(Catherine Swift) The Canada Pension Plan is an essential part of retirement income for the vast majority of Canadians. Yet most Canadians are not aware of the many changes that have taken place since the CPP was first created in 1965. For the first few decades of its existence, the CPP was a very boring pension plan that employed just a handful of people, invested Canadians’ mandatory contributions very conservatively, produced modest and consistent investment returns and paid older Canadians a reliable monthly amount. This was a very deliberate plan on the part of governments of the day, as they didn’t believe such an important pillar of Canadians’ retirement should be invested in a risky manner, even if there was the potential for higher rates of return.

The timing of the creation of CPP in the 1960s was very important, as the post-war Baby Boomers were just starting to enter the workforce in massive numbers. The Boomers started paying into the CPP when there were many fewer retired Canadians, such that the system could sustain itself even though it was not an established fund at all but rather a “pay as you go” system when the people paying into CPP directly funded those collecting CPP pensions. --More...