Here’s what you need to know about the Canada Pension Plan

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By John Graham

This message is for Gen Z. If you’re not Gen Z, I hope you’ll keep reading anyway.

As we mark Financial Literacy Month, I know many of you are feeling anxious about money. In fact, we’ve heard that over two-thirds of Gen Z worry about making the wrong financial decisions and about the same number are concerned they will run out of money in retirement. It’s understandable — student loans, rent, house prices and the rising cost of living are a lot to manage at any age. At this point in your life, investing money systematically for retirement probably seems out of reach. Fortunately, if you’re part of the Canada Pension Plan (CPP), you’re already doing just that.

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Here’s how the Canadian pension promise works: Every month, a small part of your pay goes into the CPP, matched by your employer. The amount not needed to pay current retirees is entrusted to the team at CPP Investments, where we focus solely on growing it for your retirement. When you’re ready to retire, you’ll receive a deposit in your bank account every month for as long as you live — adjusted for inflation to help ensure your financial security.

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This year, we’re marking the 25th anniversary of CPP Investments. We started with $12 million; today, the CPP Fund stands at over $646 billion. Of that, $432 billion, after all costs, has come from the investment income we’ve generated on top of your contributions. Our mission is simple: While you’re building your life, education, career and family, we’re behind the scenes, quietly helping to grow and protect your retirement savings.

For your generation, the CPP will be especially important. People are living longer, and many of you might not retire in your 60s like past generations. You have more flexibility than ever before, as you’re expected to live to 100 and beyond. You may even choose to collect from the CPP while continuing to work, or while living abroad in retirement. Living your latter years differently — and on your own terms — has never been more possible. And the CPP will be essential in helping you do it.

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With an annualized return of nine per cent over the past 10 years, we’re recognized as one of the best in the world at what we do. One reason for that is we’ve only ever had one goal: to produce stable returns that help pay pensions for Canadians. In a world where companies are preoccupied with day-to-day considerations, we stay laser focused on our singular purpose. We have no other choice; before we started to manage the CPP Fund, Canada’s senior poverty rate was among the highest in the world. Today, it is among the lowest.

We’re ready for the next generation. At 25 years old, CPP Investments is part of Gen Z. Like you, we’ve grown up in an era of financial crises, inflationary cycles and even a global pandemic. And, like you, we’ve faced these challenges head-on.

But here’s the reality: Long-term investing is harder today than ever before. The world we live in now is more complex and unpredictable than it was even a decade ago. Markets today are increasingly rewarding short-termism, prioritizing quick wins over the long-term. However, we believe prioritizing growth through globally diversified investments and prudently managing risks will be required to meet retirement needs decades in the future.

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What does this mean for you? At CPP Investments, we navigate these investment complexities alongside you, helping to keep one of your sources of retirement income safe. We continuously adapt our strategies, seize opportunities and manage risks — such as climate change and geopolitical risk — across a wide range of considerations, sectors and regions. Our priority is ensuring that our returns help provide pensions not just today, but for generations to come. We’re not chasing big wins or risking big losses — we focus on delivering steady, reliable returns you can count on.

So, this Financial Literacy Month, I’d encourage you to take two small steps. First, learn more about how the CPP fits into your financial future. You don’t have to figure everything out today, but understanding this piece can help reduce your financial stress and give you confidence to plan for the future. Second, take pride in the fact that, with every pay day, your retirement security is already being built.

For the two most important members of Gen Z in my life — my kids — retirement will likely look very different from mine, but one thing remains certain: The Canadian pension promise will be there for us all.

John Graham is President and CEO of CPP Investments

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