 billion by 2030, $1.4 trillion by 2050, and $12 trillion by 2100. The ratio of assets to the following year’s expenditures is projected to increase rapidly until 2026 and then decrease after that, reaching a level of about 26 by 2080 and remaining close to that level for the years following up to 2100.
    • Due to the financing approach of the additional Plan, as it matures, 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 50% of revenues (i.e. contributions and investment income) by 2040. This proportion is expected to continue increasing to about 61% of revenues by 2050 and 73% of revenues by 2100.
    • The first additional minimum contribution rate (FAMCR) applicable to pensionable earnings between the YBE and YMPE is 1.97% for the year 2025 and thereafter. The second additional minimum contribution rate (SAMCR) applicable to pensionable earnings above the YMPE up to the YAMPE is 7.88% for the year 2025 and thereafter.
    • Under the FAMCR and SAMCR of 1.97% and 7.88%, respectively, for 2025 and thereafter, the additional CPP open group assets represent 105% of its open group actuarial obligations as at 31 December 2021, and the ratio of invested assets to expenditures stabilizes at a value of 24 for the target years 2088 and 2098.
    • The AMCRs determined for this report are slightly lower than the AMCRs of 1.98% and 7.92% determined under the 30th CPP Actuarial Report due to experience over the period 2019 to 2021 as well as changes in assumptions.
    • 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 $9.3 billion in 2022 to $22 billion in 2030, $45 billion in 2050, and $237 billion by 2100.
    • The number of beneficiaries of additional retirement benefits is expected to increase from 0.8 million in 2022 to 1.7 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 $287 million in 2022 to $2.0 billion in 2030, $29 billion in 2050, and $446 billion by 2100.

    6.2 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 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 number of working beneficiaries who are contributors is derived from the number of retirement beneficiaries in pay.

    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 $9.3 billion in 2022 and then are projected to increase to about $13 billion in 2023 following the phase-in of the first additional contribution rate. The total additional contributions are projected to reach $18 billion by 2025, following the full phase-in of the additional CPP. Thereafter, total contributions to the additional Plan are projected to continue increasing, reaching $22 billion in 2030, $45 billion in 2050, and $237 billion by 2100.

    The projected YMPE and YAMPE are also shown, which are assumed to increase according to increases in the average weekly earnings 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 YMPE for 2023 reflects actual data up to April 2022. The YAMPE is projected to be $74,000 initially in 2024 and to then increase to $93,700 in 2030, $165,900 in 2050 and $693,300 by 2100.

    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)
    2022 1.5 nil- 64,900 nil- 15,235 616,668 nil- 9,250
    2023 2.0 nil- 66,900 nil- 15,534 648,785 nil- 12,976
    2024 2.0 8.0 69,200 74,000 15,751 680,189 24,669 15,577
    2025 2.0 8.0 71,200 81,100 15,959 710,485 49,554 18,174
    2026 2.0 8.0 73,300 83,500 16,114 739,632 51,488 18,912
    2027 2.0 8.0 75,400 85,900 16,264 769,230 53,505 19,665
    2028 2.0 8.0 77,600 88,400 16,419 800,229 55,539 20,448
    2029 2.0 8.0 79,900 91,000 16,566 832,186 57,535 21,247
    2030 2.0 8.0 82,200 93,700 16,708 864,552 60,075 22,097
    2035 2.0 8.0 94,800 108,000 17,464 1,047,401 71,771 26,690
    2040 2.0 8.0 109,400 124,700 18,057 1,254,280 85,518 31,927
    2045 2.0 8.0 126,200 143,800 18,686 1,499,428 101,433 38,103
    2050 2.0 8.0 145,600 165,900 19,263 1,784,712 120,070 45,300
    2055 2.0 8.0 168,000 191,500 19,687 2,108,096 141,425 53,476
    2060 2.0 8.0 193,800 220,900 19,992 2,474,655 165,270 62,715
    2065 2.0 8.0 223,600 254,900 20,289 2,903,032 193,282 73,523
    2070 2.0 8.0 258,000 294,100 20,699 3,421,988 226,782 86,582
    2080 2.0 8.0 343,300 391,300 21,805 4,803,930 316,670 121,412
    2090 2.0 8.0 457,000 520,900 22,975 6,744,599 442,520 170,294
    2100 2.0 8.0 608,200 693,300 23,973 9,379,076 614,085 236,708

    6.3 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 an estimated 819,000 in 2022 to 3.2 million in 2030, 8.9 million in 2050, and 15.3 million by 2100.

    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 are also 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 an estimated 85,000 in 2022 to 258,000 in 2030, 546,000 in 2050, and 698,000 by 2100. The total number of survivor beneficiaries receiving additional benefits is projected to increase from about 85,000 in 2022 to 362,000 in 2030, 1.6 million in 2050, and 2.5 million by 2100.

    Table 17 Beneficiaries - Additional CPP Table 17 Footnote 1
    (thousands)
    Year Retirement Table 17 Footnote 2, Table 17 Footnote 3, Table 17 Footnote 4 Disability Table 17 Footnote 5 Survivor Table 17 Footnote 4, Table 17 Footnote 5
    2022 819 85 85
    2023 1,088 107 111
    2024 1,373 130 140
    2025 1,674 153 171
    2026 1,979 177 205
    2027 2,274 199 240
    2028 2,571 220 278
    2029 2,870 239 319
    2030 3,174 258 362
    2035 4,737 351 628
    2040 6,219 432 952
    2045 7,607 500 1,296
    2050 8,926 546 1,601
    2055 10,125 571 1,833
    2060 11,189 575 1,996
    2065 12,042 571 2,120
    2070 12,652 585 2,232
    2080 13,551 623 2,446
    2090 14,266 674 2,554
    2100 15,260 698 2,545

    Table 17 Footnotes

    Table 17 footnote 1

    Numbers of beneficiaries by sex in Table 18 may not sum to total numbers of beneficiaries shown in Table 17 due to rounding.

    Return to table 17 footnote 1

    Table 17 footnote 2

    The number given for retirement beneficiaries includes working beneficiaries.

    Return to table 17 footnote 2

    Table 17 footnote 3

    The number given for retirement beneficiaries does not take into account that the retirement pension (base and additional benefits) can be shared between spouses.

    Return to table 17 footnote 3

    Table 17 footnote 4

    A beneficiary who receives concurrently a retirement and a survivor’s benefit is counted in each category.

    Return to table 17 footnote 4

    Table 17 footnote 5

    A beneficiary who receives concurrently a disability and survivor’s benefit is counted in each category.

    Return to table 17 footnote 5

    Table 18 Beneficiaries by Sex – Additional CPP Table 18 Footnote 1(thousands)
     Year Males Females
    Retirement Table 18 Footnote 2, Table 18 Footnote 3, Table 18 Footnote 4 Disability Table 18 Footnote 5 Survivor Table 18 Footnote 4, Table 18 Footnote 5 Retirement Table 18 Footnote 2, Table 18 Footnote 3, Table 18 Footnote 4 Disability Table 18 Footnote 5 Survivor Table 18 Footnote 4, Table 18 Footnote 5
    2022 427 41 27 392 44 58
    2023 566 51 36 522 55 75
    2024 712 62 45 661 68 95
    2025 866 73 55 809 81 116
    2026 1,020 83 66 960 94 139
    2027 1,168 93 77 1,106 106 163
    2028 1,316 102 89 1,255 118 189
    2029 1,464 111 101 1,406 129 217
    2030 1,613 118 114 1,561 140 248
    2035 2,351 155 191 2,386 195 437
    2040 3,021 188 272 3,198 244 680
    2045 3,629 217 344 3,978 284 952
    2050 4,205 236 398 4,720 310 1,203
    2055 4,740 246 437 5,385 325 1,396
    2060 5,234 246 464 5,955 329 1,532
    2065 5,636 242 488 6,407 329 1,632
    2070 5,909 248 509 6,743 337 1,723
    2080 6,296 265 537 7,255 358 1,909
    2090 6,610 287 540 7,655 387 2,014
    2100 7,090 297 536 8,170 401 2,009

    Table 18 Footnotes

    Table 18 footnote 1

    Numbers of beneficiaries by sex in Table 18 may not sum to total numbers of beneficiaries shown in Table 17 due to rounding.

    Return to Table 18 1

    Table 18 footnote 2

    The number given for retirement beneficiaries includes working beneficiaries.

    Return to Table 18 2

    Table 18 footnote 3

    The number given for retirement beneficiaries does not take into account that the retirement pension (base and additional benefits) can be shared between spouses.

    Return to Table 18 3

    Table 18 footnote 4

    A beneficiary who receives concurrently a retirement and a survivor’s benefit is counted in each category.

    Return to Table 18 4

    Table 18 footnote 5

    A beneficiary who receives concurrently a disability and survivor’s benefit is counted in each category.

    Return to Table 18 5

    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. As higher additional benefits become payable to a greater number of beneficiaries, projected additional expenditures will increase to reach $2.0 billion in 2030, $29 billion in 2050, and $446 billion by 2100. Table 20 presents the same information but in 2022 constant dollars.

    Table 19 Expenditures - Additional CPP
    ($ million)
    Year Retirement Table 19 Footnote 1 Disability  Survivor Operating Expenses Table 19 Footnote 2 Total
    2022 60 2 1 224 287
    2023 119 5 2 252 377
    2024 209 10 3 279 502
    2025 325 18 5 291 640
    2026 473 29 8 302 813
    2027 659 44 13 313 1,030
    2028 890 63 18 325 1,297
    2029 1,166 86 25 337 1,615
    2030 1,485 113 34 349 1,982
    2031 1,853 143 45 362 2,403
    2032 2,276 178 58 375 2,888
    2033 2,765 217 73 389 3,444
    2034 3,324 261 92 403 4,080
    2035 3,951 310 114 418 4,792
    2036 4,646 362 139 432 5,580
    2037 5,413 420 168 447 6,448
    2038 6,254 482 201 463 7,400
    2039 7,178 550 240 479 8,446
    2040 8,196 623 283 496 9,598
    2041 9,319 701 333 513 10,866
    2042 10,555 784 388 531 12,258
    2043 11,913 872 451 550 13,786
    2044 13,407 965 521 570 15,463
    2045 15,051 1,062 601 590 17,303
    2046 16,857 1,163 689 610 19,319
    2047 18,836 1,267 786 632 21,521
    2048 20,999 1,374 895 654 23,922
    2049 23,358 1,486 1,015 677 26,535
    2050 25,924 1,600 1,146 700 29,370
    2051 28,713 1,715 1,291 723 32,442
    2052 31,728 1,832 1,448 748 35,756
    2053 34,977 1,949 1,620 772 39,318
    2054 38,477 2,066 1,806 798 43,147
    2055 42,250 2,180 2,008 823 47,261
    2060 65,031 2,692 3,265 962 71,950
    2065 92,923 3,111 5,000 1,124 102,158
    2070 123,272 3,647 7,294 1,317 135,530
    2075 156,308 4,349 10,202 1,555 172,414
    2080 192,714 5,191 13,702 1,839 213,446
    2085 232,804 6,267 17,642 2,176 258,889
    2090 279,137 7,529 21,786 2,570 311,022
    2095 335,014 8,842 25,964 3,029 372,848
    2100 401,761 10,353 30,283 3,563 445,961

    Table 19 Footnotes

    Table 19 footnote 1

    Retirement expenditures include expenditures related to post-retirement benefits for working beneficiaries.

    Return to table 19 footnote 1

    Table 19 footnote 2

    Plan operating expenses exclude CPPIB operating expenses, which are accounted for separately in the investment expenses assumption.

    Return to table 19 footnote 2

    Table 20 Expenditures – Additional CPP Table 20 Footnote 1
    (millions of 2022 constant dollars)
    Year Retirement Table 20 Footnote 2 Disability Survivor Operating Expenses Table 20 Footnote 3 Total
    2022 60 2 1 224 287
    2023 116 5 2 245 366
    2024 198 9 3 264 475
    2025 301 17 5 270 593
    2026 430 26 7 274 738
    2027 587 39 12 279 917
    2028 777 55 16 284 1,132
    2029 998 74 21 288 1,382
    2030 1,246 95 29 293 1,663
    2031 1,524 118 37 298 1,977
    2032 1,835 144 47 302 2,329
    2033 2,186 172 58 308 2,723
    2034 2,577 202 71 312 3,163
    2035 3,002 236 87 318 3,642
    2036 3,461 270 104 322 4,157
    2037 3,954 307 123 326 4,710
    2038 4,478 345 144 332 5,299
    2039 5,039 386 168 336 5,930
    2040 5,641 429 195 341 6,606
    2041 6,288 473 225 346 7,332
    2042 6,983 519 257 351 8,109
    2043 7,727 566 293 357 8,942
    2044 8,525 614 331 362 9,833
    2045 9,383 662 375 368 10,787
    2046 10,303 711 421 373 11,807
    2047 11,287 759 471 379 12,895
    2048 12,336 807 526 384 14,053
    2049 13,453 856 585 390 15,282
    2050 14,638 903 647 395 16,583
    2051 15,895 949 715 400 17,959
    2052 17,219 994 786 406 19,405
    2053 18,610 1,037 862 411 20,920
    2054 20,071 1,078 942 416 22,507
    2055 21,607 1,115 1,027 421 24,170
    2060 30,122 1,247 1,512 446 33,327
    2065 38,984 1,305 2,098 472 42,859
    2070 46,842 1,386 2,772 500 51,500
    2075 53,796 1,497 3,511 535 59,339
    2080 60,073 1,618 4,271 573 66,536
    2085 65,729 1,769 4,981 614 73,094
    2090 71,381 1,925 5,571 657 79,534
    2095 77,594 2,048 6,014 702 86,357
    2100 84,281 2,172 6,353 747 93,553

    Table 20 Footnotes

    Table 20 footnote 1

    For a given year, the value in 2022 constant dollars is equal to the corresponding value in current dollars divided by the cumulative projected increases in prices since 2022.

    Return to table 20 footnote 1

    Table 20 footnote 2

    Retirement expenditures include expenditures related to post-retirement benefits for working beneficiaries.

    Return to table 20 footnote 2

    Table 20 footnote 3

    Plan operating expenses exclude CPPIB operating expenses, which are accounted for separately in the investment expenses assumption.

    Return to table 20 footnote 3

    6.4 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 2022 constant dollars, respectively. Historical results up to 31 December 2021 are also shown. The projected financial state of the additional CPP using the FAMCR and SAMCR of 1.97% and 7.88%, respectively is discussed in the next section 6.5.

    The market value of additional CPP assets is $11 billion as at 31 December 2021. Additional CPP assets are projected to decrease in 2022 due to the market downturn observed in the first half of 2022 and assumed continued volatility for the remainder of 2022.

    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 therefore projected to grow rapidly, from $11 billion at the end of 2021 to $200 billion by 2030, $1.4 trillion by 2050, and $12 trillion by 2100.

    In comparison with Table 11, additional CPP assets are projected to be 62% of base CPP assets by 2050, and this percentage is expected to increase to 70% by 2100.

    Table 21 Historical Results and Financial Projections - Additional CPP, 2.0%, 8.0% Legislated First and Second Additional Contribution Rates
    Year First / Second Additional Contribution Rates Table 21 Footnote 1 (%) First Additional Contributory Earnings ($ million) Second Additional Contributory Earnings ($ million) Contributions ($ million) Expenditures ($ million) Net Cash Flows ($ million) Net Investment Income Table 21 Footnote 2 ($ million) Assets at 31 Dec. ($ million) Net Rate of Return Table 21 Footnote 2 (%) Assets/ Expenditures Ratio 
    Historical Results:
    2019 0.3 533,626 0 1,601 130 1,471 62 1,533 5.61 8.1
    2020 0.6 532,930 0 3,198 189 3,009 370 4,912 10.84 24.5
    2021 1.0 568,840 0 5,688 201 5,488 645 11,045 4.75 38.5
    Projections:
    2022 1.5 616,668 0 9,250 287 8,963 (1,249) 18,758 (7.72) 49.7
    2023 2.0 648,785 0 12,976 377 12,598 1,256 32,612 4.87 65.0
    2024 2.0 / 8.0 680,189 24,669 15,577 502 15,076 2,042 49,730 4.98 77.8
    2025 2.0 / 8.0 710,485 49,554 18,174 640 17,534 3,011 70,275 5.06 86.5
    2026 2.0 / 8.0 739,632 51,488 18,912 813 18,099 4,131 92,505 5.14 89.8
    2027 2.0 / 8.0 769,230 53,505 19,665 1,030 18,635 5,337 116,477 5.19 89.8
    2028 2.0 / 8.0 800,229 55,539 20,448 1,297 19,151 6,601 142,229 5.19 88.0
    2029 2.0 / 8.0 832,186 57,535 21,247 1,615 19,631 8,024 169,884 5.24 85.7
    2030 2.0 / 8.0 864,552 60,075 22,097 1,982 20,115 9,564 199,564 5.28 83.0
    2031 2.0 / 8.0 898,197 62,116 22,933 2,403 20,530 11,154 231,248 5.28 80.1
    2032 2.0 / 8.0 933,295 64,289 23,809 2,888 20,921 12,944 265,113 5.32 77.0
    2033 2.0 / 8.0 969,910 66,948 24,754 3,444 21,310 15,586 302,008 5.62 74.0
    2034 2.0 / 8.0 1,007,917 69,114 25,687 4,080 21,608 17,673 341,289 5.62 71.2
    2035 2.0 / 8.0 1,047,401 71,771 26,690 4,792 21,898 19,894 383,080 5.62 68.7
    2036 2.0 / 8.0 1,085,658 74,256 27,654 5,580 22,074 22,253 427,407 5.62 66.3
    2037 2.0 / 8.0 1,125,623 76,918 28,666 6,448 22,218 24,755 474,379 5.62 64.1
    2038 2.0 / 8.0 1,167,224 79,614 29,714 7,400 22,313 27,403 524,096 5.62 62.0
    2039 2.0 / 8.0 1,210,287 82,306 30,790 8,446 22,344 30,205 576,645 5.62 60.1
    2040 2.0 / 8.0 1,254,280 85,518 31,927 9,598 22,329 33,165 632,139 5.62 58.2
    2041 2.0 / 8.0 1,299,423 88,221 33,046 10,866 22,180 36,287 690,606 5.62 56.3
    2042 2.0 / 8.0 1,346,635 91,652 34,265 12,258 22,007 39,577 752,190 5.62 54.6
    2043 2.0 / 8.0 1,396,342 94,507 35,487 13,786 21,701 43,038 816,929 5.62 52.8
    2044 2.0 / 8.0 1,446,964 98,023 36,781 15,463 21,318 46,675 884,922 5.62 51.1
    2045 2.0 / 8.0 1,499,428 101,433 38,103 17,303 20,800 50,491 956,213 5.62 49.5
    2046 2.0 / 8.0 1,553,431 104,868 39,458 19,319 20,139 54,490 1,030,842 5.62 47.9
    2047 2.0 / 8.0 1,608,638 108,996 40,892 21,521 19,371 58,674 1,108,886 5.62 46.4
    2048 2.0 / 8.0 1,666,000 112,501 42,320 23,922 18,398 63,044 1,190,329 5.62 44.9
    2049 2.0 / 8.0 1,724,766 116,552 43,819 26,535 17,285 67,603 1,275,216 5.62 43.4
    2050 2.0 / 8.0 1,784,712 120,070 45,300 29,370 15,930 72,349 1,363,494 5.62 42.0
    2051 2.0 / 8.0 1,846,030 124,142 46,852 32,442 14,410 77,281 1,455,185 5.62 40.7
    2052 2.0 / 8.0 1,909,767 128,148 48,447 35,756 12,692 82,401 1,550,278 5.62 39.4
    2053 2.0 / 8.0 1,974,826 132,729 50,115 39,318 10,797 87,708 1,648,783 5.62 38.2
    2054 2.0 / 8.0 2,040,986 136,795 51,763 43,147 8,617 93,199 1,750,598 5.62 37.0
    2055 2.0 / 8.0 2,108,096 141,425 53,476 47,261 6,215 98,871 1,855,685 5.62 35.9
    2060 2.0 / 8.0 2,474,655 165,270 62,715 71,950 (9,235) 129,839 2,428,147 5.62 31.3
    2065 2.0 / 8.0 2,903,032 193,282 73,523 102,158 (28,635) 165,027 3,077,591 5.62 28.3
    2070 2.0 / 8.0 3,421,988 226,782 86,582 135,530 (48,948) 205,013 3,816,454 5.62 26.8
    2075 2.0 / 8.0 4,051,490 267,639 102,441 172,414 (69,973) 251,121 4,669,652 5.62 25.9
    2080 2.0 / 8.0 4,803,930 316,670 121,412 213,446 (92,034) 304,991 5,667,826 5.62 25.5
    2085 2.0 / 8.0 5,697,857 374,669 143,931 258,889 (114,958) 368,765 6,851,257 5.62 25.5
    2090 2.0 / 8.0 6,744,599 442,520 170,294 311,022 (140,728) 445,078 8,268,331 5.62 25.6
    2095 2.0 / 8.0 7,958,860 522,020 200,939 372,848 (171,909) 536,555 9,966,936 5.62 25.8
    2100 2.0 / 8.0 9,379,076 614,085 236,708 445,961 (209,252) 646,104 12,001,190 5.62 26.0

    Table 21 Footnotes

    Table 21 footnote 1

    The legislated second additional contribution rate is applicable from the year 2024 onward.

    Return to table 21 footnote 1

    Table 21 footnote 2

    Rates of Return and Investment Income are net of all investment expenses.

    Return to table 21 footnote 2

    Table 22 Financial Projections - Additional CPP, 2.0%, 8.0% Legislated First and Second Additional Contribution Rates (millions of 2022 constant dollars) Table 22 Footnote 1
    Year First / Second Additional Contribution Rates Table 22 Footnote 2 (%) First Additional Contributory Earnings ($ million) Second Additional Contributory Earnings ($ million) Contributions ($ million) Expenditures ($ million) Net Cash Flows ($ million) Net Investment Income Table 22 Footnote 3 ($ million) Assets at 31 Dec. ($ million)
    2022 1.5 616,668 0 9,250 287 8,963 (1,249) 18,758
    2023 2.0 629,888 0 12,598 366 12,231 1,219 31,662
    2024 2.0 / 8.0 644,270 23,366 14,755 475 14,280 1,934 47,104
    2025 2.0 / 8.0 658,158 45,904 16,836 592 16,243 2,789 65,099
    2026 2.0 / 8.0 671,724 46,761 17,175 738 16,437 3,752 84,012
    2027 2.0 / 8.0 684,907 47,640 17,509 917 16,592 4,752 103,709
    2028 2.0 / 8.0 698,537 48,481 17,849 1,132 16,717 5,762 124,155
    2029 2.0 / 8.0 712,189 49,239 18,183 1,383 16,800 6,867 145,388
    2030 2.0 / 8.0 725,380 50,404 18,540 1,663 16,877 8,025 167,439
    2031 2.0 / 8.0 738,833 51,095 18,864 1,977 16,888 9,175 190,218
    2032 2.0 / 8.0 752,651 51,845 19,201 2,329 16,872 10,438 213,799
    2033 2.0 / 8.0 766,842 52,931 19,571 2,723 16,848 12,323 238,777
    2034 2.0 / 8.0 781,266 53,573 19,911 3,163 16,749 13,699 264,543
    2035 2.0 / 8.0 795,952 54,541 20,282 3,642 16,641 15,118 291,114
    2036 2.0 / 8.0 808,848 55,323 20,603 4,157 16,446 16,579 318,431
    2037 2.0 / 8.0 822,179 56,183 20,938 4,710 16,228 18,081 346,497
    2038 2.0 / 8.0 835,848 57,011 21,278 5,299 15,978 19,624 375,305
    2039 2.0 / 8.0 849,692 57,783 21,617 5,930 15,687 21,206 404,838
    2040 2.0 / 8.0 863,311 58,861 21,975 6,607 15,369 22,827 435,096
    2041 2.0 / 8.0 876,846 59,531 22,299 7,332 14,967 24,487 466,019
    2042 2.0 / 8.0 890,887 60,634 22,668 8,110 14,559 26,183 497,623
    2043 2.0 / 8.0 905,658 61,296 23,017 8,941 14,075 27,914 529,855
    2044 2.0 / 8.0 920,089 62,330 23,388 9,833 13,556 29,679 562,700
    2045 2.0 / 8.0 934,755 63,234 23,754 10,787 12,967 31,477 596,111
    2046 2.0 / 8.0 949,432 64,094 24,116 11,808 12,309 33,303 630,034
    2047 2.0 / 8.0 963,896 65,310 24,503 12,896 11,607 35,157 664,445
    2048 2.0 / 8.0 978,694 66,089 24,861 14,053 10,808 37,035 699,260
    2049 2.0 / 8.0 993,349 67,126 25,237 15,282 9,955 38,935 734,438
    2050 2.0 / 8.0 1,007,719 67,796 25,578 16,584 8,994 40,851 769,883
    2051 2.0 / 8.0 1,021,904 68,721 25,936 17,959 7,977 42,780 805,544
    2052 2.0 / 8.0 1,036,457 69,548 26,293 19,405 6,888 44,720 841,357
    2053 2.0 / 8.0 1,050,751 70,621 26,665 20,920 5,745 46,667 877,272
    2054 2.0 / 8.0 1,064,659 71,358 27,002 22,507 4,495 48,616 913,182
    2055 2.0 / 8.0 1,078,104 72,326 27,348 24,170 3,178 50,564 949,018
    2060 2.0 / 8.0 1,146,263 76,553 29,050 33,327 (4,278) 60,142 1,124,720
    2065 2.0 / 8.0 1,217,925 81,089 30,846 42,859 (12,013) 69,235 1,291,159
    2070 2.0 / 8.0 1,300,308 86,174 32,900 51,500 (18,599) 77,902 1,450,200
    2075 2.0 / 8.0 1,394,382 92,112 35,257 59,339 (24,082) 86,427 1,607,132
    2080 2.0 / 8.0 1,497,486 98,713 37,847 66,536 (28,689) 95,072 1,766,781
    2085 2.0 / 8.0 1,608,706 105,782 40,637 73,094 (32,457) 104,115 1,934,352
    2090 2.0 / 8.0 1,724,728 113,161 43,547 79,534 (35,987) 113,815 2,114,376
    2095 2.0 / 8.0 1,843,378 120,907 46,540 86,357 (39,816) 124,273 2,308,475
    2100 2.0 / 8.0 1,967,536 128,822 49,657 93,553 (43,897) 135,539 2,517,602

    Table 22 Footnotes

    Table 22 footnote 1

    For a given year, the value in 2022 constant dollars is equal to the corresponding value in current dollars divided by the cumulative projected increases in prices since 2022.

    Return to table 22 footnote 1

    Table 22 footnote 2

    The legislated second additional contribution rate is applicable from the year 2024 onward.

    Return to table 22 footnote 2

    Table 22 footnote 3

    Investment Income is net of all investment expenses.

    Return to table 22 footnote 3

    Chart 2 shows projected revenues and expenditures of the additional CPP for the period 2022 to 2072 on a year 2022 constant dollar basis.

    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 2080, investment income is projected to represent about 72% 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.

    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 4% in 2022 to 10% in 2035. It continues to grow but at decreasing pace, and stabilizes at about 51% by 2086.

    Chart 2 Revenues and Expenditures - Additional CPP, 2.0%/8.0% legislated contribution rates (billions of 2022 constant dollars)

    Text description: Chart 2 Revenues and Expenditures - Additional CPP, 2.0%/8.0% legislated contribution rates (billions of 2022 constant dollars)
    Revenues and Expenditures - Additional CPP, 2.0%/8.0% legislated contribution rates
    (billions of 2022 constant dollars)
    Year Contributions Net Investment Income Expenditures Total Revenues (Contrib. + Net Inv. Inc.)
    2022 9,250 -1,249 287 8,001
    2023 12,598 1,219 366 13,817
    2024 14,755 1,934 475 16,689
    2025 16,836 2,789 592 19,625
    2026 17,175 3,752 738 20,927
    2027 17,509 4,752 917 22,261
    2028 17,849 5,762 1,132 23,612
    2029 18,183 6,867 1,383 25,050
    2030 18,540 8,025 1,663 26,565
    2031 18,864 9,175 1,977 28,039
    2032 19,201 10,438 2,329 29,639
    2033 19,571 12,323 2,723 31,894
    2034 19,911 13,699 3,163 33,610
    2035 20,282 15,118 3,642 35,400
    2036 20,603 16,579 4,157 37,182
    2037 20,938 18,081 4,710 39,019
    2038 21,278 19,624 5,299 40,901
    2039 21,617 21,206 5,930 42,822
    2040 21,975 22,827 6,607 44,803
    2041 22,299 24,487 7,332 46,786
    2042 22,668 26,183 8,110 48,851
    2043 23,017 27,914 8,941 50,931
    2044 23,388 29,679 9,833 53,068
    2045 23,754 31,477 10,787 55,230
    2046 24,116 33,303 11,808 57,419
    2047 24,503 35,157 12,896 59,660
    2048 24,861 37,035 14,053 61,896
    2049 25,237 38,935 15,282 64,172
    2050 25,578 40,851 16,584 66,429
    2051 25,936 42,780 17,959 68,716
    2052 26,293 44,720 19,405 71,013
    2053 26,665 46,667 20,920 73,332
    2054 27,002 48,616 22,507 75,618
    2055 27,348 50,564 24,170 77,912
    2056 27,691 52,506 25,902 80,196
    2057 28,033 54,437 27,691 82,470
    2058 28,373 56,356 29,529 84,729
    2059 28,706 58,258 31,410 86,964
    2060 29,050 60,142 33,327 89,191
    2061 29,393 62,004 35,266 91,397
    2062 29,745 63,843 37,202 93,588
    2063 30,100 65,661 39,119 95,761
    2064 30,474 67,458 41,006 97,932
    2065 30,846 69,235 42,859 100,080
    2066 31,225 70,994 44,677 102,219
    2067 31,621 72,737 46,447 104,359
    2068 32,045 74,468 48,166 106,513
    2069 32,454 76,189 49,848 108,643
    2070 32,900 77,902 51,500 110,802
    2071 33,338 79,610 53,120 112,948
    2072 33,805 81,314 54,710 115,119
    Table 23 Sources of Revenues - Additional CPP, 2.0%, 8.0% Legislated First and Second Additional Contribution Rates
    ($ million)
    Year Contributions Net Investment Income Table 23 Footnote 1 Total Revenues Net Investment Income as % of Revenues (%) Expenditures Expenditures as % of Revenues (%) Net Cash Flows (Contributions less Expenditures) % of Net Investment Income Needed to Pay Expenditures (%)
    2022 9,250 (1,249) 8,001 (15.6) 287 3.6 8,963 0.0
    2023 12,976 1,256 14,231 8.8 377 2.7 12,598 0.0
    2024 15,577 2,042 17,619 11.6 502 2.8 15,076 0.0
    2025 18,174 3,011 21,185 14.2 640 3.0 17,534 0.0
    2026 18,912 4,131 23,043 17.9 813 3.5 18,099 0.0
    2027 19,665 5,337 25,002 21.3 1,030 4.1 18,635 0.0
    2028 20,448 6,601 27,049 24.4 1,297 4.8 19,151 0.0
    2029 21,247 8,024 29,271 27.4 1,615 5.5 19,631 0.0
    2030 22,097 9,564 31,661 30.2 1,982 6.3 20,115 0.0
    2031 22,933 11,154 34,087 32.7 2,403 7.0 20,530 0.0
    2032 23,809 12,944 36,753 35.2 2,888 7.9 20,921 0.0
    2033 24,754 15,586 40,340 38.6 3,444 8.5 21,310 0.0
    2034 25,687 17,673 43,360 40.8 4,080 9.4 21,608 0.0
    2035 26,690 19,894 46,584 42.7 4,792 10.3 21,898 0.0
    2036 27,654 22,253 49,907 44.6 5,580 11.2 22,074 0.0
    2037 28,666 24,755 53,420 46.3 6,448 12.1 22,218 0.0
    2038 29,714 27,403 57,117 48.0 7,400 13.0 22,313 0.0
    2039 30,790 30,205 60,995 49.5 8,446 13.8 22,344 0.0
    2040 31,927 33,165 65,092 51.0 9,598 14.7 22,329 0.0
    2041 33,046 36,287 69,334 52.3 10,866 15.7 22,180 0.0
    2042 34,265 39,577 73,842 53.6 12,258 16.6 22,007 0.0
    2043 35,487 43,038 78,525 54.8 13,786 17.6 21,701 0.0
    2044 36,781 46,675 83,456 55.9 15,463 18.5 21,318 0.0
    2045 38,103 50,491 88,594 57.0 17,303 19.5 20,800 0.0
    2046 39,458 54,490 93,948 58.0 19,319 20.6 20,139 0.0
    2047 40,892 58,674 99,566 58.9 21,521 21.6 19,371 0.0
    2048 42,320 63,044 105,364 59.8 23,922 22.7 18,398 0.0
    2049 43,819 67,603 111,422 60.7 26,535 23.8 17,285 0.0
    2050 45,300 72,349 117,648 61.5 29,370 25.0 15,930 0.0
    2051 46,852 77,281 124,133 62.3 32,442 26.1 14,410 0.0
    2052 48,447 82,401 130,848 63.0 35,756 27.3 12,692 0.0
    2053 50,115 87,708 137,823 63.6 39,318 28.5 10,797 0.0
    2054 51,763 93,199 144,962 64.3 43,147 29.8 8,617 0.0
    2055 53,476 98,871 152,347 64.9 47,261 31.0 6,215 0.0
    2060 62,715 129,839 192,554 67.4 71,950 37.4 (9,235) 7.1
    2065 73,523 165,027 238,550 69.2 102,158 42.8 (28,635) 17.4
    2070 86,582 205,013 291,596 70.3 135,530 46.5 (48,948) 23.9
    2075 102,441 251,121 353,561 71.0 172,414 48.8 (69,973) 27.9
    2080 121,412 304,991 426,403 71.5 213,446 50.1 (92,034) 30.2
    2085 143,931 368,765 512,696 71.9 258,889 50.5 (114,958) 31.2
    2090 170,294 445,078 615,371 72.3 311,022 50.5 (140,728) 31.6
    2095 200,939 536,555 737,494 72.8 372,848 50.6 (171,909) 32.0
    2100 236,708 646,104 882,813 73.2 445,961 50.5 (209,252) 32.4

    Table 23 Footnotes

    Table 23 footnote 1

    Investment Income is net of all investment expenses.

    Return to table 23 footnote 1

    6.5 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 1.97% for 2025 and thereafter and SAMCR of 7.88% for 2025 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 105% of its open group actuarial obligations as at 31 December 2021, and the ratio of invested assets to expenditures stabilizes at a value of 24 for the target years 2088 and 2098.

    Table 25 shows the progression of the AMCRs 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 1.97% and 7.88%, 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 31st 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 1.97% / 7.88%
    Year  First / Second Additional Contribution Rates Table 24 Footnote 1 (%) First Additional Contributory Earnings ($ million) Second Additional Contributory Earnings ($ million) Contributions ($ million) Expenditures ($ million) Net Cash Flows ($ million) Net Investment Income Table 24 Footnote 2 ($ million) Assets at 31 Dec. ($ million) Assets/ Expenditures Ratio 
    2022 1.50 616,668 0 9,250 287 8,963 (1,249) 18,758 49.7
    2023 2.00 648,785 0 12,976 377 12,598 1,256 32,612 65.0
    2024 2.00 / 8.00 680,189 24,669 15,577 502 15,076 2,042 49,730 77.8
    2025 1.97 / 7.88 710,485 49,554 17,901 640 17,262 3,003 69,995 86.1
    2026 1.97 / 7.88 739,632 51,488 18,628 813 17,815 4,109 91,918 89.3
    2027 1.97 / 7.88 769,230 53,505 19,370 1,030 18,340 5,298 115,557 89.1
    2028 1.97 / 7.88 800,229 55,539 20,141 1,297 18,844 6,545 140,946 87.2
    2029 1.97 / 7.88 832,186 57,535 20,928 1,615 19,312 7,948 168,206 84.9
    2030 1.97 / 7.88 864,552 60,075 21,766 1,982 19,784 9,466 197,455 82.2
    2031 1.97 / 7.88 898,197 62,116 22,589 2,403 20,186 11,032 228,674 79.2
    2032 1.97 / 7.88 933,295 64,289 23,452 2,888 20,564 12,796 262,034 76.1
    2033 1.97 / 7.88 969,910 66,948 24,383 3,444 20,938 15,401 298,374 73.1
    2034 1.97 / 7.88 1,007,917 69,114 25,302 4,080 21,222 17,456 337,053 70.3
    2035 1.97 / 7.88 1,047,401 71,771 26,289 4,792 21,497 19,643 378,193 67.8
    2036 1.97 / 7.88 1,085,658 74,256 27,239 5,580 21,659 21,966 421,818 65.4
    2037 1.97 / 7.88 1,125,623 76,918 28,236 6,448 21,788 24,427 468,032 63.2
    2038 1.97 / 7.88 1,167,224 79,614 29,268 7,400 21,867 27,033 516,933 61.2
    2039 1.97 / 7.88 1,210,287 82,306 30,328 8,446 21,882 29,788 568,603 59.2
    2040 1.97 / 7.88 1,254,280 85,518 31,448 9,598 21,850 32,698 623,151 57.3
    2041 1.97 / 7.88 1,299,423 88,221 32,550 10,866 21,684 35,767 680,602 55.5
    2042 1.97 / 7.88 1,346,635 91,652 33,751 12,258 21,493 38,998 741,093 53.8
    2043 1.97 / 7.88 1,396,342 94,507 34,955 13,786 21,169 42,397 804,659 52.0
    2044 1.97 / 7.88 1,446,964 98,023 36,229 15,463 20,766 45,968 871,393 50.4
    2045 1.97 / 7.88 1,499,428 101,433 37,532 17,303 20,229 49,713 941,335 48.7
    2046 1.97 / 7.88 1,553,431 104,868 38,866 19,319 19,547 53,635 1,014,517 47.1
    2047 1.97 / 7.88 1,608,638 108,996 40,279 21,521 18,758 57,737 1,091,011 45.6
    2048 1.97 / 7.88 1,666,000 112,501 41,685 23,922 17,763 62,020 1,170,794 44.1
    2049 1.97 / 7.88 1,724,766 116,552 43,162 26,535 16,628 66,484 1,253,906 42.7
    2050 1.97 / 7.88 1,784,712 120,070 44,620 29,370 15,250 71,129 1,340,286 41.3
    2051 1.97 / 7.88 1,846,030 124,142 46,149 32,442 13,707 75,955 1,429,947 40.0
    2052 1.97 / 7.88 1,909,767 128,148 47,720 35,756 11,965 80,960 1,522,872 38.7
    2053 1.97 / 7.88 1,974,826 132,729 49,363 39,318 10,045 86,144 1,619,060 37.5
    2054 1.97 / 7.88 2,040,986 136,795 50,987 43,147 7,840 91,504 1,718,405 36.4
    2055 1.97 / 7.88 2,108,096 141,425 52,674 47,261 5,413 97,037 1,820,854 35.2
    2060 1.97 / 7.88 2,474,655 165,270 61,774 71,950 (10,176) 127,154 2,377,281 30.6
    2065 1.97 / 7.88 2,903,032 193,282 72,420 102,158 (29,738) 161,178 3,004,773 27.7
    2070 1.97 / 7.88 3,421,988 226,782 85,284 135,530 (50,246) 199,577 3,713,739 26.0
    2075 1.97 / 7.88 4,051,490 267,639 100,904 172,414 (71,510) 243,531 4,526,368 25.1
    2080 1.97 / 7.88 4,803,930 316,670 119,591 213,446 (93,855) 294,488 5,469,686 24.6
    2085 1.97 / 7.88 5,697,857 374,669 141,772 258,889 (117,117) 354,336 6,579,194 24.5
    2088 1.97 / 7.88 6,307,071 414,388 156,903 289,120 (132,217) 395,475 7,342,365 24.5
    2090 1.97 / 7.88 6,744,599 442,520 167,739 311,022 (143,283) 425,372 7,896,954 24.5
    2095 1.97 / 7.88 7,958,860 522,020 197,925 372,848 (174,923) 509,780 9,462,519 24.5
    2098 1.97 / 7.88 8,781,992 575,494 218,354 415,281 (196,927) 567,782 10,538,204 24.5
    2100 1.97 / 7.88 9,379,076 614,085 233,158 445,961 (212,803) 609,879 11,318,995 24.5

    Table 24 Footnotes

    Table 24 footnote 1

    The second additional minimum contribution rate is applicable from the year 2024 onward.

    Return to table 24 footnote 1

    Table 24 footnote 2

    Investment Income is net of all investment expenses.

    Return to table 24 footnote 2

    Table 25 Progression of Additional Minimum Contribution Rates over Time
    Valuation Year Table 25 Footnote 1 Target Years Table 25 Footnote 2 Target A/E Ratio Table 25 Footnote 3 Additional Minimum Contribution Rates Years Additional Minimum Contribution Rates Applicable Table 25 Footnote 4 Assets as a % of Obligations on an Open Group Basis Table 25 Footnote 5
    2021 2088 and 2098 24.5 1.97%/7.88% 2025+ 105.2%
    2024 2088 and 2098 24.5 1.97%/7.88% 2028+ 104.9%
    2027 2088 and 2098 24.5 1.97%/7.88% 2031+ 104.7%
    2030 2088 and 2098 24.6 1.96%/7.84% 2034+ 104.1%
    2033 2088 and 2098 24.6 1.96%/7.84% 2037+ 104.2%

    Table 25 Footnotes

    Table 25 footnote 1

    Reports are prepared as at 31 December of the valuation year.

    Return to table 25 footnote 1

    Table 25 footnote 2

    Target years refer to the beginning and end of the 10-year interval that are used to determine the FAMCR and SAMCR. These rates are the lowest level rates that result in the assets/expenditures (A/E) ratio being the same in the two target years. For a given triennial review period of the Plan, the target years are 53 and 63 years after the valuation year, but occurring no earlier than 2088 and 2098. For this and all reports with valuation years before 2036, the target years are 2088 to 2098. The AMCRs must also satisfy a full funding condition as described in note (5) below.

    Return to table 25 footnote 2

    Table 25 footnote 3

    The target A/E ratio is the ratio obtained in the target years relating to the determination of the corresponding AMCRs.

    Return to table 25 footnote 3

    Table 25 footnote 4

    The legislated first additional contribution rate applies to the current triennial review period 2022-2024. More generally, the legislated first and second additional contribution rates apply for each triennial review period following a valuation year.

    Return to table 25 footnote 4

    Table 25 footnote 5

    The AMCRs must satisfy the condition that the present value of projected additional expenditures equals the projected additional assets and present value of projected additional contributions. In other words, the total assets must equal 100% of the obligations of the additional Plan. As shown, this condition is projected to be met over successive valuations, under the best-estimate assumptions of this report.

    Return to table 25 footnote 5

    7 Reconciliation with Previous Triennial Report

    7.1 Base CPP

    7.1.1 Introduction

    The results presented in this report differ from those previously projected for a variety of reasons. Differences between the actual experience for 2019 through 2021 and that projected in the 30th CPP Actuarial Report are addressed in section 7.1.2 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 2019-2021) and changes in the assumptions and methodology on the base CPP minimum contribution rate are addressed in section 7.1.3. Detailed reconciliations of the projected minimum contribution rate is presented in Appendix D.

    7.1.2 Experience Update – 31 December 2018 to 31 December 2021

    The major components of the change in the base CPP assets from 31 December 2018 to 31 December 2021 are summarized in Table 26.

    Contributions during the period 2019 to 2021 were not materially different than expected.

    Expenditures during the period were $3.4 billion lower than expected. The difference between actual and expected expenditures is mainly due to retirement benefits (lower take-up of retirement benefits at age 60 than expected), disability benefits (lower disability incidence rates than expected), and survivor 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 12.7% compared to the anticipated 5.2%), investment income on base CPP assets was $103 billion higher than expected.

    The resulting base CPP assets as at 31 December 2021 are about $106 billion higher than projected under the 30th CPP Actuarial Report.

    Table 26 Change in Assets - 31 December 2018 to 31 December 2021 - Base CPP Table 26 Footnote 1
    (cost accrual basis, $ million)
    blank Actual Expected Table 26 Footnote 2 Difference: Actual – Expected
    Assets at 31 December 2018 371,700 371,700 nil-
    + Contributions
    160,534 161,101 (567)
    - Expenditures
    153,211 156,565 (3,354)
    + Investment Income
    164,701 61,801 102,900
    Change in Assets 172,024 66,337 105,687
    Assets at 31 December 2021 543,725 438,037 105,687

    Table 26 Footnotes

    Table 26 footnote 1

    Components may not sum to totals due to rounding.

    Return to table 26 footnote 1

    Table 26 footnote 2

    Expected contributions, expenditures, and investment income shown are as per the projections of the 30th CPP Actuarial Report as at 31 December 2018.

    Return to table 26 footnote 2

    Table 27 Summary of Expenditures – 2019 to 2021 – Base CPP Table 27 Footnote 1
    ($ million)
    blank Actual Table 27 Footnote 2 Expected Table 27 Footnote 3 Difference: Actual – Expected
    Retirement 121,016 123,434 (2,418)
    Disability 13,083 13,491 (408)
    Survivors 14,334 14,703 (369)
    Children 1,588 1,664 (76)
    Death 1,251 1,224 27
    Operating Expenses 1,939 2,049 (110)
    Total Expenditures 153,211 156,565 (3,354)

    Table 27 Footnotes

    Table 27 footnote 1

    Components may not sum to totals due to rounding.

    Return to table 27 footnote 1

    Table 27 footnote 2

    The actual amounts for benefit expenditures include an adjustment for total overpayments of $310 million.

    Return to table 27 footnote 2

    Table 27 footnote 3

    Expected expenditures shown are as per the projections of the 30th CPP Actuarial Report as at 31 December 2018.

    Return to table 27 footnote 3

    7.1.3 Changes in the Minimum Contribution Rate

    Table 28 presents the main elements of change in the base Plan MCR since the 30th CPP Actuarial Report and shows an overall decrease in the rate.

    Experience over the period 2019 to 2021 was better than anticipated overall. The main contributing factor for this was better than expected investment experience, which lowers the MCR by 0.35 percentage points. Changes made to the demographic assumptions also act to lower the MCR. However, these reductions in the MCR are partially offset by changes made to benefit, economic and investment assumptions.

    The impacts on the MCR resulting from changes in assumptions include the subsequent event disclosed in section 2.3. Overall, changes to the assumptions to reflect the subsequent event resulted in an increase in the MCR of 0.31 percentage points. A large portion of this increase is due to reductions in the 2022 assumed nominal rate of return. The reduction in MCR of 0.35 percentage points due to 2019-2021 investment experience is therefore partially offset by lower assumed returns in 2022.

    A more detailed reconciliation of changes in the MCR is provided in Table 107 in Appendix D of this report.

    Table 28 Reconciliation of Changes in Minimum Contribution Rate Table 28 Footnote 1
    (% of base CPP contributory earnings)
    blank Steady-State Rate Full Funding Rates Table 28 Footnote 2 MCR
    2025-2033 2034+ 2025-2033 2034+
    30th CPP Actuarial Report - After Rounding 9.71 0.04 0.01 9.75 9.72
    30th CPP Actuarial Report - Before Rounding 9.708 0.035 0.007 9.743 9.715
    Improvements in Methodology 0.048 (0.001) (0.001) 0.046 0.046
    Experience (2019 to 2021) (0.544) (0.005) (0.001) (0.550) (0.545)
    Changes in Demographic Assumptions (0.121) 0.002 0.001 (0.119) (0.120)
    Changes in Benefit Assumptions 0.016 0.003 0.002 0.019 0.018
    Changes in Economic Assumptions 0.064 0.001 0.001 0.066 0.065
    Changes in Investment Assumptions 0.373 0.001 0.000 0.373 0.373
    Changes in Other Assumptions (0.009) 0.001 0.000 (0.008) (0.009)
    Change in Funding Target from 2031-2081 to 2034-2084 (0.009) (0.002) 0.000 (0.011) (0.008)
    Rate before Rounding 9.526 0.035 0.009 9.560 9.535
    Rounded Rate, in Accordance with the Calculation of Contribution Rates Regulations, 2021 9.53 0.03 0.01 9.56 9.54
    31st CPP Actuarial Report 9.53 0.03 0.01 9.56 9.54

    Table 28 Footnotes

    Table 28 footnote 1

    Components may not sum to totals due to rounding.

    Return to table 28 footnote 1

    Table 28 footnote 2

    Under the Budget Implementation Act, 2018, No. 1, amendments to the CPP statute took effect 1 January 2019. The full funding rates in respect of the amendments were determined for the 30th CPP Actuarial Report.

    Return to table 28 footnote 2

    7.2 Additional CPP

    7.2.1 Introduction

    The results presented in this report differ from those previously projected for a variety of reasons. Differences between the actual experience for 2019 through 2021 and that projected in the 30th CPP Actuarial Report are addressed in section 7.2.2 below. Since historical results provide the starting point for the projections shown in this report, these historical differences between actual and projected experience over the period 2019-2021 have an effect on the projections. The impact of experience since the previous triennial valuation of the additional Plan and changes in the assumptions and methodology on the additional CPP first and second additional minimum contribution rates are addressed in section 7.2.3. Detailed reconciliations of the additional minimum contribution rates are presented in Appendix D.

    7.2.2 Experience Update – 1 January 2019 to 31 December 2021

    The major components of the change in the additional CPP assets from the start of the additional Plan on 1 January 2019 to 31 December 2021 are summarized in Table 29.

    Contributions during the period 2019 to 2021 were not materially different than expected.

    As the additional Plan started only recently, administrative processes regarding benefits are yet to be finalized. As such, only partial experience data regarding benefit expenditures were available at the time this CPP Actuarial Report was prepared. Operating expenses over the period 2019 to 2021 were $256 million higher than expected.

    Due to the strong investment performance over the period (actual average annual nominal rate of return of 7.1% compared to the anticipated 2.6%), investment income on the additional CPP assets was $657 million higher than expected.

    The resulting additional CPP assets as at 31 December 2021, are $459 million higher than projected under the 30th CPP Actuarial Report.

    Table 29 Change in Assets - 1 January 2019 to 31 December 2021 - Additional CPP Table 29 Footnote 1
    (cost accrual basis, $ million)
    blank Actual Expected Table 29 Footnote 2 Difference: Actual – Expected
    Assets at 1 January 2019 0 0 nil-
    + Contributions
    10,487 10,451 36
    - Expenditures
    520 286 234
    + Investment Income
    1,078 421 657
    Change in Assets 11,045 10,586 459
    Assets at 31 December 2021 11,045 10,586 459

    Table 29 Footnotes

    Table 29 footnote 1

    Components may not sum to totals due to rounding.

    Return to table 29 footnote 1

    Table 29 footnote 2

    Expected contributions, expenditures, and investment income shown are as per the projections of the 30th CPP Actuarial Report as at 31 December 2018.

    Return to table 29 footnote 2

    7.2.3 Changes in the Additional Minimum Contribution Rates

    Table 30 presents the main elements of change in the first and second additional minimum contribution rates (FAMCR, SAMCR) since the 30th CPP Actuarial Report and shows an overall decrease in the rates.

    Economic, and investment experience both acted to lower the AMCRs. Changes made to the demographic, economic, and investments assumptions also acted to lower the AMCRs. However, these reductions in the rates are partially offset by changes in other assumptions (e.g. operating expenses). The net result of all changes since the 30th CPP Actuarial Report is a decrease in the FAMCR of 0.01 percentage points and corresponding decrease in the SAMCR of 0.04 percentage points.

    The impacts on the AMCRs resulting from changes in assumptions include the subsequent event disclosed in section 2.3. Overall, changes to the assumptions to reflect the subsequent event resulted in decreases of less than 0.005 percentage points and 0.02 percentage points in the FAMCR and SAMCR, respectively.

    A more detailed reconciliation of changes in the AMCRs is provided in Table 108 in Appendix D of this report.

    Table 30 Reconciliation of Changes in Additional Minimum Contribution Rates Table 30 Footnote 1
    (% of additional CPP contributory earnings)
    blank First Additional Minimum Contribution Rate Second Additional Minimum Contribution Rate
    30th CPP Actuarial Report - After Rounding 1.98 7.92
    30th CPP Actuarial Report - Before Rounding 1.977 7.907
    Improvements in Methodology 0.027 0.108
    Experience (2019 to 2021) (0.006) (0.025)
    Changes in Demographic Assumptions (0.010) (0.038)
    Changes in Benefit Assumptions 0.004 0.014
    Changes in Economic Assumptions (0.025) (0.099)
    Changes in Investment Assumptions (0.016) (0.062)
    Changes in Other Assumptions 0.019 0.075
    Rate before Rounding 1.970 7.879
    Rounded Rates, in Accordance with the Calculation of Contribution Rates Regulations, 2021 1.97 7.88
    31st CPP Actuarial Report 1.97 7.88

    Table 30 Footnotes

    Table 30 footnote 1

    Components may not sum to totals due to rounding.

    Return to table 30 footnote 1

    8 Actuarial Opinion

    In our opinion, considering that this 31st Actuarial Report on the Canada Pension Plan as at 31 December 2021 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 9.56% for years 2025 to 2033 and 9.54% 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: 1.97% for the year 2025 and thereafter, and
      • second additional minimum contribution rate: 7.88% for the year 2025 and thereafter.
    • the insufficient rates provisions of the Canada Pension Plan and the provisions under the Additional Canada Pension Plan Sustainability Regulations do not apply. Therefore, in the absence of specific action by the federal and provincial governments, the legislated contribution rates will remain for both the base CPP and the additional CPP.

    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 section 2.3 of this report, that would have a material impact on the financial states of the base or additional CPP as at 31 December 2021.

    Assia Billig, FCIA, FSA
    Chief Actuary

    Christine Dunnigan, FCIA, FSA
    Senior Actuary

    Michel Montambeault, FCIA, FSA
    Senior Actuary

    Ottawa, Canada
    14 November 2022

    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 a number of times. The amendments include an enhancement of the CPP (the additional CPP) such that, effective 1 January 2019, the CPP consists of two components: the base CPP and additional CPP.

    The most recent amendments to the Canada Pension Plan are the following:

    The Budget Implementation Act, 2019, No. 1, which received Royal Assent on 21 June 2019, amends the CPP statute such that the application for a CPP retirement pension is waived upon reaching age 70, effective 1 January 2020. This amendment was considered to be a subsequent event for the purpose of the 30th CPP Actuarial Report since the amendment became known to the Chief Actuary after the valuation date but before the report date. The amendment was taken into account for the 30th CPP Actuarial Report since it was determined to have a material impact on the financial state of the CPP.

    Regulations regarding the CPP contribution rates and financial sustainability of the additional Plan, specifically the Calculation of Contribution Rates Regulations, 2021 and the Additional Canada Pension Plan Sustainability Regulations, which both received formal provincial approval. These Regulations were originally introduced in 2018 and were taken into account for the 30th CPP Actuarial Report. Both Regulations became effective 1 February 2021.

    The Budget Implementation Act, 2022, No. 1, which received Royal Assent on 23 June 2022, contains technical amendments regarding eligibility for the base CPP post-retirement disability benefit and determination of the additional CPP drop-in provisions under the CPP statute.Footnote 2 The amendments reflect the original intent of the given benefit and provisions and were thus included in the projections of previous CPP actuarial reports.

    This 31st CPP Actuarial Report takes into account all the above listed amendments and Regulations.

    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 was implemented as of 1 January 2019. The additional CPP has two (first and second) parts or tiers, 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, as described below.

    Since 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 $64,900 in 2022.

    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 $71,200 and $81,100, 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 2022.

    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 employee-employer 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 employee-employer 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 employee-employer contribution rate is being 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 31.

    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 employee-employer 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 31 shows the legislated contribution rates for the CPP.

    Table 31 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 nil nil
    2019 9.9 0.3 nil
    2020 9.9 0.6 nil
    2021 9.9 1.0 nil
    2022 9.9 1.5 nil
    2023 9.9 2.0 nil
    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 additional minimum 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 sustainability Regulations – the Additional Canada Pension Plan Sustainability Regulations,became effective 1 February 2021.

    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, since 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 granting the waiver is considered.

    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. In 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 toward providing post-retirement benefits from the base and additional CPP and do not affect eligibility for other CPP benefits, except the post-retirement disability benefit. 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 their 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 started their retirement benefit at age 65 in 2022, 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 2022 is $1,243.75 per month or $14,925 per year.

    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 maximum additional retirement benefit at age 65 in January 2022 is $9.84 per month or $118.08 per year, and is projected to increase over time. Additional CPP retirement benefits are initially 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 retirement benefits are shown in Table 32. 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 $647 per month or $7,759 per year, in 2022 wage-adjusted dollarsFootnote 8. Table 32 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 32 Projected Maximum Additional CPP Retirement Benefit
    Pensionable Earnings at or above YMPE before 2024, YAMPE thereafter
    All amounts in 2022 wage-adjusted dollars
    Maximum Basic CPP Retirement Benefit in 2022: $15,043.08 per year ($1,253.59 per month)
    Start Retirement Pension at Age 65 on January 1 Number of Years of Contributions to Additional CPP Table 32 footnote 1 Additional CPP Retirement Benefit
    Year Monthly Annual
    2024 5 $28 $336
    2029 10 $106 $1,271
    2044 25 $348 $4,180
    2065 46 Table 32 footnote 2 $647 $7,759

    Table 32 footnotes

    Table 32 footnote 1

    All years starting from 2019 to year before retirement.

    Return to Table 32 footnote 1

    Table 32 footnote 2

    40 years of contributions at the maximum.

    Return to Table 32 footnote 2

    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 respectively before or after 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 33 shows the legislated pension adjustment factors for the CPP.

    Table 33 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. The pension adjustment factors are reviewed with each triennial actuarial valuation. In accordance with the CPP statute, the factors are specified in every third triennial actuarial report or more frequently if deemed necessary by the Chief Actuary. The pension adjustment factors will next be specified in the CPP Actuarial Report as at 31 December 2024.

    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 CPP. 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 and additional CPP post-retirement benefits at age 65 in January 2022 for a working beneficiary who started their retirement pension at age 64 are, respectively, $31.09 and $5.17 per month for a total post-retirement benefit of $36.26 per month or $453.12 per year.

    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 pension are those of the base CPP. That is, a contributor is deemed to be eligible for the additional CPP disability pension if they are eligible for the base CPP disability pension.

    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 pension is the sum of a flat-rate portion payable ($524.64 per month in 2022) 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 pension 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 pension 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 and additional monthly CPP disability pensions payable in January 2022 are, respectively, $1,457.45 and $7.38, for a total of $1,464.83 per month or $17,577.96 for the year.

    The additional CPP disability benefits are initially 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 2022 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 disability benefit payable is $5,819 per year or $485 per month, in 2022 wage-adjusted dollars.

    Table 34 Projected Maximum Additional CPP Disability Benefit
    Pre-Disability Pensionable Earnings at or above YMPE before 2024, YAMPE thereafter
    All amounts in 2022 wage-adjusted dollars
    As at January 1
    Year
    Number of Years of Contributions to Additional CPPTable 34 Footnote 1 Additional CPP Disability Benefit
    Monthly Annual
    2024 5 $21 $252
    2029 10 $79 $953
    2044 25 $261 $3,135
    2065+ 46Table 34 Footnote 2 $485 $5,819

    Table 34 Footnotes

    Table 34 Footnote 1

    All years starting from 2019 to year before disability.

    Return to table 34 footnote 1

    Table 34 Footnote 2

    40 years of contributions at the maximum.

    Return to table 34 footnote 2

    A.6.3 Post-Retirement Disability Benefit (Base CPP only)

    Prior to 2019, base CPP retirement beneficiaries who were deemed disabled after the start of their retirement pension could not receive the CPP disability pension, even if they were still under age 65 and otherwise met eligibility requirements. Commencing 1 January 2019, a post-retirement disability benefit equal to the flat-rate portion of the disability pension ($524.64 per month in 2022) is payable under the base CPP to retirement beneficiaries who are deemed disabled while under age 65. Contributions paid by working beneficiaries toward post-retirement benefits are used in determining eligibility for the post-retirement disability benefit. Eligible disabled retirement beneficiaries receive the post-retirement disability benefit in addition to their retirement pension, and the dependent children of disabled retirees 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 person who was married to a contributor or was a common-law partner of a contributor at the time of the contributor’s death is considered to be a survivor of the deceased contributor. The survivor is eligible for a survivor’s pension 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: (i) ten calendar years, or (ii) one-third of the total number of years included wholly or partly in their contributory period, but not for less than three years.
    • If the survivor is the separated 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 pension are those of the base CPP. That is, a person is eligible for an additional CPP survivor’s pension if they are eligible for the base CPP survivor’s pension.

    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 depending 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 ($204.69 per month in 2022).

    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 they 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 and additional monthly CPP earnings-related survivor’s benefit for new survivors under age 65 are, respectively, $466.41 and $3.69 in January 2022. In total, including the base CPP flat-rate amount, the maximum CPP survivor’s pension payable in January 2022 for new survivors under age 65 is $674.79 per month or $8,097.48 for the year.

    Additional CPP survivor benefits are initially 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 survivor’s benefits, in 2022 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 younger than age 65 is $2,910 per year or $243 per month, in 2022 wage-adjusted dollars.

    Table 35 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 2022 wage-adjusted dollars
    As at January 1
    Year
    Number of Years of Prior Contributions by Deceased Contributor to Additional CPPTable 35 Footnote 1 Additional CPP Survivor's Benefit
    Monthly Annual
    2024 5 $11 $126
    2029 10 $40 $477
    2044 25 $131 $1,568
    2065+ 46Table 35 Footnote 2 $243 $2,910

    Table 35 Footnotes

    Table 35 Footnote 1

    All years starting from 2019.

    Return to table 35 footnote 1

    Table 35 Footnote 2

    40 years of contributions at the maximum.

    Return to table 35 footnote 2

    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 they 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 and additional monthly CPP survivor’s pensions payable in January 2022 for new survivors aged 65 or older are, respectively, $746.25 and $5.90, for a total of $752.15 per month or $9,025.80 for the year.

    As for survivors benefits payable to survivors younger than 65, survivor benefits for those age 65 and older are initially 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 additional CPP survivor’s benefits, in 2022 wage-adjusted dollars, are shown in Table 36. 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 $4,655 per year or $388 per month, in 2022 wage-adjusted dollars.

    Table 36 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 2022 wage-adjusted dollars
    As at January 1
    Year
    Number of Years of Prior Contributions by Deceased Contributor to Additional CPPTable 36 Footnote 1 Additional CPP Survivor's Benefit
    Monthly Annual
    2024 5 $17 $201
    2029 10 $64 $762
    2044 25 $209 $2,508
    2065+ 46Table 36 Footnote 2 $388 $4,655

    Table 36 Footnotes

    Table 36 Footnote 1

    All years starting from 2019.

    Return to table 36 footnote 1

    Table 36 Footnote 2

    40 years of contributions at the maximum.

    Return to table 36 footnote 2

    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 ($264.53 in 2022). 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 participated in the Plan. Pension sharing ceases upon separation, divorce, or death.

    Appendix B – Data, Assumptions and Methodology

    B.1 Introduction and Context

    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 generates 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 for increased or new benefits 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 together with any permanent full funding requirement for increased or new benefits. Temporary increases in the additional minimum contribution rates to fully amortize any past costs resulting from increased or new benefits would be determined separately.

    Although the demographic, economic, and investment assumptions represent the Chief Actuary’s best estimates, the resulting future financial states of the base and additional CPP presented in this report should be interpreted with caution. This information is not intended to be predictions, but rather projections of the future financial states of the base and additional CPP.

    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 the current uncertain 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 COVID-19 pandemic affected the labour markets deeply during 2020 and 2021 because of sanitary measures and lockdowns. Significant job losses and elevated unemployment rates were also observed. However, by the end 2021, main labour market measures had rebounded to pre-pandemic levels in most sectors of the economy. Short-term uncertainty due to the pandemic exists with other variables such as mortality, migration and wages.

    The financial market performed well through 2021 after an initial pandemic-related decline at the end of fiscal year 2019-2020. However, there have been significant disruptions in the financial markets in 2022, which are likely attributable to the escalation of the conflict in Ukraine. In addition, the uncertainty surrounding high inflation due to the demand and supply shocks caused by the pandemic, has been exacerbated by the conflict in Ukraine. Given the significant effects on the financial projections for the CPP, the escalation of the conflict in Ukraine is considered a subsequent event that was taken into account for the purpose of this 31st CPP Actuarial Report.

    Furthermore, 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.

    Other factors that add to the uncertainty include the timing and pace of transition to a green economy, the pace of technological advances and innovation as well as worldwide policies on protectionism vs. globalization.

    As all these events evolve, the economic, demographic and investment environments continue to be subject to sustained volatility and unpredictability. The OCA will continue to monitor current and emerging trends and will adjust assumptions as needed in future reports.

    B.2 Data

    Table 37 lists the sources of data used for this report categorized by major assumptions. The most recent years of data are also listed.

    Table 37 Data Sources
    Major Assumptions Source of Data Last Experience Year
    PopulationTable 37 Footnote 1
    Fertility
    Statistics Canada, Institut de la statistique du Québec 2020
    Migration
    Statistics Canada 2021
    Mortality
    Statistics Canada Life Tables 2020Table 37 Footnote 1
    Initial population
    Statistics Canada 2021
    Economic
    CPI
    Statistics Canada 2022Table 37 Footnote 2
    Real Wage Increases
    Statistics Canada 2022Table 37 Footnote 3
    Records of Earnings file from ESDC 2020
    Labour Force (participation, employment, and unemployment rates)
    Statistics Canada 2021
    Total Earnings and Contributory Earnings
    Records of Earnings file from ESDC 2020
    Contributions ESDC 2020
    Canada Revenue Agency 2020
    Benefits Administrative data from ESDC 2021
    Assets and Investment CPPIB
    Canadian Institute of Actuaries’ Report on Canadian Economic Statistics 1924-2021
    2022Table 37 Footnote 4
    Operating Expenses ESDC and CPPIB 2021

    Table 37 Footnotes

    Table 37 Footnote 1

    Revisions to Mortality Life Tables from 1980 to 2019, as well as new Life Tables for 2020, published by Statistics Canada in January 2022 were taken into account.

    Return to table 37 footnote 1

    Table 37 Footnote 2

    Inflation figures published by Statistics Canada up to May 2022 were taken into account.

    Return to table 37 footnote 2

    Table 37 Footnote 3

    For the purpose of projecting the YMPE for 2023, data up to April 2022 were taken into account.

    Return to table 37 footnote 3

    Table 37 Footnote 4

    CPPIB financial results up to the first quarter of Fiscal Year 2022-2023 (as at June 30, 2022) were taken into account.

    Return to table 37 footnote 4

    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, such as mortality data from the United Kingdom and United States and various economic forecasts.

    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 2021 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 2021

    The starting point for the demographic projections is based on the most recent Statistics Canada population estimates as at 1 July 2021 for Canada and Québec, by age and sex. The estimates are based on the 2016 Census. These 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 the fertility rates by age group for women aged 15 to 49 in a given calendar year. 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.

    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 then-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 further to a level of 1.5 by the late 1990s. Starting in the 2000s, Canada was one of many industrialized countries that saw their total fertility rates increase. 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 2008 economic downturn, continued economic uncertainty, as well as other factors.

    The total fertility rate for Canada was 1.47 in 2019 and 1.40 in 2020. The significant decrease in 2020 could be due to the high level of uncertainty and much lower immigration caused by the COVID-19 pandemic.

    Similar to Canada, the total fertility rate in Québec fell from a high of 4.0 per woman in the 1950s; however, the rate for Québec fell to a greater degree, reaching 1.4 by the mid-1980s. The rate for Québec then recovered somewhat in the early 1990s to over 1.6 and subsequently declined to below 1.5 by the late 1990s. The fertility rate for Québec increased with the introduction of the Québec Childcare Centres in 1997 and with the introduction of the Québec Parentale Insurance Plan (QPIP) in 2006. There was a significant increase in the rate after the year 2000, with the rate reaching 1.74 by 2008. In 2006, the rate for Québec 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. The total fertility rate for Québec was 1.57 in 2019 and 1.52 in 2020.

    Fertility rates are affected by many factors, including social attitudes, reproductive technologies, as well as economic and environmental conditions. 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. It is assumed for this report that the continued economic uncertainty and the COVID-19 pandemic have caused a temporary downward effect on total fertility rates, with couples choosing to postpone having any or more children until conditions improve. These effects were taken into consideration along with historical trends in age-specific fertility rates over the last 15 years. Given the uncertainty surrounding the effect of the COVID-19 pandemic on fertility rates in the year 2020, the data for that year were excluded from the analysis for purposes of setting the fertility rates for years 2021 and beyond. The historical data considered are therefore from the 15-year period ending in 2019.

    In 2021, the Government of Canada announced that it would work with provinces and territories to establish a Canada-Wide Early Learning and Child Care PlanFootnote 9. The fertility rate assumptions for this 31st CPP Actuarial Report take into account the proposed plan. Consistent with what was experienced in Québec with the introduction of the QPIP, the plan could lead to an increase in fertility rates for certain age groups and hence was considered in setting the assumptions for this report. The effect on the fertility rates is assumed to occur over the first several years following the adoption of the system before leveling out.

    To determine the ultimate total fertility rate for Canada, the historical fertility rate of each age group was studied and projected independently. Based on historical analysis and the factors mentioned above, it is assumed that the total fertility rate from 2029 onward for Canada will be 1.54 children per woman, which is lower than the ultimate rate of 1.62 assumed for the 30th CPP Actuarial Report.

    For Québec, the assumption was set by analyzing both the historical fertility rate as well as the difference between Canada’s and Québec’s fertility rates for each age group. The introduction of the Canada-Wide Early Learning and Child Care Plan is expected to reduce this difference. It is therefore assumed that the difference in the rates will decrease until 2029 and remain stable thereafter. As a result, the total fertility rate from 2029 onward for Québec is assumed to be 1.55 children per woman, which is lower than the assumed ultimate rate of 1.65 in the 30th CPP Actuarial Report.

    Although the historical total fertility rates, based on age-group rates, are used to set the assumptions for the future, it is nonetheless useful and informative to consider the historical progression of the cohort fertility rates. Over time, the assumed age-group rates lead to cohort fertility rates which converge to the total fertility rate assumption, as shown for Canada in Table 38.

    The cohort fertility rates in both Canada and Québec have declined over time. For females born in 1940, who reached the end of their childbearing years (turned age 49) in 1989, the cohort rates were 2.69 and 2.34 for Canada and Québec, respectively. However, for females reaching the end of their childbearing years in 2019 (born in 1970), the Canada and Québec cohort fertility rates were 1.78 and 1.74, respectively.

    Table 38 Cohort Fertility Rates by Age and Year of Birth
    (Canada)
    Year of Birth of WomanTable 38 Footnote 1 Annual Fertility Rates by Age and Year of Birth
    (per 1,000 women)
    Cohort Fertility Rate per WomanTable 38 Footnote 2
    15-19 20-24 25-29 30-34 35-39 40-44 45-49
    1940 59.7 231.6 152.6 70.5 20.3 3.1 0.1 2.69
    1945 54.7 161.4 130.4 65.7 19.9 3.3 0.1 2.18
    1950 45.0 118.9 126.2 67.6 23.3 4.2 0.2 1.93
    1955 37.4 103.7 121.1 73.6 29.0 5.2 0.2 1.85
    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 0.8Table 38 Footnote 2 1.78Table 38 Footnote 2
    1975 25.6 64.6 97.9 106.1 53.4 11.7Table 38 Footnote 2 0.9 1.80
    1980 20.0 54.2 101.9 107.7 57.1Table 38 Footnote 2 13.6 1.0 1.78
    1985 14.9 52.6 96.3 108.0Table 38 Footnote 2 61.0 15.6 1.0 1.75
    1990 13.9 44.6 87.2Table 38 Footnote 2 108.0 69.7 16.5 1.0 1.70
    1995 12.1 37.1Table 38 Footnote 2 78.7 115.4 73.2 16.5 1.0 1.67
    2000 7.8Table 38 Footnote 2 28.5 75.6 118.3 73.2 16.5 1.0 1.60
    2005 5.7 23.1 74.5 118.3 73.2 16.5 1.0 1.56
    2006 5.5 22.0 74.5 118.3 73.2 16.5 1.0 1.55
    2007 5.3 20.9 74.5 118.3 73.2 16.5 1.0 1.55
    2008 5.2 20.9 74.5 118.3 73.2 16.5 1.0 1.55
    2009 5.0 20.9 74.5 118.3 73.2 16.5 1.0 1.55
    2010 4.8 20.9 74.5 118.3 73.2 16.5 1.0 1.55
    2011 4.7 20.9 74.5 118.3 73.2 16.5 1.0 1.54
    2012+ 4.5 20.9 74.5 118.3 73.2 16.5 1.0 1.54

    Table 38 Footnotes

    Table 38 Footnote 1

    Years of birth correspond to the midpoint of each age group. For example, in the first row of the table, 1940 is the year of birth for those aged 17, 22, 27, etc.

    Return to table 38 footnote 1

    Table 38 Footnote 2

    Fertility rates below and to the right of the stepwise line are projected.

    Return to table 38 footnote 2

    Table 39 below shows the assumed fertility rates of each age group and the resulting assumed total fertility rates by calendar year.

    Table 39 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
    2022 5.7 28.5 78.7 108.0 61.0 13.6 0.9 1.48
    2023 5.5 27.4 78.0 109.5 62.8 14.0 0.9 1.49
    2024 5.3 26.3 77.4 110.9 64.5 14.4 0.9 1.50
    2025 5.2 25.3 76.8 112.4 66.3 14.8 0.9 1.51
    2026 5.0 24.2 76.2 113.9 68.0 15.2 0.9 1.52
    2027 4.8 23.1 75.6 115.4 69.7 15.6 1.0 1.53
    2028 4.7 22.0 75.0 116.8 71.4 16.1 1.0 1.53
    2029+ 4.5 20.9 74.5 118.3 73.2 16.5 1.0 1.54

    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 CanadaChart 3 Footnote 1

    Chart 3 Footnotes

    Chart 3 Footnote 1

    Cohort fertility rates are based on the age of a woman being 30 in a given calendar year. For instance, the cohort fertility rate for the year 2016 pertains to women born in 1986.

    Return to Chart 3 footnote 1

    Text description: Chart 3 Historical and Projected Total and Cohort Fertility Rates for Canada
    Historical Total and Cohort Fertility Rates for Canada
    Calendar Year Cohort Fertility Rates Historical Total Fertility Rates Historical
    1941 2,808 2,831
    1942 2,816 2,962
    1943 2,839 3,040
    1944 2,864 3,008
    1945 2,883 3,017
    1946 2,911 3,373
    1947 2,963 3,594
    1948 3,026 3,440
    1949 3,080 3,455
    1950 3,140 3,451
    1951 3,186 3,498
    1952 3,216 3,637
    1953 3,237 3,715
    1954 3,256 3,823
    1955 3,271 3,826
    1956 3,288 3,854
    1957 3,295 3,920
    1958 3,295 3,875
    1959 3,302 3,928
    1960 3,316 3,893
    1961 3,316 3,838
    1962 3,289 3,755
    1963 3,236 3,668
    1964 3,174 3,500
    1965 3,104 3,145
    1966 3,028 2,811
    1967 2,951 2,595
    1968 2,873 2,457
    1969 2,791 2,409
    1970 2,699 2,336
    1971 2,606 2,130
    1972 2,505 1,971
    1973 2,403 1,883
    1974 2,305 1,837
    1975 2,214 1,833
    1976 2,147 1,783
    1977 2,093 1,756
    1978 2,043 1,706
    1979 1,998 1,706
    1980 1,959 1,686
    1981 1,927 1,658
    1982 1,904 1,646
    1983 1,888 1,634
    1984 1,877 1,637
    1985 1,867 1,621
    1986 1,857 1,603
    1987 1,850 1,587
    1988 1,846 1,615
    1989 1,840 1,668
    1990 1,830 1,721
    1991 1,819 1,721
    1992 1,809 1,714
    1993 1,797 1,688
    1994 1,787 1,690
    1995 1,783 1,673
    1996 1,778 1,628
    1997 1,779 1,561
    1998 1,781 1,552
    1999 1,785 1,541
    2000 1,788 1,506
    2001 1,791 1,532
    2002 blank 1,506
    2003 blank 1,536
    2004 blank 1,542
    2005 blank 1,562
    2006 blank 1,611
    2007 blank 1,657
    2008 blank 1,682
    2009 blank 1,674
    2010 blank 1,636
    2011 blank 1,623
    2012 blank 1,626
    2013 blank 1,606
    2014 blank 1,610
    2015 blank 1,600
    2016 blank 1,589
    2017 blank 1,549
    2018 blank 1,508
    2019 blank 1,473
    2020 blank 1,398
    Projected Total and Cohort Fertility Rates for Canada
    Calendar Year Cohort Fertility Rates Projected Total Fertility Rates Projected
    2002 1,794 blank
    2003 1,799 blank
    2004 1,805 blank
    2005 1,807 blank
    2006 1,805 blank
    2007 1,798 blank
    2008 1,793 blank
    2009 1,786 blank
    2010 1,778 blank
    2011 1,765 blank
    2012 1,759 blank
    2013 1,753 blank
    2014 1,745 blank
    2015 1,739 blank
    2016 1,732 blank
    2017 1,725 blank
    2018 1,717 blank
    2019 1,708 blank
    2020 1,701 blank
    2021 1,695 1,478
    2022 1,688 1,482
    2023 1,681 1,490
    2024 1,672 1,499
    2025 1,662 1,508
    2026 1,653 1,517
    2027 1,641 1,526
    2028 1,628 1,535
    2029 1,615 1,544
    2030 1,603 1,544
    2031 1,592 1,544
    2032 1,583 1,544
    2033 1,574 1,544
    2034 1,567 1,544
    2035 1,560 1,544
    2036 1,556 1,544
    2037 1,552 1,544
    2038 1,549 1,544
    2039 1,547 1,544
    2040 1,546 1,544
    2041 1,545 1,544

    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 the same as for the 30th CPP Actuarial Report.

    B.3.3 Mortality

    For this report, the mortality rate projections start from the year 2019 mortality rates of Statistics Canada (2019 Canada Life Tables or 2019 CLT). According to Statistics Canada, life expectancies at birth in 2019 without any assumed future improvements in mortality (i.e. reductions in mortality) for males and females in Canada were 80.3 and 84.4 years, respectively, compared to 80.8 and 84.6 years projected under the 30th CPP Actuarial Report. At age 65 in 2019, life expectancies were 19.6 and 22.4 years according to Statistics Canada, compared to 20.0 and 22.6 years projected under the 30th CPP Actuarial Report for males and females, respectively.

    Although Statistics Canada’s 2020 CLT were published in January 2022, they were not used as the starting point for mortality rates nor for developing mortality improvement rates beyond 2020 given that they reflect significant increases related to COVID-19 deaths. However, 2020 mortality rates and mortality improvement rates reflect Statistics Canada’s 2020 CLT. In 2020, life expectancy at birth (without future mortality improvements) stood at 79.5 for males and 84.0 for females, a decrease from 2019 of 0.7 and 0.4 for males and females respectively.

    The average annual mortality improvement rates experienced in Canada over the 15-year period from 2004 to 2019 by age and sex were used as the basis for projecting annual mortality improvement rates from 2021 onward. Improvement rates by age and sex for years 2021 to 2039 were determined by cubic interpolation between:

    • the improvement rates of year 2019 and
    • the assumed ultimate improvement rates described below in respect of the period 2039 and thereafter.

    For the year 2039 and thereafter for Canada, the assumed ultimate annual rates of mortality improvement vary by age only and not by sex or calendar year. The assumed 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 1921 to 2019 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 2039 onward. The mortality improvement rates for Québec are assumed to be the same as for Canada from 2021 onward.

    The ultimate rate for both sexes for ages 0 to 89 is set at 0.8% per year from 2039 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.

    Once the projected mortality rates were calculated using the assumed mortality improvement rates, additional factors were then applied to the mortality rates for both Canada and Québec in order to reflect the additional increase in mortality rates due to the COVID-19 pandemic as well as the impact of the opioid crisis.

    For 2021, COVID-19 mortality adjustment factors by age group were determined using data on the number of COVID-19 deaths from both Health Canada and Statistics Canada. Due to the uncertainty of the effects of COVID-19 on mortality, these adjustement factors were phased out over the two year period 2022-2023. The pandemic is therefore assumed to have a residual effect on mortality in 2022, followed by an assumed full recovery and reversion to the projected unadjusted mortality rates for years 2023 and onward.

    Over the last decade, Canada has been faced with an important increase in accidental drug poisoning deaths and the COVID-19 pandemic has exacerbated the issue. Opioid overdose is a relatively new cause of death, and it is a subset of accidental drug poisoning deaths. It is more prevalent in the 25 to 49 age group and among men. In order to reflect the impact of the pandemic on the opioid-related deaths, opioid-related mortality adjustment factors were derived using data from both Health Canada and Statistics Canada. These mortality adjustment factors apply only to the year 2021 (they are assumed to be 0 for years 2022 and beyond). It is further assumed that, over the next decade, the opioid crisis in Canada will subside, due to several government initiatives to increase awareness and reduce opioid supply. Projected mortality rates of those age groups affected by the opioid crisis are assumed to revert back to normal levels, leading to a period of high growth in mortality improvement rates.

    Table 40 shows the total adjustment factors, i.e. taking into account the assumed increase in COVID-19 deaths and in opioid-related deaths resulting from the pandemic, that were applied to the mortality rates for the period 2021-2022. For reference purpose, the table also shows the actual increases in mortality rates for 2020. Table 41 shows the total adjustments by age, which amount to increases in mortality rates of 6.0% in 2020, 5.5% in 2021, and 2.0% in 2022.

    Table 40 Percentage Increase in Mortality Rates
    (2020 Historical, 2021-2022 Adjustment Factors)
    Age Group 2020 2021 2022
    0-19 1.0 1.0 0.0
    20-29 12.0 12.0 0.0
    30-39 13.0 13.0 1.0
    40-49 8.0 8.0 1.0
    50-59 5.0 5.0 1.0
    60-69 5.0 3.0 1.0
    70-79 4.0 4.0 2.0
    80+ 7.0 6.0 2.0
    Total 6.0 5.5 2.0

    Table 41 shows historical (2019 and 2020),the resulting initial adjusted (2021 2022), intermediate (2023-2038) and ultimate (2039+) assumed annual mortality improvement rates for Canada. The mortality improvement rates shown for 2023 2038 represents the average rates over this period.

    Table 41 Assumed Annual Mortality Improvement Rates for Canada
    (percentages)
    Age Males Females
    2019 2020 2021 2022 2023-2038Table 41 Footnote 1 2039+ 2019 2020 2021 2022 2023-2038Table 41 Footnote 1 2039+
    0 1.2 4.3 (3.1) 2.1 1.0 0.8 1.2 (2.6) 3.9 2.2 1.0 0.8
    1-19 2.4 (1.4) 4.9 3.3 1.5 0.8 0.9 7.3 (7.8) 1.8 0.8 0.8
    20-39 (0.6) (21.5) 6.7 10.7 1.3 0.8 (1.0) (18.3) 3.8 10.5 1.2 0.8
    40-64 1.3 (13.4) 9.1 5.7 1.1 0.8 1.4 (5.8) 2.7 5.8 1.1 0.8
    65-74 1.8 (3.3) 3.3 3.6 1.3 0.8 1.3 (2.9) 2.0 3.2 1.1 0.8
    75-84 1.8 (2.0) 0.6 4.5 1.3 0.8 1.1 (2.9) 0.3 3.9 1.1 0.8
    85-89 1.9 (2.9) 0.9 5.5 1.4 0.8 1.6 (3.5) 0.7 5.2 1.2 0.8
    90-94 1.4 (4.3) 1.3 5.2 1.1 0.5 1.3 (4.0) 0.7 5.0 1.0 0.5
    95+ 0.6 (1.6) (2.8) 4.1 0.5 0.2 0.6 (2.8) (1.4) 4.2 0.5 0.2

    Table 41 Footnotes

    Table 41 Footnote 1

    The mortality improvement rates shown for 2023-2038 represent average rates over these periods.

    Return to table 41 footnote 1

    The resulting projected mortality rates in Table 42 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 2022 to 6 deaths per thousand people by 2075. The gap in mortality rates between males and females at most ages is also expected to decrease over the projection period.

    Table 42 Mortality Rates for Canada
    (annual deaths per 1,000 people)
    Age Males Females
    2022 2025 2050 2075 2022 2025 2050 2075
    0 4.71 4.56 3.67 3.00 3.74 3.61 2.90 2.37
    10 0.07 0.07 0.05 0.04 0.07 0.07 0.06 0.05
    20 0.60 0.56 0.43 0.35 0.29 0.28 0.22 0.18
    30 1.05 1.03 0.77 0.63 0.49 0.49 0.37 0.30
    40 1.40 1.36 1.12 0.92 0.79 0.76 0.62 0.51
    50 2.77 2.63 2.09 1.71 1.76 1.68 1.34 1.10
    60 6.54 6.15 4.80 3.93 4.15 3.92 3.09 2.53
    65 10.43 9.84 7.75 6.34 6.68 6.36 5.06 4.14
    70 16.96 15.81 12.40 10.14 11.12 10.49 8.38 6.86
    75 27.85 26.03 20.49 16.76 18.86 17.89 14.43 11.80
    80 46.45 43.46 34.27 28.04 32.71 31.07 25.11 20.55
    85 77.88 72.27 56.24 46.01 57.47 54.06 43.01 35.19
    90 135.60 127.09 104.10 89.11 104.95 98.79 81.50 69.76
    100 336.40 323.16 295.32 275.48 292.54 280.40 255.29 238.14

    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 43 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 44 is similar to Table 43, 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 44 is considered to be more realistic than Table 43, 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 44 for younger ages.

    From 2022 to 2075, Canadian life expectancy at age 65 (with assumed future mortality improvements) is projected to grow from 21.3 to 24.5 years for males and from 23.8 to 26.7 years for females, as shown in Table 44.

    Chart 4 Life Expectancies at Birth for Canada, without mortality improvements after the year shownChart 4 Footnote 1

    Chart 4 Footnotes

    Chart 4 Footnote 1

    These are calendar year life expectancies based on the mortality rates of the given attained year.

    Return to Chart 4 footnote 1

    Text description: Chart 4 Life Expectancies at Birth for Canada, without mortality improvements after the year shown
    Life Expectancies at Birth for Canada, without improvements after the year shown
    (Historical)
    Year Males-historical Females-historical
    1966 68.8 75.4
    1967 68.9 75.7
    1968 69.1 75.8
    1969 69.2 76.0
    1970 69.3 76.3
    1971 69.6 76.6
    1972 69.5 76.6
    1973 69.7 76.8
    1974 69.7 76.9
    1975 70.0 77.2
    1976 70.4 77.7
    1977 70.6 78.0
    1978 70.9 78.3
    1979 71.3 78.6
    1980 71.6 78.7
    1981 72.0 79.1
    1982 72.3 79.2
    1983 72.7 79.5
    1984 73.0 79.8
    1985 73.0 79.7
    1986 73.2 79.8
    1987 73.5 80.1
    1988 73.6 80.2
    1989 73.9 80.4
    1990 74.2 80.6
    1991 74.4 80.7
    1992 74.7 81.0
    1993 74.6 80.8
    1994 74.9 80.9
    1995 75.0 81.0
    1996 75.4 81.1
    1997 75.7 81.2
    1998 75.9 81.4
    1999 76.1 81.6
    2000 76.6 81.8
    2001 76.9 81.9
    2002 77.1 82.0
    2003 77.2 82.2
    2004 77.6 82.4
    2005 77.8 82.5
    2006 78.2 82.8
    2007 78.2 82.8
    2008 78.5 83.0
    2009 78.9 83.3
    2010 79.2 83.5
    2011 79.5 83.7
    2012 79.6 83.8
    2013 79.7 83.9
    2014 79.8 83.9
    2015 79.8 83.9
    2016 79.9 84.0
    2017 79.8 84.0
    2018 79.8 84.0
    2019 80.2 84.4
    2020 79.5 84.0
    Life Expectancies at Birth for Canada, without improvements after the year shown
    (Projected)
    Year Males-projected Females-projected
    2020 79.5 84.0
    2021 79.9 84.1
    2022 80.5 84.6
    2023 80.8 84.9
    2024 81.0 85.0
    2025 81.2 85.1
    2026 81.3 85.2
    2027 81.5 85.3
    2028 81.6 85.4
    2029 81.7 85.5
    2030 81.9 85.6
    2031 82.0 85.7
    2032 82.1 85.8
    2033 82.2 85.9
    2034 82.3 86.0
    2035 82.4 86.1
    2036 82.5 86.2
    2037 82.6 86.2
    2038 82.7 86.3
    2039 82.8 86.4
    2040 82.9 86.4
    2041 82.9 86.5
    2042 83.0 86.6
    2043 83.1 86.7
    2044 83.2 86.7
    2045 83.3 86.8
    2046 83.3 86.9
    2047 83.4 86.9
    2048 83.5 87.0
    2049 83.6 87.1
    2050 83.7 87.1
    2051 83.7 87.2
    2052 83.8 87.3
    2053 83.9 87.3
    2054 84.0 87.4
    2055 84.1 87.5
    2056 84.1 87.6
    2057 84.2 87.6
    2058 84.3 87.7
    2059 84.4 87.8
    2060 84.4 87.8
    2061 84.5 87.9
    2062 84.6 88.0
    2063 84.7 88.0
    2064 84.8 88.1
    2065 84.8 88.2
    2066 84.9 88.2
    2067 85.0 88.3
    2068 85.1 88.4
    2069 85.1 88.4
    2070 85.2 88.5
    2071 85.3 88.5
    2072 85.4 88.6
    2073 85.4 88.7
    2074 85.5 88.7
    2075 85.6 88.8
    2076 85.7 88.9
    2077 85.7 88.9
    2078 85.8 89.0
    2079 85.9 89.1
    Chart 5 Life Expectancies at Age 65 for Canada, without mortality improvements after the year shownChart 5 Footnote 1

    Chart 5 Footnotes

    Chart 5 Footnote 1

    These are calendar year life expectancies based on the mortality rates of the given attained year.

    Return to Chart 5 footnote 1

    Text description: Chart 5 Life Expectancies at Age 65 for Canada, without mortality improvements after the year shown
    Life Expectancies at Age 65 for Canada, without improvements after the year shown
    (Historical)
    Year Males Females
    1966 13.6 16.9
    1967 13.7 17.2
    1968 13.6 17.1
    1969 13.7 17.3
    1970 13.8 17.5
    1971 13.9 17.6
    1972 13.8 17.6
    1973 13.9 17.7
    1974 13.8 17.7
    1975 14.0 17.9
    1976 14.0 18.1
    1977 14.2 18.4
    1978 14.4 18.6
    1979 14.5 18.8
    1980 14.5 18.7
    1981 14.7 19.0
    1982 14.6 18.9
    1983 14.8 19.1
    1984 14.9 19.2
    1985 14.8 19.2
    1986 15.0 19.1
    1987 15.1 19.4
    1988 15.0 19.4
    1989 15.3 19.5
    1990 15.5 19.7
    1991 15.6 19.7
    1992 15.8 19.9
    1993 15.6 19.7
    1994 15.8 19.8
    1995 15.9 19.8
    1996 16.0 19.8
    1997 16.1 19.9
    1998 16.1 20.0
    1999 16.3 20.1
    2000 16.7 20.3
    2001 16.9 20.4
    2002 17.0 20.4
    2003 17.2 20.6
    2004 17.5 20.8
    2005 17.7 20.9
    2006 18.0 21.2
    2007 18.0 21.1
    2008 18.2 21.3
    2009 18.4 21.6
    2010 18.7 21.7
    2011 18.9 21.8
    2012 19.0 22.0
    2013 19.1 21.9
    2014 19.1 22.0
    2015 19.2 21.9
    2016 19.4 22.2
    2017 19.3 22.1
    2018 19.4 22.1
    2019 19.6 22.4
    2020 19.4 22.1
    Life Expectancies at Age 65 for Canada, without improvements after the year shown
    (Projected)
    Year Males Females
    2020 19.4 22.1
    2021 19.5 22.2
    2022 19.9 22.5
    2023 20.2 22.8
    2024 20.3 22.8
    2025 20.4 22.9
    2026 20.5 23.0
    2027 20.6 23.1
    2028 20.7 23.2
    2029 20.8 23.3
    2030 20.9 23.3
    2031 21.0 23.4
    2032 21.1 23.5
    2033 21.2 23.6
    2034 21.2 23.6
    2035 21.3 23.7
    2036 21.4 23.7
    2037 21.4 23.8
    2038 21.5 23.8
    2039 21.6 23.9
    2040 21.6 24.0
    2041 21.7 24.0
    2042 21.7 24.1
    2043 21.8 24.1
    2044 21.8 24.2
    2045 21.9 24.2
    2046 22.0 24.3
    2047 22.0 24.3
    2048 22.1 24.4
    2049 22.1 24.4
    2050 22.2 24.5
    2051 22.3 24.5
    2052 22.3 24.6
    2053 22.4 24.7
    2054 22.4 24.7
    2055 22.5 24.8
    2056 22.5 24.8
    2057 22.6 24.9
    2058 22.6 24.9
    2059 22.7 25.0
    2060 22.8 25.0
    2061 22.8 25.1
    2062 22.9 25.1
    2063 22.9 25.2
    2064 23.0 25.2
    2065 23.0 25.3
    2066 23.1 25.3
    2067 23.2 25.4
    2068 23.2 25.4
    2069 23.3 25.5
    2070 23.3 25.5
    2071 23.4 25.6
    2072 23.4 25.6
    2073 23.5 25.7
    2074 23.5 25.8
    2075 23.6 25.8
    2076 23.7 25.9
    2077 23.7 25.9
    2078 23.8 26.0
    2079 23.8 26.0
    Table 43 Life Expectancies for Canada, without mortality improvements after the year shownTable 43 Footnote 1
    Age Males Females
    2022 2025 2050 2075 2022 2025 2050 2075
    0 80.5 81.2 83.7 85.6 84.6 85.1 87.1 88.8
    10 71.0 71.6 74.0 75.9 75.0 75.5 77.5 79.1
    20 61.1 61.7 64.1 66.0 65.1 65.6 67.5 69.1
    30 51.6 52.2 54.5 56.3 55.3 55.8 57.7 59.3
    40 42.2 42.8 44.9 46.7 45.6 46.1 47.9 49.5
    50 32.9 33.5 35.5 37.2 36.1 36.6 38.3 39.8
    60 24.0 24.6 26.5 28.0 26.9 27.3 29.0 30.4
    65 19.9 20.4 22.2 23.6 22.5 22.9 24.5 25.8
    70 16.0 16.5 18.1 19.4 18.3 18.7 20.2 21.4
    75 12.5 12.9 14.4 15.5 14.5 14.8 16.1 17.2
    80 9.4 9.8 11.0 11.9 11.0 11.3 12.4 13.4
    85 6.8 7.1 8.0 8.7 8.0 8.2 9.1 9.9
    90 4.6 4.9 5.5 5.9 5.5 5.7 6.3 6.8
    100 2.2 2.3 2.5 2.6 2.5 2.6 2.8 3.0

    Table 43 Footnotes

    Table 43 Footnote 1

    These are calendar year life expectancies based on the mortality rates of the given attained year.

    Return to table 43 footnote 1

    Table 44 Life Expectancies for Canada, with mortality improvements after the year shownTable 44 Footnote 1
    Age Males Females
    2022 2025 2050 2075 2022 2025 2050 2075
    0 86.7 86.9 88.7 90.4 90.0 90.2 91.7 93.1
    10 76.4 76.6 78.4 80.1 79.8 80.0 81.5 82.9
    20 65.8 66.0 67.9 69.5 69.2 69.4 71.0 72.4
    30 55.5 55.7 57.5 59.2 58.8 59.0 60.6 62.0
    40 45.3 45.5 47.3 49.0 48.5 48.7 50.2 51.7
    50 35.3 35.6 37.3 38.9 38.3 38.5 40.0 41.4
    60 25.8 26.0 27.6 29.1 28.5 28.7 30.1 31.5
    65 21.3 21.5 23.1 24.5 23.8 24.0 25.4 26.7
    70 17.2 17.4 18.8 20.1 19.4 19.6 20.8 22.1
    75 13.4 13.6 14.8 16.0 15.3 15.4 16.6 17.7
    80 10.0 10.2 11.2 12.2 11.6 11.7 12.7 13.7
    85 7.1 7.3 8.1 8.9 8.3 8.5 9.3 10.0
    90 4.8 5.0 5.5 6.0 5.7 5.8 6.4 6.8
    100 2.2 2.3 2.5 2.6 2.6 2.6 2.8 3.0

    Table 44 Footnotes

    Table 44 Footnote 1

    These are cohort life expectancies that take into account assumed future improvements in mortality of the general population and therefore differ from calendar year life expectancies, which are based on the mortality rates of the given attained year.

    Return to table 44 footnote 1

    B.3.4 Net Migration

    The net migration rate refers to the net effect relative to the population of the number of immigrants less the number of total (net) emigrants, plus 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 2021, annual immigration to Canada varied between 84,000 and 323,000, annual emigration from Canada fluctuated between 35,000 and 95,000, and the annual number of returning Canadians fluctuated between 8,000 and 55,000. The 2020 and 2021 data are especially volatile compared to historical experience due to the COVID-19 pandemic, and they were thus excluded from our analysis in setting the net migration rate assumption. The net migration rate for year ending June 2021 stands at 0.41% of the population, well below pre-pandemic levels. In the 2020 Annual Report to Parliament, the Government of Canada released details on its Immigration Levels Plan for 2021-2023. The target numbers of new permanent residents are set at 401,000 in 2021, 411,000 in 2023 and 421,000 in 2023.

    Over the same period, the annual net increase in the number of non-permanent residents fluctuated between -71,000 and 169,000. In the most recent years, the number of international students and temporary workers with permits under the International Mobility Program have grown substantially. They represent the two largest groups of non-permanent residents, accounting for more than half of non-permanent residents.

    The number of temporary workers is assumed to stabilize in future as the aging of the labour force and related labour shortages subside. It is also expected that the number of foreign students will stabilize over the next five years. Therefore, the annual net increase in the number of non-permanent residents is projected to fall gradually to reach zero in 2026 and to remain at that level thereafter.

    The actual 2021 net migration rate of 0.41% is assumed to increase to 1.04% of the Canadian population in 2022, 1.05% in 2023, and 0.93% in 2024. From 2025 to 2031, the net migration rate is assumed to decrease gradually to reach an ultimate level of 0.64%, which corresponds to the average rate experienced over the ten-year period 2010-2019, 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 0.64% due to 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 2022 through 2026. Chart 6 shows the net migration experience since 1972 and the projected rates.

    Chart 6 Net Migration Rate (Canada)

    Text description: Chart 6 Net Migration Rate (Canada)
    Net Migration Rate, including non-permanent residents (Canada)
    (Historical)
    Year Migration rate, including NPR
    1972 0.42%
    1973 0.53%
    1974 0.74%
    1975 0.76%
    1976 0.58%
    1977 0.44%
    1978 0.28%
    1979 0.25%
    1980 0.56%
    1981 0.49%
    1982 0.47%
    1983 0.29%
    1984 0.24%
    1985 0.23%
    1986 0.33%
    1987 0.60%
    1988 0.63%
    1989 1.07%
    1990 0.75%
    1991 0.50%
    1992 0.54%
    1993 0.51%
    1994 0.55%
    1995 0.52%
    1996 0.57%
    1997 0.55%
    1998 0.44%
    1999 0.45%
    2000 0.57%
    2001 0.76%
    2002 0.76%
    2003 0.58%
    2004 0.61%
    2005 0.62%
    2006 0.66%
    2007 0.67%
    2008 0.75%
    2009 0.80%
    2010 0.77%
    2011 0.67%
    2012 0.75%
    2013 0.74%
    2014 0.70%
    2015 0.48%
    2016 0.84%
    2017 0.90%
    2018 1.15%
    2019 1.19%
    2020 0.95%
    2021 0.41%
    Net Migration Rate, including non-permanent residents (Canada)
    (Projected)
    Year Migration rate, including NPR
    (Projected)
    2022 1.04%
    2023 1.05%
    2024 0.93%
    2025 0.86%
    2026 0.79%
    2027 0.76%
    2028 0.73%
    2029 0.69%
    2030 0.66%
    2031 0.64%
    2032 0.64%
    2033 0.64%
    2034 0.64%
    2035 0.64%

    To project Québec’s population, the same migration components of immigration, total emigration and net increase in non-permanent residents are considered. An additional component consisting of the net interprovincial migration for Québec is also included. It is assumed that the 2021 net migration rate of 0.16% for Québec will increase gradually to reach an ultimate level of 0.43% in 2031, assuming a decline in the net increase of non-permanent residents to zero by 2026. The ultimate net migration rate for Québec of 0.43% corresponds to the average experience over the last 10 years ending in 2019, excluding the net increase in non-permanent residents.

    For both Canada and Québec, the distributions of immigrants, total emigrants, and non-permanent residents by age and sex used for the demographic projections were derived from Statistics Canada data averaged over the period 2010 to 2019.

    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 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)

    Text description: Chart 7 Age Distribution of the Population of Canada less Québec (thousands)
    Age Distribution of the Population of Canada less Québec
    (thousands)
    Age Group 1966 2021 2030 2050
    0-4 1,585,423 1,460,901 1,751,000 1,754,529
    5-9 1,630,472 1,581,846 1,680,142 1,820,283
    10-14 1,479,183 1,626,556 1,677,075 1,905,308
    15-19 1,306,941 1,632,639 1,757,610 2,013,529
    20-24 1,042,168 1,966,573 1,809,073 2,077,312
    25-29 899,017 2,084,777 1,971,369 2,086,590
    30-34 897,837 2,140,658 2,404,358 2,221,097
    35-39 929,325 2,096,750 2,490,511 2,376,705
    40-44 920,538 1,917,880 2,396,254 2,430,956
    45-49 801,523 1,851,481 2,218,024 2,473,487
    50-54 730,747 1,894,690 1,962,285 2,699,215
    55-59 602,941 2,076,452 1,880,087 2,619,894
    60-64 494,436 1,979,011 1,880,276 2,416,883
    65-69 401,997 1,691,356 2,029,378 2,155,393
    70-74 330,969 1,400,638 1,796,392 1,822,676
    75-79 238,561 949,859 1,414,965 1,612,426
    80-84 143,973 634,180 1,031,455 1,400,358
    85-89 63,212 395,548 567,281 1,191,877
    90+ 21,997 259,818 369,539 999,232

    The population of Canada as at 1 July 2021 is 38.2 million, while the population of Canada less Québec is 29.6 million. Table 45 and Table 46 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 2100. Table 47 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 be 18.4% of the total population in 2022 and to increase significantly thereafter to 28.4% by 2100. The number of people aged 65 and older as a proportion of the number of people aged 20 to 64 also increases significantly over the same period, from a projected 30.4% in 2022 to 53.7% by 2100. This proportion affects the ratio of benefits to contributions under the CPP.

    Table 45 Population of Canada by Age
    (thousands)
    Year 0-17 18-69 70+ 0-19 20-64 65+ Total
    2022 7,297 26,401 5,037 8,115 23,273 7,347 38,735
    2023 7,391 26,616 5,240 8,226 23,400 7,621 39,247
    2024 7,469 26,791 5,456 8,319 23,504 7,893 39,716
    2025 7,531 26,947 5,682 8,399 23,591 8,169 40,160
    2026 7,578 27,093 5,908 8,467 23,667 8,445 40,579
    2027 7,626 27,222 6,139 8,528 23,748 8,711 40,987
    2028 7,674 27,334 6,374 8,580 23,821 8,981 41,382
    2029 7,728 27,428 6,606 8,631 23,892 9,239 41,762
    2030 7,775 27,508 6,841 8,678 23,973 9,474 42,124
    2035 7,976 27,870 7,913 8,886 24,608 10,264 43,758
    2040 8,204 28,505 8,465 9,100 25,289 10,784 45,173
    2045 8,263 29,383 8,766 9,246 25,947 11,219 46,412
    2050 8,268 30,240 9,035 9,271 26,516 11,755 47,543
    2055 8,343 30,837 9,460 9,335 26,911 12,394 48,640
    2060 8,505 31,243 10,043 9,498 27,088 13,204 49,790
    2065 8,713 31,486 10,818 9,720 27,279 14,018 51,017
    2070 8,923 31,773 11,566 9,947 27,781 14,534 52,262
    2080 9,227 33,063 12,295 10,314 28,877 15,395 54,586
    2090 9,509 34,487 12,777 10,626 30,146 16,000 56,773
    2100 9,917 35,754 13,541 11,068 31,153 16,991 59,212
    Table 46 Population of Canada less Québec by Age
    (thousands)
    Year 0-17 18-69 70+ 0-19 20-64 65+ Total
    2022 5,684 20,605 3,785 6,335 18,203 5,536 30,074
    2023 5,763 20,814 3,942 6,429 18,344 5,746 30,519
    2024 5,835 20,994 4,108 6,510 18,471 5,957 30,937
    2025 5,895 21,156 4,283 6,581 18,579 6,173 31,333
    2026 5,944 21,307 4,458 6,644 18,674 6,390 31,708
    2027 5,996 21,442 4,636 6,705 18,768 6,600 32,073
    2028 6,049 21,560 4,817 6,759 18,851 6,815 32,426
    2029 6,107 21,662 4,996 6,814 18,929 7,022 32,764
    2030 6,159 21,748 5,180 6,866 19,012 7,209 33,087
    2035 6,387 22,135 6,036 7,105 19,580 7,873 34,557
    2040 6,619 22,722 6,513 7,328 20,191 8,335 35,854
    2045 6,679 23,529 6,800 7,474 20,836 8,699 37,008
    2050 6,676 24,375 7,027 7,494 21,402 9,182 38,078
    2055 6,741 24,974 7,413 7,548 21,797 9,783 39,128
    2060 6,901 25,373 7,956 7,706 22,020 10,504 40,229
    2065 7,116 25,647 8,635 7,932 22,211 11,255 41,398
    2070 7,332 25,930 9,320 8,167 22,665 11,750 42,581
    2080 7,632 27,165 10,001 8,531 23,763 12,505 44,799
    2090 7,900 28,591 10,403 8,829 25,021 13,045 46,894
    2100 8,307 29,828 11,094 9,267 25,996 13,966 49,228
    Chart 8 Population of Canada less Québec (millions)

    Text description: Chart 8 Population of Canada less Québec (millions)
    Population of Canada less Québec
    (millions)
    Year Population 0-19 Population 20-64 Population 65+
    1975 6,124,266 9,202,837 1,485,869
    1976 6,093,541 9,425,810 1,533,696
    1977 6,060,162 9,648,081 1,584,467
    1978 6,016,339 9,870,769 1,635,636
    1979 5,958,819 10,083,892 1,692,837
    1980 5,915,814 10,342,644 1,751,212
    1981 5,863,694 10,605,114 1,803,900
    1982 5,820,851 10,863,114 1,852,346
    1983 5,762,628 11,105,213 1,895,634
    1984 5,701,591 11,329,606 1,944,636
    1985 5,651,029 11,514,283 2,011,002
    1986 5,628,904 11,684,398 2,078,806
    1987 5,648,705 11,860,023 2,155,889
    1988 5,689,656 12,042,425 2,222,589
    1989 5,756,951 12,298,390 2,296,312
    1990 5,819,878 12,507,303 2,366,971
    1991 5,858,033 12,680,641 2,431,350
    1992 5,921,059 12,848,876 2,491,319
    1993 5,968,591 13,011,820 2,547,816
    1994 6,023,769 13,184,442 2,600,049
    1995 6,068,615 13,359,719 2,654,758
    1996 6,115,933 13,537,128 2,710,260
    1997 6,142,329 13,724,795 2,764,213
    1998 6,164,880 13,879,517 2,814,841
    1999 6,170,750 14,047,934 2,859,352
    2000 6,182,011 14,240,897 2,905,871
    2001 6,193,812 14,473,036 2,957,598
    2002 6,194,019 14,713,503 3,010,901
    2003 6,171,356 14,921,171 3,065,748
    2004 6,153,715 15,127,988 3,123,362
    2005 6,140,107 15,341,194 3,180,976
    2006 6,131,083 15,551,164 3,256,961
    2007 6,121,301 15,747,606 3,327,202
    2008 6,129,640 15,945,821 3,409,932
    2009 6,134,464 16,151,770 3,499,278
    2010 6,134,228 16,349,977 3,591,462
    2011 6,136,342 16,498,886 3,699,010
    2012 6,136,159 16,663,562 3,853,400
    2013 6,139,737 16,823,666 4,008,671
    2014 6,154,256 16,979,733 4,153,263
    2015 6,171,685 17,063,243 4,292,708
    2016 6,228,207 17,211,302 4,444,028
    2017 6,271,892 17,364,198 4,607,083
    2018 6,322,163 17,565,067 4,776,116
    2019 6,352,622 17,781,369 4,963,756
    2020 6,361,714 17,943,375 5,153,815
    2021 6,301,942 18,008,272 5,331,399
    2022 6,335,216 18,203,135 5,535,712
    2023 6,429,083 18,343,831 5,746,437
    2024 6,509,560 18,470,545 5,956,673
    2025 6,581,158 18,579,372 6,172,767
    2026 6,644,372 18,674,353 6,389,590
    2027 6,704,632 18,768,100 6,600,176
    2028 6,758,944 18,851,358 6,815,335
    2029 6,813,679 18,928,902 7,021,854
    2030 6,865,828 19,012,236 7,209,008
    2031 6,919,240 19,107,197 7,366,854
    2032 6,968,806 19,225,218 7,500,171
    2033 7,016,366 19,346,113 7,626,399
    2034 7,062,044 19,464,203 7,750,592
    2035 7,104,985 19,579,650 7,872,849
    2036 7,145,274 19,694,972 7,990,169
    2037 7,186,212 19,820,958 8,088,920
    2038 7,229,694 19,949,635 8,175,897
    2039 7,277,188 20,075,009 8,255,836
    2040 7,328,182 20,191,377 8,334,899
    2041 7,385,052 20,299,730 8,409,921
    2042 7,417,675 20,431,959 8,479,920
    2043 7,441,263 20,571,196 8,547,388
    2044 7,459,994 20,706,728 8,619,257
    2045 7,473,885 20,835,771 8,698,541
    2046 7,483,134 20,960,515 8,783,195
    2047 7,488,578 21,081,042 8,872,965
    2048 7,491,096 21,194,268 8,970,678
    2049 7,492,026 21,301,976 9,073,616
    2050 7,493,649 21,402,139 9,181,963
    2051 7,497,468 21,494,487 9,294,918
    2052 7,504,121 21,586,086 9,405,490
    2053 7,514,323 21,671,760 9,518,933
    2054 7,528,594 21,742,490 9,644,387
    2055 7,547,541 21,796,901 9,783,272
    2056 7,571,596 21,848,091 9,922,681
    2057 7,600,073 21,898,511 10,061,109
    2058 7,632,017 21,945,206 10,202,580
    2059 7,667,268 21,986,957 10,348,696
    2060 7,705,976 22,019,561 10,503,645
    2061 7,748,091 22,051,190 10,659,357
    2062 7,792,592 22,089,606 10,808,634
    2063 7,838,342 22,129,797 10,956,960
    2064 7,884,961 22,171,456 11,104,565
    2065 7,932,271 22,211,190 11,254,530
    2066 7,980,076 22,267,173 11,388,394
    2067 8,027,789 22,352,707 11,492,849
    2068 8,074,893 22,456,332 11,579,264
    2069 8,121,208 22,559,534 11,665,830
    2070 8,166,573 22,664,856 11,749,707
    2071 8,210,905 22,771,923 11,830,981
    2072 8,253,889 22,876,353 11,914,055
    2073 8,295,161 22,976,410 12,000,798
    2074 8,334,545 23,079,615 12,083,708
    2075 8,371,878 23,185,335 12,163,502
    2076 8,407,045 23,298,426 12,235,462
    2077 8,440,283 23,411,502 12,306,857
    2078 8,471,910 23,526,488 12,375,604
    2079 8,502,038 23,643,713 12,441,467
    2080 8,530,793 23,762,721 12,505,031
    2081 8,558,326 23,883,723 12,566,268
    2082 8,585,221 24,008,830 12,622,876
    2083 8,612,153 24,138,529 12,674,102
    2084 8,639,487 24,273,751 12,719,046
    2085 8,667,550 24,413,935 12,758,356
    2086 8,696,619 24,561,058 12,790,226
    2087 8,727,051 24,686,021 12,843,866
    2088 8,759,151 24,802,446 12,905,795
    2089 8,793,057 24,914,013 12,972,606
    2090 8,828,841 25,020,756 13,044,616
    2091 8,866,495 25,122,871 13,122,060
    2092 8,905,964 25,220,904 13,204,859
    2093 8,947,142 25,315,517 13,292,805
    2094 8,989,877 25,408,011 13,385,018
    2095 9,033,982 25,500,576 13,479,668
    2096 9,079,226 25,594,720 13,575,540
    2097 9,125,352 25,690,883 13,672,414
    2098 9,172,122 25,789,499 13,769,973
    2099 9,219,328 25,890,946 13,867,849
    2100 9,266,764 25,995,681 13,965,534
    Table 47 Analysis of Population of Canada less Québec by Age
    Year % of Total PopulationTable 47 Footnote 1 % of Total PopulationTable 47 Footnote 1 Age 65 + as % of Age 20-64
    0-17 18-69 70+ 0-19 20-64 65+
    2022 18.9 68.5 12.6 21.1 60.5 18.4 30.4
    2023 18.9 68.2 12.9 21.1 60.1 18.8 31.3
    2024 18.9 67.9 13.3 21.0 59.7 19.3 32.2
    2025 18.8 67.5 13.7 21.0 59.3 19.7 33.2
    2026 18.7 67.2 14.1 21.0 58.9 20.2 34.2
    2027 18.7 66.9 14.5 20.9 58.5 20.6 35.2
    2028 18.7 66.5 14.9 20.8 58.1 21.0 36.2
    2029 18.6 66.1 15.2 20.8 57.8 21.4 37.1
    2030 18.6 65.7 15.7 20.8 57.5 21.8 37.9
    2035 18.5 64.1 17.5 20.6 56.7 22.8 40.2
    2040 18.5 63.4 18.2 20.4 56.3 23.2 41.3
    2045 18.0 63.6 18.4 20.2 56.3 23.5 41.7
    2050 17.5 64.0 18.5 19.7 56.2 24.1 42.9
    2055 17.2 63.8 18.9 19.3 55.7 25.0 44.9
    2060 17.2 63.1 19.8 19.2 54.7 26.1 47.7
    2065 17.2 62.0 20.9 19.2 53.7 27.2 50.7
    2070 17.2 60.9 21.9 19.2 53.2 27.6 51.8
    2080 17.0 60.6 22.3 19.0 53.0 27.9 52.6
    2090 16.8 61.0 22.2 18.8 53.4 27.8 52.1
    2100 16.9 60.6 22.5 18.8 52.8 28.4 53.7

    Table 47 Footnotes

    Table 47 Footnote 1

    Sum of components may not equal to 100% due to rounding

    Return to table 47 footnote 1

    Table 48 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 2022 to 2100, and Chart 9 presents these figures graphically. For Canada less Québec, the number of births is projected to exceed deaths until 2039. Thereafter, all population growth is expected to come from migration.

    In 2022, the population of Canada less Québec is projected to grow by about 1.5%. The annual growth is projected to slow to about 1.0% by 2030, 0.6% by 2045 and around 0.5% by 2075. The population of Canada less Québec is expected to reach 49.2 million by 2100.

    Table 48 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
    (%)
    2022 30,074 301 359 228 432 1.1 3.8 1.5
    2023 30,519 313 361 229 445 0.8 3.8 1.5
    2024 30,937 320 330 233 417 0.7 3.7 1.4
    2025 31,333 327 308 238 397 0.6 3.6 1.3
    2026 31,708 334 285 244 375 0.5 3.5 1.2
    2027 32,073 339 274 249 365 0.5 3.3 1.1
    2028 32,426 344 263 255 353 0.4 3.3 1.1
    2029 32,764 348 252 261 339 0.4 3.0 1.0
    2030 33,087 349 241 267 323 0.4 2.7 1.0
    2035 34,557 343 239 301 281 0.6 1.6 0.8
    2040 35,854 338 248 339 246 0.6 1.0 0.7
    2045 37,008 340 255 373 222 0.6 0.9 0.6
    2050 38,078 346 262 398 210 0.5 1.2 0.6
    2055 39,128 358 269 414 212 0.3 1.4 0.5
    2060 40,229 373 276 422 226 0.1 1.5 0.6
    2065 41,398 383 283 429 237 0.2 1.4 0.6
    2070 42,581 387 291 444 235 0.5 0.7 0.6
    2080 44,799 397 305 491 211 0.5 0.5 0.5
    2090 46,894 419 319 523 215 0.4 0.6 0.5
    2100 49,228 441 334 524 250 0.4 0.7 0.5
    Chart 9 Projected Components of Population Growth for Canada less Québec (thousands)

    Text description: Chart 9 Projected Components of Population Growth for Canada less Québec (thousands)
    Projected Components of Population Growth for Canada less Québec
    (thousands)
    Year Births Deaths Births and Migration
    2022 301 228 661
    2023 313 229 674
    2024 320 233 651
    2025 327 238 635
    2026 334 244 619
    2027 339 249 614
    2028 344 255 607
    2029 348 261 599
    2030 349 267 589
    2031 348 273 579
    2032 347 280 581
    2033 346 287 581
    2034 345 294 582
    2035 343 301 582
    2036 341 309 582
    2037 339 316 582
    2038 339 324 583
    2039 338 332 584
    2040 338 339 586
    2041 337 346 587
    2042 337 353 588
    2043 338 360 590
    2044 339 367 593
    2045 340 373 595
    2046 341 378 597
    2047 342 384 600
    2048 343 389 602
    2049 344 394 605
    2050 346 398 608
    2051 348 402 611
    2052 350 406 614
    2053 352 409 618
    2054 355 412 622
    2055 358 414 626
    2056 361 416 631
    2057 364 418 635
    2058 367 420 640
    2059 370 421 644
    2060 373 422 649
    2061 376 423 653
    2062 378 425 657
    2063 380 426 660
    2064 382 428 663
    2065 383 429 666
    2066 384 431 669
    2067 385 434 672
    2068 386 437 674
    2069 387 440 676
    2070 387 444 678
    2071 388 448 680
    2072 388 452 682
    2073 389 456 685
    2074 390 461 687
    2075 391 466 689
    2076 392 471 692
    2077 393 476 694
    2078 394 481 697
    2079 396 486 700
    2080 397 491 703
    2081 399 496 706
    2082 401 500 709
    2083 403 504 712
    2084 405 508 716
    2085 407 512 719
    2086 409 515 723
    2087 412 517 726
    2088 414 520 730
    2089 417 522 734
    2090 419 523 738
    2091 421 524 742
    2092 424 525 746
    2093 426 526 749
    2094 429 526 753
    2095 431 526 757
    2096 433 525 760
    2097 435 525 764
    2098 437 525 767
    2099 439 524 771
    2100 441 524 774

    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 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

    Text description: Chart 10 Components of the Labour Market

    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 of this report. The projected effect of working beneficiaries is reflected in all these assumptions.

    B.4.1.1 Active Population (Canada)

    Table 49 to Table 51 provide projections of the active and employed populations and associated labour force participation, employment, and unemployment rates for Canada.

    Table 49 Active and Employed Populations (Canada, ages 15 and over)
    (thousands)
    Year PopulationTable 49 Footnote 1 Active Population Employed
    Males Females Total Males Females Total Males Females Total
    2022 15,661 16,048 31,709 10,908 9,741 20,649 10,211 9,199 19,410
    2023 15,879 16,274 32,153 11,025 9,860 20,885 10,356 9,339 19,695
    2024 16,079 16,482 32,561 11,129 9,967 21,096 10,443 9,431 19,873
    2025 16,265 16,679 32,944 11,225 10,069 21,294 10,521 9,517 20,038
    2026 16,435 16,862 33,297 11,313 10,166 21,479 10,592 9,598 20,190
    2027 16,601 17,039 33,640 11,400 10,264 21,663 10,661 9,681 20,342
    2028 16,761 17,210 33,971 11,481 10,358 21,839 10,738 9,770 20,507
    2029 16,913 17,374 34,287 11,560 10,449 22,009 10,812 9,855 20,667
    2030 17,059 17,529 34,588 11,636 10,538 22,174 10,883 9,938 20,821
    2035 17,695 18,219 35,914 12,031 11,002 23,033 11,252 10,376 21,628
    2040 18,287 18,860 37,147 12,356 11,291 23,647 11,556 10,649 22,205
    2045 18,873 19,484 38,358 12,681 11,575 24,256 11,859 10,918 22,776
    2050 19,401 20,046 39,447 12,952 11,815 24,767 12,111 11,145 23,256
    2055 19,875 20,539 40,414 13,139 11,993 25,132 12,286 11,313 23,599
    2060 20,348 21,019 41,367 13,286 12,142 25,428 12,424 11,453 23,877
    2065 20,836 21,516 42,352 13,451 12,307 25,758 12,579 11,608 24,187
    2070 21,333 22,031 43,364 13,681 12,516 26,196 12,794 11,804 24,599
    2080 22,316 23,077 45,393 14,263 13,027 27,290 13,338 12,286 25,625
    2090 23,224 24,047 47,271 14,849 13,552 28,401 13,886 12,783 26,669
    2100 24,227 25,052 49,279 15,402 14,039 29,440 14,404 13,240 27,644

    Table 49 Footnotes

    Table 49 Footnote 1

    Adjusted to the basis used by Statistics Canada in its Labour Force Survey.

    Return to table 49 footnote 1

    Table 50 Labour Force Participation, Employment, and Unemployment Rates (Canada, ages 15 and over)
    (percentages)
    Year Labour Force Participation Rate Employment Rate Unemployment Rate
    Males Females Total Males Females Total Males Females Total
    2022 69.7 60.7 65.1 65.2 57.3 61.2 6.4 5.6 6.0
    2023 69.4 60.6 65.0 65.2 57.4 61.3 6.1 5.3 5.7
    2024 69.2 60.5 64.8 64.9 57.2 61.0 6.2 5.4 5.8
    2025 69.0 60.4 64.6 64.7 57.1 60.8 6.3 5.5 5.9
    2026 68.8 60.3 64.5 64.4 56.9 60.6 6.4 5.6 6.0
    2027 68.7 60.2 64.4 64.2 56.8 60.5 6.5 5.7 6.1
    2028 68.5 60.2 64.3 64.1 56.8 60.4 6.5 5.7 6.1
    2029 68.4 60.1 64.2 63.9 56.7 60.3 6.5 5.7 6.1
    2030 68.2 60.1 64.1 63.8 56.7 60.2 6.5 5.7 6.1
    2035 68.0 60.4 64.1 63.6 57.0 60.2 6.5 5.7 6.1
    2040 67.6 59.9 63.7 63.2 56.5 59.8 6.5 5.7 6.1
    2045 67.2 59.4 63.2 62.8 56.0 59.4 6.5 5.7 6.1
    2050 66.8 58.9 62.8 62.4 55.6 59.0 6.5 5.7 6.1
    2055 66.1 58.4 62.2 61.8 55.1 58.4 6.5 5.7 6.1
    2060 65.3 57.8 61.5 61.1 54.5 57.7 6.5 5.7 6.1
    2065 64.6 57.2 60.8 60.4 54.0 57.1 6.5 5.7 6.1
    2070 64.1 56.8 60.4 60.0 53.6 56.7 6.5 5.7 6.1
    2080 63.9 56.4 60.1 59.8 53.2 56.5 6.5 5.7 6.1
    2090 63.9 56.4 60.1 59.8 53.2 56.4 6.5 5.7 6.1
    2100 63.6 56.0 59.7 59.5 52.9 56.1 6.5 5.7 6.1
    Table 51 Labour Force Participation Rates (Canada)
    (percentages)
    Age Group Males Females
    2022 2025 2035 2050 2022 2025 2035 2050
    15-19 48.7 49.4 52.0 52.0 51.2 51.8 54.0 54.0
    20-24 77.1 77.7 80.0 80.0 75.2 75.9 78.0 78.0
    25-29 88.8 89.6 92.0 92.0 84.4 85.5 89.0 89.0
    30-34 92.4 92.8 94.0 94.0 84.1 84.8 87.0 87.0
    35-39 93.4 93.6 94.0 94.0 83.3 84.4 88.0 88.0
    40-44 92.8 93.1 94.0 94.0 85.0 85.9 89.0 89.0
    45-49 92.3 92.5 93.0 93.0 85.0 86.0 89.0 89.0
    50-54 90.0 90.3 91.0 91.0 83.3 84.2 87.0 87.0
    55-59 82.4 82.7 84.0 84.0 72.3 73.1 76.0 76.0
    60-64 64.8 65.1 66.0 66.0 51.3 51.7 53.0 53.0
    65-69 34.0 34.4 36.0 36.0 21.7 22.3 24.0 24.0
    70 and Over 11.4 11.7 13.0 13.0 4.5 4.7 5.5 5.5
    55-69 61.7 60.9 62.6 63.7 49.4 48.8 51.5 52.3
    55 and Over 43.0 41.2 37.9 39.7 31.4 30.0 27.7 28.7
    18-69 80.8 81.1 83.2 82.2 72.6 73.2 76.8 75.9
    15 and Over 69.7 69.0 68.0 66.8 60.7 60.4 60.4 58.9

    Several trends are taken into account in developing the above assumptions. Some of these trends are discussed below.

    Male-Female Labour Force Participation Gap

    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 2021 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. It has also been observed that participation rates for those aged 55 and older have increased significantly over the last decade for both men and women.

    In 1976, overall male labour force 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 9.0% in 2021 (participation rates of 69.6% for males, 60.6% for females), slightly higher than its pre-pandemic level of 8.8% in 2018 and 2019. 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 7.6% by 2035 (68.0% for males vs. 60.4% for females). A part of this reduction comes from the expected impact on the female labour force due to the Early Learning and Child Care Plan initiative announced by the federal Government in 2021. This is in line with the observed historical impact on the province of Quebec’s female labour force following the implementation of their childcare system in 1997.

    Population Aging

    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 50 to fall from 65.1% in 2021 to 60.3% in 2050, instead of 62.8% as projected under the best-estimate assumptions.

    An assumption underlying the future overall participation rate is an increase in participation rates for age groups 55 and over as a result of an expected continued trend toward longer working lives. Continued trends in making work more accessible to older workers (such as wage subsidies for hiring older workers and flexible work arrangements), the removal of the work cessation test to receive the CPP retirement pension prior to age 65, the projected continued increases 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.

    The participation rates for those aged 55 to 59 are assumed to increase from 82.4% to 84.0% for males and from 72.3% to 76.0% for females over the period 2021 to 2050. Over the same period, the participation rates for those aged 60 to 64 are assumed to increase from 64.8% to 66.0% and from 51.3% to 53.0% for males and females, respectively, and the participation rates for those aged 65 to 69 are assumed to increase from 34.0% to 36.0% and from 21.7% 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.

    Chart 11 Labour Force Participation Rates (Canada)

    Text description: Chart 11 Labour Force Participation Rates (Canada)
    Labour Force Participation Rates (Canada)
    (Historical)
    Year Males (55-59) Males (60-64) Males (65-69) Females (55-59) Females (60-64) Females (65-69)
    1995 0.7209 0.4339 0.1671 0.4825 0.2342 0.0730
    1996 0.7158 0.4351 0.1652 0.4838 0.2316 0.0710
    1997 0.7175 0.4581 0.1687 0.4814 0.2428 0.0781
    1998 0.7071 0.4473 0.1774 0.5021 0.2525 0.0737
    1999 0.7189 0.4624 0.1688 0.506 0.2584 0.0714
    2000 0.7255 0.4576 0.1599 0.5305 0.2702 0.0715
    2001 0.7216 0.4648 0.1614 0.5321 0.2731 0.0779
    2002 0.7313 0.4999 0.1842 0.5447 0.3019 0.0880
    2003 0.7538 0.5205 0.2114 0.601 0.3226 0.1038
    2004 0.7555 0.5314 0.2169 0.6001 0.3443 0.1103
    2005 0.7633 0.5389 0.2306 0.6039 0.3505 0.1213
    2006 0.7599 0.5306 0.2302 0.6137 0.3613 0.1216
    2007 0.774 0.5373 0.2446 0.6261 0.3878 0.1263
    2008 0.7681 0.5458 0.2655 0.6454 0.3922 0.1496
    2009 0.7605 0.566 0.2856 0.6565 0.4204 0.1517
    2010 0.7715 0.5707 0.3041 0.6611 0.4225 0.1648
    2011 0.7712 0.5742 0.2973 0.6718 0.4283 0.1734
    2012 0.7812 0.5701 0.2935 0.6791 0.4395 0.1825
    2013 0.7757 0.5929 0.3112 0.6847 0.4571 0.1890
    2014 0.7796 0.592 0.3202 0.6802 0.4598 0.1913
    2015 0.7945 0.5983 0.3152 0.6755 0.4661 0.1928
    2016 0.7962 0.614 0.316 0.7005 0.4672 0.1986
    2017 0.7989 0.6073 0.3317 0.7048 0.4760 0.2034
    2018 0.797 0.6227 0.3132 0.7023 0.4888 0.2041
    2019 0.8047 0.6346 0.3400 0.7032 0.4910 0.2269
    2020 0.8044 0.6309 0.3285 0.7043 0.4789 0.2028
    2021 0.8222 0.6475 0.3380 0.7198 0.5120 0.2157
    Labour Force Participation Rates (Canada)
    (Projected)
    Year Males (55-59) Males (60-64) Males (65-69) Females (55-59) Females (60-64) Females (65-69)
    2022 0.8235 0.6484 0.3396 0.7227 0.5133 0.2174
    2023 0.8248 0.6493 0.3412 0.7256 0.5146 0.2191
    2024 0.8261 0.6502 0.3428 0.7285 0.5159 0.2208
    2025 0.8274 0.6511 0.3444 0.7314 0.5172 0.2225
    2026 0.8287 0.6520 0.3460 0.7343 0.5185 0.2242
    2027 0.8300 0.6529 0.3476 0.7372 0.5198 0.2259
    2028 0.8313 0.6538 0.3492 0.7401 0.5211 0.2276
    2029 0.8326 0.6547 0.3508 0.7430 0.5224 0.2293
    2030 0.8339 0.6556 0.3524 0.7459 0.5237 0.2310
    2031 0.8352 0.6565 0.3540 0.7488 0.5250 0.2327
    2032 0.8365 0.6574 0.3556 0.7517 0.5263 0.2344
    2033 0.8378 0.6583 0.3572 0.7546 0.5276 0.2361
    2034 0.8391 0.6592 0.3588 0.7575 0.5289 0.2378
    2035 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2036 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2037 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2038 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2039 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2040 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2041 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2042 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2043 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2044 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2045 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2046 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2047 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2048 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2049 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    2050 0.8400 0.6600 0.3600 0.7600 0.5300 0.2400
    Labour Shortages

    Despite the assumed future increase in participation rates of women and older workers, as well as an assumed continued reliance on skilled immigrant workers, it is still expected that there will be continued 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.

    Based on the foregoing, the participation rates of both men and women are expected to increase over the projection period from their 2021 levels for all age groups. 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 from population aging.

    For the purpose of projecting the participation rates, the projection period has been divided into two periods: 2022 to 2035 and from 2035 onward. From 2022 to 2035, the projected participation rates are based on the expected impact of the above-mentioned 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 rate of growth of approximately 0.4% for the Canadian active population (that is, the labour force) after 2035.

    B.4.1.2 Employment (Canada)

    In Canada, the annual job creation rate (i.e. the change in the number of persons employed) has been on average about 1.5% since 1976. However, this rate has varied over the years. It is assumed that the job creation rate will be 2.9% in 2022 and 1.5% in 2023, corresponding to an assumed decrease in unemployment rate from 7.5% in 2021 (actual) to 6.0% in 2022 and 5.7% in 2023. These rates are based on the recent experience and various economic forecasts, and reflect the expected labour market recovery from the COVID-19 pandemic. It is further assumed that over the 2024-2027 period, the job creation rate will be slightly lower than the labour force growth rate, so that the unemployment rate will slowly increase from 5.7% in 2023 to 6.1% by 2027.

    Over the long term, the job creation rate is projected to be the same as the labour force growth of 0.4%. This reflects the ultimate assumption for the unemployment rate of 6.1% for years 2027 and thereafter.

    Table 52 shows the projected number of employed persons and the employment rate for those aged 18 to 69, in Canada.

    Table 52 Employment of Population
    (Canada, ages 18 to 69)
    Year Population
    (thousands)
    Employed
    (thousands)
    Employment Rate
    (%)
    Males Females Males Females Males Females
    2022 13,241 13,161 9,768 8,874 73.8 67.4
    2023 13,347 13,269 9,890 8,998 74.1 67.8
    2024 13,433 13,358 9,957 9,077 74.1 68.0
    2025 13,508 13,439 10,017 9,152 74.2 68.1
    2026 13,578 13,516 10,071 9,224 74.2 68.2
    2027 13,640 13,583 10,123 9,298 74.2 68.5
    2028 13,692 13,642 10,182 9,378 74.4 68.7
    2029 13,737 13,691 10,239 9,454 74.5 69.1
    2030 13,776 13,733 10,293 9,528 74.7 69.4
    2035 13,950 13,919 10,579 9,923 75.8 71.3
    2040 14,264 14,241 10,843 10,174 76.0 71.4
    2045 14,711 14,672 11,115 10,416 75.6 71.0
    2050 15,144 15,096 11,353 10,633 75.0 70.4
    2055 15,433 15,404 11,506 10,793 74.6 70.1
    2060 15,616 15,627 11,605 10,918 74.3 69.9
    2065 15,708 15,778 11,708 11,051 74.5 70.0
    2070 15,828 15,945 11,872 11,225 75.0 70.4
    2080 16,491 16,572 12,363 11,670 75.0 70.4
    2090 17,211 17,276 12,879 12,144 74.8 70.3
    2100 17,841 17,913 13,342 12,574 74.8 70.2
    B.4.1.3 Labour Market (Canada less Québec)

    Given that the CPP covers labour force in all provinces except Québec, labour market assumptions were developed for Québec, and the results for Canada less Québec were derived. Table 53 and Table 54 show the projected active population, number of employed, and labour force participation rates for Canada less Québec.

    Table 53 Active and Employed Populations (Canada less Québec, ages 15 and over)
    (thousands)
    Year PopulationTable 53 Footnote 1 Active Population Employed
    Males Females Total Males Females Total Males Females Total
    2022 12,101 12,471 24,572 8,491 7,601 16,092 7,933 7,157 15,090
    2023 12,287 12,668 24,955 8,600 7,714 16,314 8,064 7,288 15,353
    2024 12,460 12,852 25,312 8,699 7,819 16,519 8,154 7,383 15,537
    2025 12,621 13,026 25,647 8,791 7,919 16,710 8,236 7,472 15,708
    2026 12,769 13,186 25,955 8,876 8,012 16,888 8,310 7,556 15,866
    2027 12,911 13,342 26,253 8,957 8,105 17,062 8,382 7,639 16,021
    2028 13,048 13,491 26,539 9,033 8,192 17,225 8,453 7,722 16,175
    2029 13,178 13,633 26,811 9,105 8,277 17,382 8,521 7,801 16,322
    2030 13,303 13,768 27,071 9,175 8,358 17,533 8,586 7,877 16,463
    2035 13,857 14,378 28,235 9,527 8,781 18,308 8,916 8,275 17,191
    2040 14,391 14,958 29,349 9,829 9,052 18,881 9,198 8,531 17,729
    2045 14,936 15,540 30,476 10,142 9,325 19,466 9,489 8,790 18,279
    2050 15,440 16,079 31,519 10,412 9,564 19,976 9,741 9,016 18,757
    2055 15,894 16,557 32,452 10,606 9,745 20,351 9,923 9,187 19,110
    2060 16,339 17,015 33,354 10,759 9,893 20,652 10,066 9,326 19,392
    2065 16,796 17,482 34,278 10,921 10,051 20,972 10,218 9,475 19,693
    2070 17,263 17,966 35,229 11,138 10,252 21,391 10,422 9,664 20,086
    2080 18,201 18,961 37,162 11,709 10,761 22,470 10,955 10,144 21,099
    2090 19,073 19,893 38,966 12,285 11,282 23,567 11,494 10,635 22,129
    2100 20,024 20,849 40,873 12,819 11,754 24,573 11,994 11,080 23,074

    Table 53 Footnotes

    Table 53 Footnote 1

    Adjusted to the basis used by Statistics Canada in its Labour Force Survey.

    Return to table 53 footnote 1

    Table 54 Labour Force Participation Rates (Canada less Québec)
    (percentages)
    Age Group Males Females
    2022 2025 2035 2050 2022 2025 2035 2050
    15-19 46.7 47.7 51.5 51.5 49.3 50.2 53.5 53.5
    20-24 76.8 77.3 79.2 79.3 74.2 74.9 77.2 77.3
    25-29 88.8 89.5 92.0 92.0 83.9 85.0 88.7 88.8
    30-34 92.4 92.8 94.0 94.0 83.8 84.5 86.8 86.8
    35-39 93.5 93.6 94.0 94.0 82.2 83.5 87.5 87.5
    40-44 92.6 92.9 94.0 94.0 84.0 85.2 88.8 88.8
    45-49 92.3 92.4 93.0 93.0 84.3 85.3 88.8 88.8
    50-54 90.1 90.4 91.0 91.0 82.3 83.3 86.7 86.8
    55-59 82.3 82.7 84.0 84.0 72.0 73.1 76.6 76.5
    60-64 65.9 66.1 66.9 66.7 53.0 53.4 54.6 54.4
    65-69 35.9 36.4 37.7 37.6 23.2 23.8 25.6 25.5
    70 and Over 12.0 12.4 13.6 13.6 5.1 5.3 6.0 5.9
    55-69 62.8 62.0 63.4 64.5 50.5 50.1 52.7 53.5
    55 and Over 44.1 42.3 38.7 40.9 32.5 31.2 28.7 29.8
    18-69 81.1 81.4 83.5 82.4 72.4 73.2 77.1 76.0
    15 and Over 70.2 69.7 68.8 67.4 60.9 60.8 61.1 59.5
    B.4.1.4 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 2019. Table 55 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 55 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 55 Employment of Population
    (Canada less Québec, ages 18 to 69)
    Year Population
    (thousands)
    Employed
    (thousands)
    Earners
    (thousands)
    Proportion of Earners (earners as % of population)
    (%)
    Males Females Males Females Males Females Males Females
    2022 10,301 10,304 7,591 6,900 8,475 7,853 82.3 76.2
    2023 10,404 10,411 7,705 7,019 8,627 8,004 82.9 76.9
    2024 10,492 10,502 7,779 7,104 8,733 8,117 83.2 77.3
    2025 10,570 10,586 7,846 7,184 8,830 8,223 83.5 77.7
    2026 10,641 10,665 7,907 7,260 8,894 8,307 83.6 77.9
    2027 10,706 10,735 7,965 7,335 8,955 8,390 83.6 78.2
    2028 10,762 10,798 8,021 7,411 9,016 8,473 83.8 78.5
    2029 10,811 10,851 8,075 7,483 9,073 8,552 83.9 78.8
    2030 10,852 10,896 8,126 7,551 9,125 8,626 84.1 79.2
    2035 11,038 11,096 8,385 7,912 9,392 9,015 85.1 81.2
    2040 11,327 11,395 8,631 8,146 9,655 9,272 85.2 81.4
    2045 11,740 11,789 8,891 8,379 9,962 9,548 84.9 81.0
    2050 12,169 12,206 9,131 8,595 10,253 9,812 84.3 80.4
    2055 12,460 12,514 9,292 8,758 10,451 10,010 83.9 80.0
    2060 12,642 12,731 9,401 8,884 10,578 10,158 83.7 79.8
    2065 12,756 12,891 9,506 9,013 10,686 10,298 83.8 79.9
    2070 12,878 13,052 9,662 9,180 10,847 10,478 84.2 80.3
    2080 13,510 13,655 10,143 9,623 11,385 10,980 84.3 80.4
    2090 14,227 14,363 10,655 10,095 11,966 11,525 84.1 80.2
    2100 14,841 14,987 11,104 10,513 12,467 12,001 84.0 80.1

    B.4.2 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. Since the mid-1950s, the trend was generally upward through the early 1980s and then generally 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 2021 were 3.9%, 1.9% and 1.7%, respectively.

    On December 13, 2021, the Bank of Canada and the Government renewed their commitment to keep inflation between 1% and 3% with a target at the mid-point of 2% until the end of 2026Footnote 10. They further noted that the Bank will use the flexibility of the 1% to 3% control range to actively seek the maximum sustainable level of employment to an extent that is consistent with keeping medium-term inflation expectations at 2%.

    Despite the mid-point target of 2%, the CPI tends to fluctuate from year to year. The COVID-19 pandemic had an impact on the CPI. In 2020, the CPI rose by only 0.7% as a result of a decline in consumer spending stemming from various pandemic-related measures and restrictions. However, as the pandemic evolved and restrictions were lifted, consumer demand increased and supply issues arose. As a result, the increase in CPI was 3.4% in 2021, the fastest pace since 1991. The uncertainty surrounding high inflation due to the demand and supply shocks caused by the pandemic has been exacerbated by the escalation of the conflict in Ukraine. This report considers the escalation of the conflict in Ukraine a subsequent event.

    Due to the economic instability caused by the COVID-19 pandemic, the global impacts of the war in Ukraine, and related supply chain issues, inflation is expected to be higher than the 2% target up until 2025. Increase in prices are assumed to be 6.9% in 2022, 3.0% in 2023, 2.5% in 2024, 2.25% in 2025 and 2.0% for 2026 and thereafter. These assumed price increases are based on short-term forecasts from various economists as well as on the expectation that the Bank of Canada and federal Government will continue to renew the inflation target at 2.0% and that the Bank of Canada will be successful in keeping inflation at its mid-point target in the long term.

    B.4.3 Real Wage Increases

    Two wage measure are used in this report: the average annual earnings (AAE) and the average weekly earnings (AWE). The assumed increase in AAE is used to project the total employment earnings of CPP contributors, while the assumed increase in the AWE is used to project the increase in the YMPE from one year to the next. The average difference between both measures has been relatively small over the period 1966 to 2019. However, they tend to grow at different paces in times of economic expansions and slowdowns.

    B.4.3.1 Long-Term Real Wage Increases

    Over the long term, increases in the real AAE and real AWE are assumed to be the same and are referred to as real wage increases in this report. The real wage increase can be measured using the difference between the increases 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 relationship between real wages and the labour markets and overall economy is complex. In general, 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.

    The real wage increase is related to the growth in total labour productivity plus the growth of various factors, as shown in Table 56. Data for year 2020 were not taken into account due to variability in data related to the pandemic.

    Table 56 Real Wage Increase and Related ComponentsTable 56 Footnote 1
    blank 1961-2019
    Average
    1990-2019
    Average
    2000-2019
    Average
    Ultimate Assumption
    Labour Productivity Growth 1.61% 1.19% 0.93% 1.05%
    + Compensation Ratio Growth (0.08)% (0.15)% 0.01% 0.00%
    + Earnings Ratio Growth (0.17)% (0.16)% (0.11)% (0.05)%
    + Average Hours Worked Growth (0.33)% (0.17)% (0.29)% (0.10)%
    + Price Differential Growth 0.05% (0.06)% 0.04% 0.00%
    Real Wage Increase 1.07% 0.65% 0.57% 0.90%

    Table 56 Footnotes

    Table 56 Footnote 1

    Components may not sum to totals due to rounding.

    Return to table 56 footnote 1

    Labour productivity in the above table is defined as the ratio of the real Gross Domestic Product (GDP) to total hours worked in the Canadian economy. As shown in Table 56, growth in labour productivity has decreased since the 1960s. However, long-term productivity is expected to increase as a result of labour shortages and continued technological advancements. 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 labour shortages and the associated impact on productivity.

    In addition, labour productivity could be affected by the timing and pace of Canada’s transition to a green economy. There is a substantial uncertainty surrounding the effect of this transition on the composition of Canada’s economy as it potentially moves away from carbon-intensive sectors over the next decades.

    Based on the foregoing, a labour productivity growth of 1.05% is assumed for the long term.

    The compensation ratio is the ratio of the total compensation received by workers to the nominal GDP, thereby reflecting the extent to which changes in productivity are shared between capital and labour. This ratio decreased on average by 0.08% per year over the 58-year period ending in 2019. 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. Changes in the earnings ratio reflect changes in the compensation structure offered to employees. The historical decline in the earnings ratio of 0.17% per year from 1961 to 2019 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, 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. There was a decrease in the average hours worked between 1961 and 2019. 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 0.10% 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 0.05% between 1961 and 2019. it is assumed that the price differential will remain stable without change over the long term.

    The result of the foregoing discussion is that the real wage is assumed to increase by 0.9% per year over the long term.

    B.4.3.2 Short-Term Real Wage Increases

    Although the real AAE and real AWE are assumed to grow at the same pace in the long term, they tend to grow at different paces in times of economic expansions and slowdowns.

    In times of economic slowdown, the AWE increases at a faster pace than the AAE and the reverse occurs in times of economic expansion. This is because during economic slowdowns, individuals with lower earnings lose their jobs, which tends to increase the AWE (proportionally higher earners remain in the labour force and people work less weeks during the year). The reverse holds true in times of economic expansion, i.e., low earners get rehired and people work more weeks during the year.

    Based on information up to the end of June 2022, the real AAE is projected to decrease by 2.4% in 2022 and by 0.1% in 2023. Real AAE are then projected to increase, with an ultimate real increase of 0.9% reached in 2026. The negative real AAE growth in the early years of the projection is a result of assumed wage dynamics in periods of high inflation stemming from the COVID-19 pandemic and exarcerbated by the escalation of the conflict in Ukraine, which is considered a subsequent event. The ultimate real AAE increase assumption is developed taking into account historical trends, labour productivity, labour shortages, and other contributing factors. The ultimate real AAE increase assumption combined with the ultimate price increase assumption results in an assumed nominal annual increase of 2.9% in 2026 and thereafter.

    Real AWE are projected to decrease by 3.3% in 2022 and by 0.1% in 2023. In the following years, and consistent with the historical long-term relationship between the real change in the AWE and AAE, AWE increase, with an ultimate real increase of 0.9% reached in 2026, equal to the same ultimate real increase in AAE that year.

    B.4.3.3 Summary

    Table 57 shows the assumptions regarding the annual increases in prices, real AAE, and real AWE.

    Table 57 Inflation, Real AAE and AWE Increases
    (percentages)
    Year Price Increases Real Increases
    Average Annual Earnings
    (AAE)
    Real Increases
    Average Weekly Earnings
    (AWE), (YMPE)
    2022 6.90 (2.40) (3.30)
    2023 3.00 (0.10) (0.10)
    2024 2.50 0.40 0.40
    2025 2.25 0.65 0.65
    2026+ 2.00 0.90 0.90

    B.4.4 Average Annual Earnings, Total Earnings, and Pensionable Earnings

    Average annual earnings are projected by taking into account past and expected structural demographic and labour market 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 79% in 2019. This ratio is projected to increase to 87% by 2050. Table 58 shows the projected average annual earnings by age group and sex for selected years.

    Table 58 Average Annual Earnings (Canada less Québec, ages 18 to 69)
    (dollars)
    Age Group Males Females
    2022 2025 2050 2022 2025 2050
    20-24 28,844 31,372 62,089 23,168 25,359 51,816
    25-29 47,880 51,694 102,162 39,661 43,200 90,330
    30-34 59,805 64,383 126,451 45,928 50,186 106,976
    35-39 65,016 69,986 137,292 50,383 55,078 117,484
    40-44 67,857 73,083 143,502 54,550 59,584 126,144
    45-49 69,087 74,447 145,975 55,927 61,068 128,915
    50-54 67,653 73,043 143,178 55,028 60,018 126,401
    55-59 62,875 67,512 132,685 50,474 55,487 116,963
    60-64 54,073 58,429 114,042 41,524 45,987 98,623
    65-69 38,633 42,872 84,567 28,459 31,126 68,963
    All Ages 55,850 60,553 119,711 44,606 48,953 104,580

    Total earnings are the product of average earnings and the number of earners. Table 59 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 significant increase in total earnings of 8.3% in 2022 results from projected higher employment and high nominal wage growth following the first two years of the COVID-19 pandemic. The annual increase in total earnings is set to reach an ultimate value of about 3.4%. This nominal increase comprises an ultimate inflation rate of 2.0%, real wage growth of 0.9%, and employed population growth for the age group 18 to 69 of 0.5%.

    Table 59 Total Earnings
    (Canada less Québec, ages 18 to 69)
    Year Average Annual Earnings Earners Total Earnings
    ($ million)
    Annual Increase in Total Earnings
    (%)
    Males
    ($)
    Females
    ($)
    Males
    (thousands)
    Females
    (thousands)
    2022 55,850 44,606 8,475 7,853 823,656 8.3
    2023 57,374 46,011 8,627 8,004 863,211 4.8
    2024 58,945 47,456 8,733 8,117 899,943 4.3
    2025 60,553 48,953 8,830 8,223 937,262 4.1
    2026 62,212 50,494 8,894 8,307 972,783 3.8
    2027 63,917 52,084 8,955 8,390 1,009,361 3.8
    2028 65,669 53,722 9,016 8,473 1,047,268 3.8
    2029 67,466 55,413 9,073 8,552 1,085,983 3.7
    2030 69,313 57,154 9,125 8,626 1,125,534 3.6
    2035 79,367 66,667 9,392 9,015 1,346,437 3.6
    2040 90,949 77,553 9,655 9,272 1,597,232 3.5
    2045 104,305 90,100 9,962 9,548 1,899,381 3.5
    2050 119,711 104,580 10,253 9,812 2,253,547 3.4
    2055 137,533 121,256 10,451 10,010 2,651,238 3.2
    2060 158,118 140,483 10,578 10,158 3,099,531 3.1
    2065 181,895 162,645 10,686 10,298 3,618,653 3.1
    2070 209,339 188,185 10,847 10,478 4,242,605 3.3
    2080 277,903 251,176 11,385 10,980 5,921,931 3.4
    2090 369,452 334,704 11,966 11,525 8,278,334 3.4
    2100 491,216 445,970 12,467 12,001 11,475,969 3.3

    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. The average pensionable earnings are determined using average annual earnings and distributions of earners and earnings. 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 2022, the YMPE and YBE are respectively $64,900 and $3,500. The YAMPE is set at 107% of the YMPE in 2024 ($74,000 as projected in this report), and at 114% of the YMPE in 2025 ($81,100 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 60 and Table 61, respectively.

    Table 60 Average Pensionable Earnings up to YMPE (Canada less Québec) (dollars)
    Age Group Males Females
    2022 2025 2050 2022 2025 2050
    20-24 29,672 32,146 61,826 24,879 27,052 53,076
    25-29 42,933 46,564 91,715 38,227 41,557 83,955
    30-34 48,749 52,971 105,071 41,568 45,322 92,381
    35-39 50,739 55,196 109,847 43,698 47,691 97,328
    40-44 51,731 56,322 112,346 45,704 49,903 101,766
    45-49 52,044 56,672 113,058 46,430 50,705 103,435
    50-54 51,566 56,175 111,864 46,138 50,354 102,521
    55-59 49,421 53,694 106,313 43,811 47,955 97,087
    60-64 46,072 49,989 97,482 39,815 43,619 87,908
    65-69 41,908 45,652 88,625 34,830 37,657 76,391
    All Ages 46,121 50,309 99,541 40,334 44,114 89,768
    YMPE 64,900 71,200 145,600 64,900 71,200 145,600
    All Ages / YMPE 0.71 0.71 0.68 0.62 0.62 0.62
    Table 61 Average Pensionable Earnings up to YAMPE (Canada less Québec) (dollars)
    Age Group Males Females
    2022 2025 2050 2022 2025 2050
    20-24 nil - 32,811 63,004 nil - 27,326 53,617
    25-29 nil - 48,987 96,221 nil - 43,125 87,277
    30-34 nil - 56,841 112,417 nil - 47,718 97,577
    35-39 nil - 59,704 118,505 nil - 50,581 103,520
    40-44 nil - 61,169 121,733 nil - 53,158 108,648
    45-49 nil - 61,636 122,679 nil - 54,042 110,474
    50-54 nil - 60,979 121,133 nil - 53,554 109,274
    55-59 nil - 57,987 114,547 nil - 50,776 103,039
    60-64 nil - 53,792 104,659 nil - 45,919 92,781
    65-69 nil - 49,196 95,407 nil - 39,525 80,336
    All Ages nil - 54,027 106,730 nil - 46,508 94,919
    YAMPE nil - 81,100 165,900 nil - 81,100 165,900
    All Ages / YMPE nil - 0.67 0.64 nil - 0.57 0.57

    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. Contributions are determined separately for the base and additional Plans to account for the different contributory earnings (as of 2024) and different contribution rates of the two components of the CPP. The number of contributors is the same since a contributor to the additional Plan is necessarily a contributor to the base Plan.

    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 populationFootnote 11) is determined by multiplying the proportion of the population who are 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 62 presents the proportion of contributors by selected age groups and years for males and females.

    Table 62 Proportion of Contributors to the CPP, by Age Group
    (percentages)
    Age Group Males Females
    2022 2025 2050 2022 2025 2050
    20-24 79.2 82.0 85.1 77.3 79.9 84.3
    25-29 87.0 87.7 92.5 83.4 84.6 91.2
    30-34 89.0 90.3 92.4 82.0 83.5 88.2
    35-39 88.0 90.1 91.8 79.5 82.0 87.6
    40-44 88.2 88.1 89.9 80.1 81.9 87.3
    45-49 85.9 87.7 89.4 79.9 82.1 87.3
    50-54 84.2 85.3 86.9 79.0 81.0 86.0
    55-59 77.2 79.6 81.7 69.7 71.9 76.7
    60-64 61.5 63.5 66.8 51.0 52.4 56.5
    65-69 28.9 30.4 33.4 19.5 20.6 23.6
    All Ages 77.4 78.8 81.1 70.5 72.1 76.9

    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 60 and Table 61. The resulting average contributory earnings by age group and sex for selected years up to the YMPE and YAMPE are shown in Table 63 and Table 64, respectively.

    Table 63 Average Contributory Earnings for Pensionable Earnings up to YMPE
    (dollars)
    Age Group Males Females
    2022 2025 2050 2022 2025 2050
    20-24 26,172 28,646 58,326 21,379 23,552 49,576
    25-29 39,433 43,064 88,215 34,727 38,057 80,455
    30-34 45,249 49,471 101,571 38,068 41,822 88,881
    35-39 47,239 51,696 106,347 40,198 44,191 93,828
    40-44 48,231 52,822 108,846 42,204 46,403 98,266
    45-49 48,544 53,172 109,558 42,930 47,205 99,935
    50-54 48,066 52,675 108,364 42,638 46,854 99,021
    55-59 45,921 50,194 102,813 40,311 44,455 93,587
    60-64 42,572 46,489 93,982 36,315 40,119 84,408
    65-69 38,408 42,152 85,125 31,330 34,157 72,891
    All Ages 42,621 46,809 96,041 36,834 40,614 86,268
    YMPE 64,900 71,200 145,600 64,900 71,200 145,600
    Table 64 Average Contributory Earnings for Pensionable Earnings up to YAMPE
    (dollars)
    Age Group Males Females
    2022 2025 2050 2022 2025 2050
    20-24 nil - 29,311 59,504 nil - 23,826 50,117
    25-29 nil - 45,487 92,721 nil - 39,625 83,777
    30-34 nil - 53,341 108,917 nil - 44,218 94,077
    35-39 nil - 56,204 115,005 nil - 47,081 100,020
    40-44 nil - 57,669 118,233 nil - 49,658 105,148
    45-49 nil - 58,136 119,179 nil - 50,542 106,974
    50-54 nil - 57,479 117,633 nil - 50,054 105,774
    55-59 nil - 54,487 111,047 nil - 47,276 99,539
    60-64 nil - 50,292 101,159 nil - 42,419 89,281
    65-69 nil - 45,696 91,907 nil - 36,025 76,836
    All Ages nil - 50,527 103,230 nil - 43,008 91,419
    YAMPE nil - 81,100 165,900 nil - 81,100 165,900

    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, and (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, and not for the determination of benefits.

    The records of earnings from Service Canada, statistics on contributors from the “The CPP & OAS Stats Book 2021”, published by ESDC, and information from the Canada Revenue Agency on base CPP contribution refunds were used to project the adjustment to contributory earnings up to the YMPE and YAMPE. The adjustment for earnings up to the YMPE is projected to be 1.54% in 2022 and decrease to 1.49% 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 decrease to 1.43% over the projection period also to account for the YBE being frozen at $3,500.

    Annual contributions are equal to the product of adjusted contributory earnings and the contribution rates 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 65 and Table 66 present information on the total adjusted contributory earnings for pensionable earnings up to the YMPE and YAMPE, respectively. The significant increase in total adjusted contributory earnings of 9.4% in 2022 represents the projected higher employment and high nominal wage growth following the first two years of the COVID-19 pandemic.

    Table 65 Total Adjusted Contributory Earnings for Pensionable Earnings up to YMPE
    Year Unadjusted Average Contributory Earnings YMPE
    ($)
    Contributors Total Adjusted Contributory Earnings
    ($ million)
    Annual Increase in Total Adjusted Contributory Earnings
    (%)
    Males
    ($)
    Females
    ($)
    Males
    (thousands)
    Females
    (thousands)
    2022 42,621 36,834 64,900 7,975 7,261 616,668 9.4
    2023 43,956 38,040 66,900 8,124 7,410 648,785 5.2
    2024 45,435 39,357 69,200 8,229 7,522 680,189 4.8
    2025 46,809 40,614 71,200 8,328 7,632 710,485 4.5
    2026 48,237 41,915 73,300 8,394 7,720 739,632 4.1
    2027 49,671 43,237 75,400 8,458 7,806 769,230 4.0
    2028 51,155 44,604 77,600 8,524 7,895 800,229 4.0
    2029 52,691 46,023 79,900 8,586 7,980 832,186 4.0
    2030 54,237 47,461 82,200 8,646 8,062 864,552 3.9
    2035 62,655 55,306 94,800 8,963 8,501 1,047,401 3.9
    2040 72,359 64,290 109,400 9,256 8,801 1,254,280 3.6
    2045 83,366 74,508 126,200 9,579 9,107 1,499,428 3.6
    2050 96,041 86,268 145,600 9,872 9,390 1,784,712 3.5
    2055 110,817 99,919 168,000 10,076 9,610 2,108,096 3.3
    2060 127,943 115,699 193,800 10,212 9,780 2,474,655 3.2
    2065 147,760 133,916 223,600 10,342 9,947 2,903,032 3.2
    2070 170,574 154,910 258,000 10,539 10,160 3,421,988 3.4
    2080 227,074 206,683 343,300 11,106 10,699 4,803,930 3.5
    2090 302,482 275,498 457,000 11,705 11,270 6,744,599 3.4
    2100 403,048 367,285 608,200 12,213 11,760 9,379,076 3.3
    Table 66 Total Adjusted Contributory Earnings for Pensionable Earnings up to YAMPE
     Year Table 66 footnote 1 Unadjusted Average Contributory Earnings YAMPE
    ($)
    Contributors Total Adjusted Contributory Earnings
    ($ million)
    Annual Increase in Total Adjusted Contributory Earnings
    (%)
    Males
    ($)
    Females
    ($)
    Males
    (thousands)
    Females
    (thousands)
    2024 47,318 40,579 74,000 8,229 7,522 704,857 N/A
    2025 50,527 43,008 81,100 8,328 7,632 760,039 7.8
    2026 52,057 44,388 83,500 8,394 7,720 791,120 4.1
    2027 53,597 45,792 85,900 8,458 7,806 822,735 4.0
    2028 55,186 47,241 88,400 8,524 7,895 855,768 4.0
    2029 56,824 48,739 91,000 8,586 7,980 889,721 4.0
    2030 58,509 50,283 93,700 8,646 8,062 924,626 3.9
    2035 67,503 58,584 108,000 8,963 8,501 1,119,173 3.9
    2040 77,903 68,116 124,700 9,256 8,801 1,339,798 3.7
    2045 89,672 78,945 143,800 9,579 9,107 1,600,861 3.6
    2050 103,230 91,419 165,900 9,872 9,390 1,904,782 3.4
    2055 119,058 105,906 191,500 10,076 9,610 2,249,521 3.3
    2060 137,386 122,638 220,900 10,212 9,780 2,639,925 3.2
    2065 158,604 141,959 254,900 10,342 9,947 3,096,314 3.2
    2070 183,008 164,205 294,100 10,539 10,160 3,648,770 3.4
    2080 243,502 219,059 391,300 11,106 10,699 5,120,600 3.5
    2090 324,241 291,943 520,900 11,705 11,270 7,187,118 3.4
    2100 431,955 389,190 693,300 12,213 11,760 9,993,162 3.3

    Table 66 footnotes

    Table 66 footnote 1

    The years shown start in 2024 since it is the first year the YAMPE applies.

    Return to Table 66 footnote 1

    B.6 Investment Assumptions

    The total assets of the CPP at the end of any given year throughout the projection period are determined by adding the total assets at the end of the previous year to the 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 2021

    The actual value of the base CPP assets on a market-value accrual basis as at 31 December 2021 was $544 billion. This is the sum of the CPP Account ($108 million) and the assets invested by the CPPIB ($540 billion) for a total of $540 billion, before being adjusted by the amounts receivable minus amounts payable.

    The actual value of the additional CPP assets on a market-value accrual basis as at 31 December 2021 was $11 billion. This is the sum of the Additional CPP Account ($19 million) and the assets invested by CPPIB ($11 billion) for a total of $11 billion before being adjusted by the amounts receivable minus amounts payable.

    The CPP Account and Additional CPP Account were established in respect of the base Plan and additional 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 Canada Revenue Agency (CRA). Benefit and operating expenditures are described in detail in sections B.7 and B.8, respectively of this appendix.

    Table 67 reconciles the assets of the base CPP and additional CPP as at 31 December 2021.

    Table 67 Net Assets as at 31 December 2021
    ($ million)
    blank  Base CPP Additional CPP
    CPP Account 108 19
    Assets Invested by CPPIB 539,682 10,693
    Subtotal CPP Account and Invested Assets by CPPIB 539,790 10,713
    Plus Amounts Receivable
    Contributions
    4,241 335
    Benefit Overpayments
    105 8
    Net Transfers Due from QPP
    105 8
    Minus Amounts Payable 517 19
    Net CPP Assets 543,725 11,045

    B.6.2 Investment Strategy and Two-Pool Structure

    The CPPIB invests funds according to its own investment policies. For the purpose of this 31st CPP Actuarial Report, the CPP invested assets 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.

    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 as at 31 December 2021 is maintained at 85% global equity and 15% Canadian government nominal bonds, whereas, the reference portfolio applicable to the additional CPP as at 31 December 2021 consists of 55% global equity and 45% Canadian government nominal bonds. In the previous report, the reference portfolio for the additional CPP stood at 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 2021 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 and credit. 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 CPPIB

    Text description: Chart 12 Illustrative Two-Pool Investment Structure of the CPPIB

    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 several 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 Fiscal 2021 Annual Report, the CPPIB signaled its intention to continue increasing the CPP Fund’s exposure to emerging markets as part of their 2025 strategyFootnote 12. This intention is reflected in all assumptions presented in this section.

    As at 31 December 2021, the asset mix of the base CPP consisted of 55% equities, 23% fixed income securities, and 22% real assets, while the asset mix of the additional CPP consisted of 36% equities, 50% fixed income, and 14% real assets. Table 68 further categorizes the actual assets under the CPPIB management into the asset classes identified at the beginning of this section, which correspond to the strategic portfolios’ asset classes.

    Table 68 Initial Asset Mix as at 31 December 2021 for Base and Additional CPP
    (percentages)
    Plan Equity Fixed Income Securities Real Assets
    Public Equities Private Equities Marketable Bonds Non-Marketable Bonds Credit CashTable 68 footnote 1
    Base 29 26 19 4 16 (16) 22
    Additional 19 17 50 0 10 (10) 15

    Table 68 footnotes

    Table 68 footnote 1

    A negative allocation to cash represents financial leverage. This indicates that funds are borrowed in order to increase the amounts invested in the other asset classes.

    Return to Table 68 footnote 1

    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 escalation of the conflict in Ukraine has had significant impacts on financial markets. In an effort to control rising inflation stemming from the COVID-19 pandemic and excarcerbated by the esclatation of the conflict in Ukraine, the Bank of Canada has increased its benchmark interest rate by 225 basis points so far in 2022 (as of July 13, 2022), which has impacted returns on fixed income investments. In addition, stock market indices in the first half of 2022 have decreased significantly across geographies and sectors.

    This report considers the escalation of the conflict in Ukraine a subsequent event, and the assumed rates of return have been adjusted accordingly. More specifically, for 2022, the assumed nominal return is -9.0% for the base CPP and -7.7% for the additional CPP. In real terms, this translates into 2022 assumed returns of -15.9% and -14.6% for the base CPP and additional CPP respectively. These returns reflect actual CPPIB results up to 30 June 2022, and continued uncertainty for the remainder of the year. In addition, fixed income returns beyond 2022 are based on a revised interest rate path that reflects the significant rate hikes that occurred in the first half of 2022.

    B.6.4.1 Fixed Income Securities

    As at 31 December 2021, the CPPIB had 23% of the CPP portfolio invested in fixed income securities, split between nominal fixed income, credit, and cash. Nominal fixed income in the Core pool 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 domestic federal and provincial bonds and foreign sovereign bonds. Starting 1 January 2019, the CPPIB started investing part of the additional CPP’s contributions in a Supplementary pool composed of fixed income securities and credit.

    Canadian Fixed Income

    The new money rate is the nominal yield on 10-year-plus Government of Canada bonds and is set for each year in the projection period. The real yield on 10-year-plus federal bonds is equal to the new money rate less the assumed rate of inflation.The real yield on long-term Canadian federal bonds as at 31 December 2021 is about -1.68% and is assumed to gradually increase to 2.0% by 2033 and remain at that level.

    The real yields for long-term provincial bonds, as well as for federal and provincial bonds of shorter maturities (mid and short), are based on the real yield on long-term federal bonds adjusted based on historical spreads over the last 20 years. The initial spreads over the real yield on federal long-term bonds are based on spreads prevailing as at 31 December 2021 and reflect the current economic environment. Since the long-term federal bond yield is assumed to increase between 2022 and 2033 and only stabilize at the end of 2033, bond returns are lower for the first ten years of the projection.

    For the Core pool, the yields are determined in relation to yields for Canadian federal universe bonds. The yield for Canadian federal universe bonds is assumed to be represented by a diversified portfolio of Canadian federal bonds. Using the federal long-, mid- and short-term yields developed above, weighted by the Canadian Fixed Income Universe Index market values as at 31 December 2021, the average maturity is set at 8.0 years for Canadian federal universe bonds, and the resulting ultimate real return is 1.3%.

    Non-Marketable Bond Portfolio and Rollover Rates (Loans to Provinces, Core Pool)

    The non-marketable bond portfolio at the end of 2021 represented 4% 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 2002 to 2021, 89% of provincial bonds available for rollover were rolled over at or before maturity. The rollover proportion increases to 100% when considering the five-year period from 2017 to 2021. Using this rollover experience, it is assumed that the rollover rate will be 99% for 2022 and thereafter. The last non-marketable bond is expected to mature in 2049.

    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 2000, a spread over the federal long-term yield was determined for each province. The initial spreads on rollover bonds are set at the actual market spreads at the end of 2021 for provincial bonds issued by the given province. The ultimate spreads, applicable from 2033 onward, are set at the average spreads of provincial bonds issued by a given province during the period 2000 to 2021, excluding the global financial crisis of 2008 and 2009. The weighted long-term average spread for all provinces is approximately 70 basis points.Therefore, an ultimate annual real yield of approximately 2.7% for provincial rollover bonds is assumed for 2033 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 mainly of foreign sovereign bonds (developed market and emerging market). The composition of developed market and emerging market bonds in the portfolio is consistent with information provided by the CPPIB. Since the last report (30th CPP Actuarial Report), it is assumed that corporate bond holdings of the CPPIB are part of the credit asset class (discussed in the subsequent section).

    The returns for developed market sovereign bonds are derived from a blend of projected sovereign yields for the Euro Zone, the United States and the United Kingdom. This is obtained by adding a negative spread of 20 basis points to the projected yields of Canadian federal universe bonds. The ultimate real return for the developed market sovereign bonds is assumed to be 1.1%.

    The yield for emerging sovereign market bonds is assumed to correspond to a blend of projected local currency long-term yields for the emerging economies of Brazil, China, India, Indonesia, and Mexico. This is expected to be 160 basis points higher than the yield on Canadian federal universe bonds, resulting in an ultimate return for the emerging market sovereign bond portfolio of 2.9%.

    The assumed ultimate real rate of return of the Core pool marketable bond portfolio is 1.3% before investment expenses. The real rates of return of the Core pool marketable bond portfolio are expected to be lower over the first few projection years due to the projected increase in yields.

    Marketable Bond Portfolio (Supplementary Pool)

    The Supplementary pool is expected to be composed mainly of Canadian fixed income securities and credit, 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 Canadian fixed income securities are assumed to be represented by a portfolio of Canadian federal and provincial bonds in varying proportions.

    The initial asset mix of this portfolio is estimated from the CPPIB 31 December 2021 financial statements. It is assumed that the CPPIB will purchase a variety of federal and provincial bonds in proportions consistent with their investment strategy. It is thus assumed that the bond mix applicable for 2022 and thereafter will be the same as the mix as at 31 December 2021 and will be composed of 70% federal and 30% provincial bonds.

    The assumed average maturities of federal and provincial bonds are estimated based on the CPPIB holdings as at 31 December 2021 and are assumed to remain constant throughout the projection period. The average maturity is set at 9.4 years for supplementary federal bonds and 14.8 years for supplementary provincial bonds.

    The ultimate real rate of return for the supplementary marketable bonds is assumed to be 1.8%. Similar to the Core pool marketable bonds portfolio, the real rates of return of the Supplementary pool are expected to be lower over the first few projection years due to the projected increase in yields.

    Credit (Core and Supplementary)

    The credit asset class includes investments in corporate bonds, private debt, and private real estate debt. In the previous report, the Supplementary pool consisted only of Canadian fixed income securities. However, the CPPIB has since introduced credit in the Supplementary pool. At the end of 2021, the CPPIB had approximately 16% of the base CPP and 10% of the additional CPP 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 characteristics of the CPPIB’s actual holdings. Credit in the Supplementary pool only consists of Canadian securities, while the Core pool credit includes exposure to other developed markets as well as emerging markets. Furthermore, the Core pool credit includes an assumed increasing exposure to both developed markets and emerging markets.

    For the Core pool, the returns on the diversified portfolio of corporate bonds are derived from projected U.S. corporate yields. The ultimate real rate of return for the Core pool credit asset class is assumed to be 2.2% from 2033 onward. The assumed ultimate real rate of return for the Supplementary pool credit asset class is 2.9%. This return is higher than the Core pool to reflect that it consists only of Canadian securities as well as its different risk characteristics.

    The assumed real rates of return of the credit portfolio for both the Core pool and the Supplementary pool are expected to be lower over the first few projection years due to the projected increase in yields.

    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. The balance in the CPP Account serves as a flow-through account with investments solely in short-term securities.

    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 other assets with the expectation that the borrowing cost will be less than the return on the assets purchased. As at 31 December 2021, CPPIB’s external debt and financing liability represented about 16% of its net assets. Similar to the previous actuarial report, there is an explicit recognition in this report for the amount of leverage 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 0.3% for 2033 and thereafter.

    B.6.4.2 Equity

    The CPP 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 expected dividend yields, expected growth of the underlying economies and long-term risk premiums for various factors such as size, maturity and geography. 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. Various elements contribute to the return on an equity investment such as earnings, income paid to shareholders, fluctuation in valuation, and exchange rates for non-Canadian investments.

    Over long periods, valuation changes and currency fluctuations are not expected to contribute significantly to the return on broad equity markets. Therefore, it is assumed that expectations regarding income and earnings growth are sufficient to project future equity returns, with additional adjustments for the riskiness of small caps and emerging market equities. The income derived from dividend and buyback yields on developed market equities is expected to be 3.1%. This is based on historical income from dividend and buyback yields for developed market equities, adjusted to reflect current and expected economic environments. Growth in earnings is proxied using GDP growth per capita; and it is expected to add 0.9% to the overall real return of developed market equities. Hence, the expected return on developed market equities is 4.0%. Because of their additional risk, small caps are assumed to yield an additional 0.2% and emerging market equities are assumed to yield an additional 1.0%.

    The ultimate real rate of return on public equities is projected to be 4.2%. The short-term path is lower due to the subsequent event described in section 2.3.

    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 institutional 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 the additional illiquidity risk and complex management.

    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 be lower than historical levels.

    The ultimate real rate of return on private equities is projected to be 5.1%. The short-term path is lower due to the subsequent event described in section 2.3.

    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. It is also assumed that real CPP assets will ultimately include a greater exposure to emerging markets than as at 31 December 2021.

    The ultimate real rate of return on real assets is projected to be 4.1%. The short-term path is lower due to the subsequent event described in section 2.3.

    B.6.4.4 Summary of Real Rates of Return by Asset Type

    Table 69 summarizes the assumed real rates of return by asset type throughout the projection period, before reduction for investment expenses. The rates of return by asset type are presented without any allowance for rebalancing and diversification (discussed in section B.6.5). The rebalancing and diversification allowance is presented at the portfolio level in Table 70 for the base CPP and Table 71 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 69 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.

    This report considers the escalation of the conflict in Ukraine a subsequent event, and the assumed rates of return have been adjusted accordingly as presented in section B.6.4. Given that the assumed rate of return for 2022 was not developed by asset class, year 2022 is not shown in the tables below.

    Table 69 Real Rates of Return by Asset Type (before investment expenses and allocation for rebalancing and diversification)
    (percentages)
    Year Equity Fixed Income Securities Real Assets
    Public Equities Private Equities Marketable Bonds (Core) Marketable Bonds (Supplementary) Non-Marketable Bonds Credit (Core) Credit (Supplementary) Cash
    2023 3.0 3.9 0.1 (0.4) 1.0 0.9 (0.6) (0.3) 2.4
    2024 3.6 4.6 0.1 0.2 1.0 1.1 0.7 (0.3) 2.9
    2025 3.9 4.9 0.2 0.5 1.4 1.3 1.4 (0.3) 3.3
    2026 4.2 5.2 0.2 0.7 1.8 1.5 1.9 (0.3) 3.5
    2027 4.2 5.2 0.3 0.8 1.8 1.6 2.0 (0.2) 3.6
    2028 4.2 5.2 0.4 0.9 1.8 1.7 2.1 (0.1) 3.6
    2029 4.2 5.2 0.5 0.9 1.9 1.7 2.1 (0.1) 3.6
    2030 4.2 5.2 0.6 1.0 2.0 1.8 2.2 0.0 3.7
    2035 4.2 5.1 1.3 1.8 2.0 2.2 2.9 0.3 4.1
    2040 4.2 5.1 1.3 1.8 1.1 2.2 2.9 0.3 4.1
    2045+ 4.2 5.1 1.3 1.8 2.2 2.2 2.9 0.3 4.1

    B.6.5 Asset Allocation and Expected Portfolio Rates of Return

    This report provides projections of over 75 years. As such, long-term asset mix assumptions are required for the base and additional CPP. As the base CPP continues to mature and the Plan’s participants age, the ratio of contributors to beneficiaries is projected to decrease, and the proportion of investment income required to pay benefits is projected to increase. Starting in 2026, 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 is projected to increase over time, reaching about 16% in 2050 and 34% by 2070. 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 are expected to 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 to maintain the desired relative assets allocation by asset classes. In other words, the expected 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 12.4% annuallyFootnote 13. Thereafter, it is projected that the volatility of the rate of return of the Core pool will gradually decrease to 10.7% in 2033, 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 reviews of the CPP. Hence, the asset mix is projected to progress from its initial allocation (base CPP assets as at 31 December 2021) to a portfolio constructed to match the level of risk of a hypothetical reference portfolio of 70% equity and 30% fixed income. Table 70 presents the projected asset allocation, the expected volatility of the portfolio, and the expected portfolio real rate of return before investment expenses for the base Plan.

    Due to the assumed three-year steps progression of the portfolio risk, the total portfolio real rate of return does not move in a linear fashion. The expected real rate of return of the portfolio tends to decrease each time the level of risk of the portfolio decreases towards its ultimate level. However, 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 the total portfolio real rate of return with periodic adjustments corresponding to triennial portfolio risk recalibration.

    Table 70 Asset Mix, Portfolio Risk and Expected Rates of Return (before investment expenses)
    Base CPP (%)
    Year Equity Fixed Income Securities Real Assets Expected Long-term Volatility Total Real Rate of Return Table 70 Footnote 1,Table 70 Footnote 2
    Public Equities Private Equities Marketable Bonds Non-Marketable Bonds Credit Cash
    2022 29 26 19 4 16 (16) 22 12.4 (15.74)
    2023 29 26 20 3 16 (16) 22 12.2 3.09
    2024 29 26 20 3 16 (16) 22 12.1 3.61
    2025 28 25 20 2 16 (13) 22 11.7 3.83
    2026 28 25 20 2 16 (13) 22 11.6 4.08
    2027 28 25 20 2 16 (13) 22 11.6 4.11
    2028 27 25 19 2 16 (10) 21 11.3 4.05
    2029 27 25 19 1 16 (10) 21 11.3 4.08
    2030 27 25 20 1 16 (10) 21 11.3 4.10
    2035 25 25 18 1 16 (5) 20 10.7 4.21
    2040 25 25 19 0 16 (5) 20 10.7 4.20
    2045+ 25 25 19 0 16 (5) 20 10.7 4.20

    Table 70 footnotes

    Table 70 footnote 1

    The assumed total real rate of return is shown before reduction for investment expenses. The assumed total real rate of return net of expenses is obtained by reducing the total real rate of return by 18 basis points.

    Return to Table 70 footnote 1

    Table 70 footnote 2

    The assumed total real rate of return includes an allowance for rebalancing and diversification. At the portfolio level, this allowance is assumed to add 0.45% to the rate of return annually over the projection period.

    Return to Table 70 footnote 2

    Additional CPP

    The additional CPP assets are invested in both the Core and Supplementary pools. Table 71 presents the projected asset allocation, the expected volatility, and the expected real rate of return before investment expenses for the additional CPP.

    It is expected that the Supplementary pool will transition by 2026 from being purely invested in Canadian marketable bonds to being about 48% invested in marketable bonds, with the remainder being allocated to Credit.

    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. Similarly, a lower allocation to the Core pool would lower the total portfolio risk for the additional Plan.

    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 55% equity and 45% fixed income with an estimated volatility of 7.7%. During the first few projection years, this level of risk is obtained by investing 65% of the additional CPP assets in the Core pool and 35% 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 assets is expected to be allocated to the Core pool to maintain the additional CPP portfolio volatility at 7.7%. It is assumed that 68% of the additional CPP assets will be allocated to the Core pool for the year 2033 and thereafter.

    Table 71 Asset Mix, Portfolio Risk and Expected Rates of Return (before investment expenses) Additional CPP (%)
    Year Core Pool Allocation Supplementary Pool Allocation Expected Long-term Volatility Table 71 footnote 2,Table 71 footnote 3 Total Real Rate of Return
    Marketable Bonds CreditTable 71 footnote 1
    2022 65 35 0 7.7 (14.50)
    2023 65 30 4 7.8 2.00
    2024 65 26 9 8.0 2.61
    2025 66 21 13 8.0 2.94
    2030 66 16 17 7.9 3.41
    2035 68 15 17 7.7 3.75
    2040 68 15 17 7.7 3.75
    2045+ 68 15 17 7.7 3.75

    Table 71 footnotes

    Table 71 footnote 1

    Fluctuation in volatility in the years before the ultimate in 2033 is due to the changing composition of the supplementary pool to include credit.

    Return to Table 71 footnote 1

    Table 71 footnote 2

    The assumed total real rate of return is shown before reduction for investment expenses. For all years, the assumed total real rate of return net of expenses is obtained by reducing the total real rate of return by 13 basis points.

    Return to Table 71 footnote 2

    Table 71 footnote 3

    The assumed total real rate of return includes an allocation for rebalancing and diversification. At the portfolio level, this allocation is assumed to add 0.45% to the rate of return annually over the projection period.

    Return to Table 71 footnote 3

    B.6.6 Investment Expenses

    CPPIB’s total investment expenses consist of operating expenses, transaction costs, and investment management fees. Over the last three calendar years, the total investment expenses have averaged 0.90% of total assets, ranging from 0.84% to 1.10%. 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, total investment expenses of the CPPIB will be 0.95% of the Core Pool.

    Active management is implemented to generate excess returns (after reduction for active management expenses). 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 and in accordance with the Canadian Institute of Actuaries’ guidance regarding the determination of best-estimate discount rates, it is assumed that the additional returns generated by active management will equal the additional expenses incurred from active management. These expenses are assumed to be the difference between total investment expenses and the assumed expenses that would be incurred for the passive management of the portfolios.

    It is assumed that investment expenses of 0.18% would be incurred to passively manage the Core pool. Since the base CPP assets are invested only in the Core pool, the assumed investment expenses from passive management of 0.18% represents $994 million and $1,592 million in years 2022 and 2033, respectively, for the base CPP. The investment expenses for active management for the base CPP are therefore 0.77%.

    The passive management investment expenses from the Supplementary pool are assumed to be 0.03%. It is further assumed, that there are no active management expenses associated with the Supplementary pool. 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. For years 2035 and thereafter, it is assumed that 68% of additional Plan assets are invested in the Core pool and 32% are invested in the Supplementary pool. Such allocation results in total investment expenses for the additional Plan being 0.65% and the overall investment expenses from passive management related to the additional CPP being 0.13%. The investment expenses for active management for the additional CPP are therefore 0.52%.

    The assumed investment expenses from passive management of additional CPP are $21 million and $360 million in year 2022 and 2033, respectively.

    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 projected nominal returns are the sum of the assumed levels of inflation and real returns. The ultimate net rates of return are shown in Table 72.

    Table 72 Ultimate Rates 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)
    6.20 4.20 5.75 3.75
    Additional Rate of Return due to Active Management 0.77 0.77 0.52 0.52
    Total Weighted Average Rates of Return before Investment Expenses 6.97 4.97 6.27 4.27
    Expected Investment Expenses
    Expenses due to Passive Management (0.18) (0.18) (0.13) (0.13)
    Additional Expenses due to Active Management (0.77) (0.77) (0.52) (0.52)
    Total Expected Investment Expenses (0.95) (0.95) (0.65) (0.65)
    Ultimate Rate of Return after Investment Expenses 6.02 4.02 5.62 3.62

    The resulting nominal and real rates of return for selected projection years are shown in Table 73. The projected average annual real rate of return over the next 75 years is 3.69% for the base CPP and 3.27% for the additional CPP.

    Table 73 Annual Rates of Return on CPP Assets
    (percentages)
    Year Base CPP Additional CPP
    Nominal Real Nominal Real
    2022 (9.02) (15.92) (7.72) (14.62)
    2023 5.91 2.91 4.87 1.87
    2024 5.93 3.43 4.98 2.48
    2025 5.90 3.65 5.06 2.81
    2026 5.90 3.90 5.14 3.14
    2040+ 6.02 4.02 5.62 3.62
    Average over:
    2023-2027 5.91 3.56 5.05 2.70
    2023-2032 Table 73 Footnote 1 5.90 3.73 5.15 2.98
    2022-2096 Table 73 Footnote 1 5.79 3.69 5.37 3.27

    Table 73 footnotes

    Table 73 footnote 1

    For 5 and 10 year averages, year 2022 was excluded given that it creates a strong downward bias.

    Return to Table 73 footnote 1

    The 75-year (2022-2096) average annual real rate of return on investments are lowe