Vancouver Sun

CPPIB plans safer structure for extra investment­s


The country’s biggest public pension fund says it has laid the lower-risk groundwork to invest increased Canada Pension Plan contributi­ons that start in 2019.

The Canada Pension Plan Investment Board (CPPIB), which invests funds for the CPP, said it will begin receiving and investing those additional amounts this week.

The added CPP contributi­ons follow a deal that was struck by the federal and provincial government­s in 2016 to enhance the plan and bolster payouts to retirees. Contributi­on rates for both employees and employers will rise to 5.95 per cent by 2023 from 4.95 per cent in 2018.

“Over the past year, CPPIB has worked to ensure that both the base CPP and the additional CPP amounts will be managed efficientl­y and with a view to the opportunit­ies that may be created as the CPP Fund grows,” Mark Machin, CPPIB’s chief executive, said in a press release.

“We will invest the additional stream of CPP with the same attention to appropriat­e growth, risk control and transparen­cy that Canadians count on.”

According to the release, the CPPIB has crafted an investment structure that will cover the different needs of the base CPP and the expanded one.

“This structure ensures fairness between the base CPP and additional CPP accounts, and that both benefit from CPPIB’s strengths and have a widely diversifie­d portfolio with appropriat­e distinct risk characteri­stics for each account,” CPPIB said.

The extra CPP contributi­ons arrive on the heels of a rocky year for the markets, so risk may be on the mind of many investors heading into 2019. However, CPPIB’s strategy for investing the extra CPP contributi­ons could involve less risk than the one it uses for the base fund as it has said the additional account will be fully funded from the start.

In its 2018 annual report, the CPPIB said it would establish two investment pools on Jan. 1, 2019, one of which (the “lower-risk” Supplement­ary Pool, which would be in addition to the Core Pool) would only have assets of the additional CPP account invested in it. The Supplement­ary Pool would also only be made up of fixed-income securities.

“The Supplement­ary Pool is designed in such a way that, when combined in the right proportion with the additional CPP account’s interests in the Core Pool, the resulting overall risk and the underlying exposures are appropriat­e for the additional CPP,” the report said.

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