This is how Canada's $570B pension fund supports your future retirement

Though retirement may seem like a far-off prospect for many young Canadians, there is actually good news!

You might already be familiar with the Canada Pension Plan (CPP), which provides a foundation for your retirement income via contributions from you and your employer. However, Canadians might not be as familiar with how that fund is actually managed and growing.

Since 1999, CPP Investments has been investing, managing, and helping the CPP Fund grow, making sure over 21 million Canadians have a foundational nest egg when it’s time for retirement.

To help clear up any confusion you may have about this Canadian global investor, we’ve partnered with CPP Investments to outline how the organization is helping make sure you get your future retirement funds in the decades to come.

The difference between the CPP and CPP Investments

CPP Investments

The CPP provides you with a foundational start to your income post-retirement and is a program run by both the federal and provincial governments. Depending on your contributions, you’ll receive a monthly, taxable benefit that replaces part of your income in the event of retirement, disability, or death.

But what happens to the money you’re contributing regularly? That’s where CPP Investments steps in.

CPP Investments is responsible for helping grow the CPP Fund so it will be there for you when you retire. The organization is guided and governed by an independent Board of Directors and is run by an experienced and diverse team of investment professionals.

How the CPP Fund works

CPP Investments

The average Canadian worker, upon reaching retirement age (over 60), is eligible to receive around $8,700 per year from the CPP Fund, depending on how long they’ve been working in Canada and contributing to the fund.

Before CPP Investments was established, the CPP was an in-and-out fund, which meant contributions from people working today paid retirement benefits to people who had already retired.

But in the 1990s, when there were too few workers in comparison to retirees, the federal and provincial governments got together and formed CPP Investments to invest the contributions not currently being paid out to retirees to improve the Fund’s sustainability — and it worked.

Reviews of the CPP Fund by Canada’s Chief Actuary project that, at current rates of return, the CPP Fund will be able to pay benefits to retirees for at least the next 75 years.

Making the best investment decisions

CPP Investments

Over the last 20 years, CPP Investments has grown the CPP Fund to $570 billion. Its success lies in its portfolio, which is a mix of diversified, long-term assets that deliver returns over a very long time horizon — without taking on undue risk.

The portfolio is split into six classes: 33% in private equities, 24% in public equities, 13% in credit, 9% in real estate, 12% in fixed income, and 9% in infrastructure.

A commitment to sustainable investing

CPP Investments

In line with its long-term investment strategy, CPP Investments has made several commitments to sustainable investing. One of the biggest commitments the organization has made is to ensure its portfolio and operations reach net-zero greenhouse gas emissions across the organization by 2050.

Earlier this year, the organization achieved its goal of becoming carbon neutral for internal operations and is continuing to serve as an active investor by exerting influence over portfolio companies in the whole economic transition. CPP Investments is also committed to almost doubling its green and transition assets to at least $130 billion by 2030.

It’s also building on the new decarbonization investment approach, which looks for attractive returns from investments that enable emissions reduction and business transformation in high-emitting sectors.

Track the progress of CPP Investments

CPP Investments

To keep the lines of communication open with Canadians, CPP Investments makes regular progress updates on its website.

It also issues regular news releases, updates, and an annual update to Canadians on its year-end results, where you can explore key figures like the total size of the CPP Fund, and the rates of return over the past year, five years, and 10 years (both nominal — i.e., money earned before inflation; and real — i.e., the amount earned after accounting for inflation).

CPP Investments recently issued its latest Update to Contributors and Beneficiaries called “A Year in Review.” The update is an overview that highlights this year’s portfolio results, explains how the CPP Fund is performing, how the CPP works, and provides a clear understanding of how the CPP Fund is invested.

Whether retirement is on the horizon or you’re just beginning to think about your financial future, be sure to read CPP Investments’ update to contributors and beneficiaries to learn more.