Book contents
- Frontmatter
- Contents
- List of Figures and Tables
- Acknowledgments
- PART I PROBLEM AND THEORY
- PART II PROGRAMMATIC ORIGINS: INTERTEMPORAL CHOICE IN PENSION DESIGN
- PART III PROGRAMMATIC CHANGE: INTERTEMPORAL CHOICE IN PENSION REFORM
- Introduction
- 7 Investment as Last Resort
- 8 Shifting the Long-Run Burden
- 9 Committing to Investment
- 10 Constrained by Uncertainty
- PART IV CONCLUSION
- Bibliography
- Index
9 - Committing to Investment
Reforming Canadian Pensions, 1998
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- List of Figures and Tables
- Acknowledgments
- PART I PROBLEM AND THEORY
- PART II PROGRAMMATIC ORIGINS: INTERTEMPORAL CHOICE IN PENSION DESIGN
- PART III PROGRAMMATIC CHANGE: INTERTEMPORAL CHOICE IN PENSION REFORM
- Introduction
- 7 Investment as Last Resort
- 8 Shifting the Long-Run Burden
- 9 Committing to Investment
- 10 Constrained by Uncertainty
- PART IV CONCLUSION
- Bibliography
- Index
Summary
For most of its first three decades in operation, the Canada Pension Plan (CPP) was a model of stability (Béland and Myles 2005; Banting 1987). For 20 years, premiums remained frozen at their initial rate of 3.6 percent, even as workers accumulated longer contribution records and growing entitlements to benefits. Organized labor, women's groups, and social-welfare lobbies were also unsuccessful in attempts to substantially enhance the program's relatively modest payouts. An incremental reform in 1987 – instituting a 25-year schedule of contribution rates, to be adjusted every 5 years – was expected to keep the system in balance as the program matured.
In the early 1990s, however, economic recession and a rise in the disability caseload put severe strains on the program's long-run financial balance. Actuarial projections were showing sharp increases in expenditures over the next four decades, requiring as much as a tripling of contribution rates to keep the system solvent. As the pension scheme's financial picture darkened, officials within the federal Finance Department spearheaded a complex reform effort – involving extensive public and federal-provincial consultations – that resulted in a massive policy investment in the CPP's long-term sustainability, with parallel reforms to the Quebec Pension Plan (QPP) enacted simultaneously. In combination with modest benefit cuts, the programs' contribution rates would be nearly doubled to 9.9 percent by 2003, far higher than the required PAYGO rate for many years.
- Type
- Chapter
- Information
- Governing for the Long TermDemocracy and the Politics of Investment, pp. 193 - 214Publisher: Cambridge University PressPrint publication year: 2011