4 ms·

> Defined benefit pensions are stupid unless you can print money. Or you look at demographics ahead of time and have the political will to switch away from a p

> Defined benefit pensions are stupid unless you can print money. Or you look at demographics ahead of time and have the political will to switch away from a pay-as-you-go system. Like Canada did with its CPP in the 1990s: * https://en.wikipedia.org/wiki/Canada_Pension_Plan#1996_reforms https://en.wikipedia.org/wiki/Canada_Pension_Plan#1996_refor... Every three years the CPP is independently audited to make sure it is solvent 75 years out given certain assumptions: * https://www.cppinvestments.com/the-fund/our-performance/actuary-special-exam-reports https://www.cppinvestments.com/the-fund/our-performance/actu... And that includes audits from foreign auditors/actuaries that don't have a dog in the fight: * https://www.osfi-bsif.gc.ca/Eng/oca-bac/ipr-rip/Pages/gad30.aspx https://www.osfi-bsif.gc.ca/Eng/oca-bac/ipr-rip/Pages/gad30.... > no city, county, or state should be in the business of promising things that far into the future. Health care workers in the province of Ontario would disagree: * https://hoopp.com https://hoopp.com

lotsofpulp 5y ago
Canada can print its own money though. They are effectively solvent no matter what. And sure, there might be some decent people working at decent DB pension funds. But at the end of the day, what are they doing different that a target date fund from Vanguard/Schwab/Fidelity is not? Except the latter avoids agency risk and is super cheap.
- throw0101a 5y ago
  And yet the health care works who have HOOPP also get it. As well as secondary school teachers (OTP), municipal workers (OMERS), etc. None of these entities can print money. There's no guarantee that pensions will perform well of course (see Alberta). But as someone who spends a decent amount of time in /r/PersonalFinanceCanada, the random person on the street probably does worse. > But at the end of the day, what are they doing different that a target date fund from Vanguard/Schwab/Fidelity is not? 1. Forced savings taken off their pay cheques no matter what, which solves a huge behaviour issue. 2. Run by folks who are better audited than individuals are personally, so results are readily available, and can be easily criticized for non-performance.
  - renewiltord 5y ago
    Actually, if these funds are so good for the public good why not open it to all members of the public? Surely just because you don’t work for Ontario doesn’t mean you shouldn’t be allowed a pension. Same in, same out should be the principle.
    - throw0101a 5y ago
      1. I wouldn't object. But employers would have to kick in money too, and some may not want to because that could potentially effect the bottom line. With (US) 401(k) (CA: RRSP), it's up to the employee to contribute and many don't so that saves companies money. 2. The listed pension funds are not for working specifically for the government, but are for more publicly focused aspects (health care, education). But there are other options, like folks who work in (e.g.) the food industry (supermarkets): * http://ccwipp.ca/index.php/en/ http://ccwipp.ca/index.php/en/ Construction: * https://www.lpfcec.org https://www.lpfcec.org And even general solutions: * https://www.caatpension.ca https://www.caatpension.ca That said, the public sector pension (OPTrust) set up a system where Ontario charities / non-profits can join their general pool not too long ago: * https://pensionpulse.blogspot.com/2018/09/ontarios-new-non-profit-pension-plan.html https://pensionpulse.blogspot.com/2018/09/ontarios-new-non-p... * https://www.optrust.com/AboutOPTrust/News/Nonprofits-Enroll-In-OPTrust-Select.asp https://www.optrust.com/AboutOPTrust/News/Nonprofits-Enroll-... * https://theonn.ca/our-work/our-people/decent-work/pension/ https://theonn.ca/our-work/our-people/decent-work/pension/ BC is looking at pensions for gig workers: * https://www.benefitscanada.com/benefits/health-benefits/b-c-s-ndp-developing-benefits-pension-supports-for-gig-workers/ https://www.benefitscanada.com/benefits/health-benefits/b-c-...
      - renewiltord 5y ago
        Why make it on employers to kick in rather than say $x gets $y? The thing the fund performs on is amount of money in per person anyway. Otherwise seems rather sensible.
  - lotsofpulp 5y ago
    1. This is more easily accomplished as a federal program. 2. It is already very easy to write software that compares performance to an index. Regardless, if the purpose of a DB pension fund is to protect people from their own proclivities, then a federal pay as you go system works better (cheaper, less agency risk). If the purpose is to supplement the amounts from the federal system, then a personal account at a brokerage invested in a low cost index works better. I am not even sure why Canada invests its pension funds in the private markets. Canada can always issue new Canadian dollars anytime it needs to pay the benefits it has promised if tax receipts are insufficient. If anything, this leads to another perverse incentive of Canada’s government wanting to bail out businesses it has invested in.
dleslie 5y ago
CPP is woefully inadequate to survive on in most of Canada.
- throw0101a 5y ago
  Which is why there is also OAS and GIS. CPP was never meant to be a 100% program.

lotsofpulp 5y ago

Canada can print its own money though. They are effectively solvent no matter what. And sure, there might be some decent people working at decent DB pension funds. But at the end of the day, what are they doing different that a target date fund from Vanguard/Schwab/Fidelity is not? Except the latter avoids agency risk and is super cheap.

throw0101a 5y ago
And yet the health care works who have HOOPP also get it. As well as secondary school teachers (OTP), municipal workers (OMERS), etc. None of these entities can print money. There's no guarantee that pensions will perform well of course (see Alberta). But as someone who spends a decent amount of time in /r/PersonalFinanceCanada, the random person on the street probably does worse. > But at the end of the day, what are they doing different that a target date fund from Vanguard/Schwab/Fidelity is not? 1. Forced savings taken off their pay cheques no matter what, which solves a huge behaviour issue. 2. Run by folks who are better audited than individuals are personally, so results are readily available, and can be easily criticized for non-performance.
- renewiltord 5y ago
  Actually, if these funds are so good for the public good why not open it to all members of the public? Surely just because you don’t work for Ontario doesn’t mean you shouldn’t be allowed a pension. Same in, same out should be the principle.
  - throw0101a 5y ago
    1. I wouldn't object. But employers would have to kick in money too, and some may not want to because that could potentially effect the bottom line. With (US) 401(k) (CA: RRSP), it's up to the employee to contribute and many don't so that saves companies money. 2. The listed pension funds are not for working specifically for the government, but are for more publicly focused aspects (health care, education). But there are other options, like folks who work in (e.g.) the food industry (supermarkets): * http://ccwipp.ca/index.php/en/ http://ccwipp.ca/index.php/en/ Construction: * https://www.lpfcec.org https://www.lpfcec.org And even general solutions: * https://www.caatpension.ca https://www.caatpension.ca That said, the public sector pension (OPTrust) set up a system where Ontario charities / non-profits can join their general pool not too long ago: * https://pensionpulse.blogspot.com/2018/09/ontarios-new-non-profit-pension-plan.html https://pensionpulse.blogspot.com/2018/09/ontarios-new-non-p... * https://www.optrust.com/AboutOPTrust/News/Nonprofits-Enroll-In-OPTrust-Select.asp https://www.optrust.com/AboutOPTrust/News/Nonprofits-Enroll-... * https://theonn.ca/our-work/our-people/decent-work/pension/ https://theonn.ca/our-work/our-people/decent-work/pension/ BC is looking at pensions for gig workers: * https://www.benefitscanada.com/benefits/health-benefits/b-c-s-ndp-developing-benefits-pension-supports-for-gig-workers/ https://www.benefitscanada.com/benefits/health-benefits/b-c-...
    - renewiltord 5y ago
      Why make it on employers to kick in rather than say $x gets $y? The thing the fund performs on is amount of money in per person anyway. Otherwise seems rather sensible.
- lotsofpulp 5y ago
  1. This is more easily accomplished as a federal program. 2. It is already very easy to write software that compares performance to an index. Regardless, if the purpose of a DB pension fund is to protect people from their own proclivities, then a federal pay as you go system works better (cheaper, less agency risk). If the purpose is to supplement the amounts from the federal system, then a personal account at a brokerage invested in a low cost index works better. I am not even sure why Canada invests its pension funds in the private markets. Canada can always issue new Canadian dollars anytime it needs to pay the benefits it has promised if tax receipts are insufficient. If anything, this leads to another perverse incentive of Canada’s government wanting to bail out businesses it has invested in.

dleslie 5y ago

CPP is woefully inadequate to survive on in most of Canada.

throw0101a 5y ago
Which is why there is also OAS and GIS. CPP was never meant to be a 100% program.