Canada Pension Plan

History

The CPP was established in 1966 by then Prime Minister Lester Bowles Pearson. Back then, the prescribed contribution rate was 1.8% of an employee's gross income went towards contributing to the CPP. However, by the 1990's, it was concluded that the "pay-as-you-go" structure was not sustainable, due to Canada's changing demographics, increased life expectancy of Canadians, and a changing economy. Based on the current numbers, it is estimated that CPP benefits paid out will exceed CPP contributions in 2022. This impending pension crisis sparked an extensive review by the federal and provincial governments in 1996. As a part of the major review process, the federal government actively conducted consultations with the Canadian public to solicit suggestions, recommendations, and proposals on how the CPP could be restructured to achieve sustainability once again. As a direct result of this public consultation process and internal review of the CPP, the following key changes were proposed and approved by the Federal Government in 1997:

Related Topics:
1966 - Prime Minister - Lester Bowles Pearson

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• Total CPP contribution rates (employer/employee combined) were increased from six per cent in 1997 to 9.9 per cent of maximum pensionable earnings by 2003
• Continuously seek out ways to reduce CPP administration and operating costs.
• Move towards a hybrid structure. Instead of being a completely "pay-as-you-go" structure, the CPP is expected to be 20 per cent funded (that is, CPP assets will equal 20 per cent of the liabilities - or pension obligations) by 2017.
• Creation of the CPP Investment Board (CPPIB).
• Review the CPP and CPPIB every 3 years.