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Public pension plans

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Most Canadians look forward to retirement for many years—no more commuting to work, no more bosses and no more deadlines. But there’s a flip side to all that freedom: regular paycheques stop coming in. While many have pensions they can draw on for income, all Canadians supplement their post-retirement income by receiving payments from government-run pension plans.

Established in 1966, the Canada Pension Plan (CPP) covers Canadians in all provinces and territories except Quebec, which runs its own plan—the Quebec Pension Plan (QPP). It is mandatory for nearly all employed persons to make contributions to these plans, which are heavily invested in bonds and investment funds. In March 2006, the combined financial assets of the two plans totalled just over $100.4 billion. The CPP accounted for $77.0 billion of this, and the QPP, $23.4 billion.

The two pension plans have grown tremendously since 2001, when their combined value was $64.1 billion. Despite shaky market conditions in the first years of the new century, concerns about declining balances in the CPP/QPP led to a change in the investment strategy for their growth. This, combined with rising contribution rates for both plans, has greatly improved their holdings.

Annual contributions to the CPP have grown by more than one-quarter from $23.5 billion in 2001/2002 to nearly $29.9 billion in 2005/2006. Coupled with pension payments growing at a slower pace (21%), and steady investment income, the CPP has generated strong surpluses over this period. The same trends are roughly mirrored in the QPP, although contributions to this plan have grown even faster, at 33%. CPP and QPP contribute almost one-fifth of total income for Canadians 65 and older.