In March 1999, the Canada Pension Plan Investment Board received $12.1 million from the administrators of the CPP in Ottawa. The money was immediately invested in a portfolio of domestic and foreign equities designed to track the performance of broad market indexes. This little-noticed event heralded the practical beginning of an exciting and closely watched public policy initiative: using capital market returns to help sustain the retirement, survivor, and disability benefits promised by a national pension plan.

For the benefit of current and future generations of Canadians, this book captures the demographic, economic, social, and political events and debates that...

Post-work income provision has been an important economic challenge for people everywhere since the beginning of time. In the pre-industrial age, intergenerational ‘pension deals’ were family affairs. Mom and Dad took care of their children when they were young, and the children took care of Mom and Dad when they could no longer take care of themselves. In today’s post-industrial age, intergenerational ‘pension deals’ have become significantly more complex multi-pillar affairs.

Typically, post-industrial societies provide all citizens with a basic Pillar 1 pension funded through a national tax and/or payroll deduction structure. Many employers supplement this basic Pillar 1 state...

In 1993, if you had told a Canadian that within a half-decade, the country would have both erased its federal deficit and put the Canada Pension Plan on a solid financial footing for the first time, you would have been greeted with hoots of disbelieving laughter and urged to bet some serious money on your obviously mad predictions.

Everyone ‘knew’ that Canada’s fiscal problems were so grave and so intractable that big deficits and big debts would be part of the landscape for decades to come. Everyone ‘knew’ that the twenty-seven-year-old national pension plan was in deep financial trouble despite...

Canada in the early 1990s was not a happy place. To a casual visitor, even a regular one, Canada would have looked as it always had – a country of magnificent vistas and bustling cities. But visitors, unless they come looking for such things, pay little attention to economic indicators or government finances. From an economic and fiscal perspective, Canada was a mess. Recession, unemployment, inflation, interest rates, and government deficits were daily fodder for thousands of disheartening headlines. And Canadians were getting angry at – and losing confidence in – their governments for allowing, even creating, the economic and...

The chief actuary’s15th Reportin early 1995 was a bombshell for anyone who had not been keeping tabs on the finances of the Canada Pension Plan; which is to say the entire population save the handful of officials whose job it was to keep any eye on such things and another small group of social policy experts. News accounts of the report focused the public’s attention: unless contributions to the plan almost tripled, the plan’s fund would be exhausted – ‘broke’ in the headlines – in twenty years. Those with long memories recalled that the original architects of the...

From the late 1960s to the early 1980s, public debate over pensions – and, more broadly, retirement income in general – passed by the Canada Pension Plan entirely. Much of the CPP story during this period can be found in periodic reports of the plan’s chief actuary, an official in what was then the federal Department of Insurance and is now the Office of the Superintendent of Financial Institutions (OSFI). The reports make for less-than-scintillating reading – actuarial reports are not written with an eye to attracting a wide audience – but they tell a vital tale all the same....

The Canada Pension Plan was about to return to the federal–provincial agenda, but any thoughts of a greatly expanded package of retirement benefits – along the lines of the CLC and NCW proposals – were off the table entirely. ‘Finance dumped it,’ says Ken Battle. The department had two key objections. First, Old Age Security and the Guaranteed Income Supplement were already accomplishing the anti-poverty objective, and second, the earnings replacement goal might not be met because people would simply contribute less to their RRSPs. ‘The same arguments are true today.’¹

Now the chief actuary re-entered the debate with...

Once more, the CPP disappeared from public view, but the officials kept plugging away. In Ottawa, a new dynamic was developing in terms of who controlled the plan. Before 1987, the National Health and Welfare Department (NHW) took care of the benefit side – running the day-to-day administration of the plan and examining new policy proposals, which usually involved improved benefits – while the Finance Department took care of the financing side. Now that financing had emerged as a more important concern, Finance began looking more closely at the benefit changes. As Réal Bouchard recalls, there was a growing recognition...

The sense among pension officials that it was time to break the mould and try something different reflected a broader attitudinal change in the country. The public – at least the public that understood something about pensions – was stirring to the idea that the CPP needed a thorough repair job. And some were beginning to suggest that reforms should go well beyond simple contribution rate increases to more radical alternatives.

Beginning in 1992, just after the latest rate schedule had gone into effect, Canadians were increasingly treated to studies, reports, newspaper stories, and magazine articles that articulated their growing...

In early 1995, the federal and provincial officials who monitored the Canada Pension Plan were awaiting the chief actuary’s15th Report, which would become the basis for their next review of the CPP. They knew it would be grim reading, but even so, it still came as something of a shock when it was released quietly on 24 February 1995, the Friday before Paul Martin’s big turnaround budget. For the CPP, it was the proverbial ‘straw that broke the camel’s back,’ according to one federal Finance official.¹

Bernard Dussault, the chief actuary, wasted little time in getting to his bottom...

In the months following the chief actuary’s report, activity on the Canada Pension Plan quickened noticeably. Outside government circles, the media were replete with predictably apocalyptic articles. After all, the government itself had declared a crisis, and there are few things the media like better. It is difficult in ordinary times to grab the attention of the public for a discussion of big public policy issues. This time, however, the CPP mattered: it was in trouble, and the government had declared its intention to act. It was time for the experts to explain and analyse, time for the advocates of...

While the pension debate swirled outside government circles, the federal and provincial officials who devote large chunks of their careers to thinking about pensions spent 1995 coming up with options for their political masters to consider.¹

Collectively, this was – and remains to this day – about as unsung a group of public servants as you can find. Their work was highly technical and, to most people, epitomized the word ‘boring.’ Outsiders, including the politicians, took an interest in what these people thought and did only when a problem needed solving or a crisis was perceived or when the public...

During the two months after the ministerial meeting, officials worked to put their proposals on paper in a form that the public could understand. They needed a discussion paper that explained the roots of the problem and laid out the options for solving it. Federal Finance officials ‘held the pen,’ as the saying in government circles goes, but provincial officials were consulted along the way and their favourite options were included. Midway through the writing process, on 12 January 1996, the officials got together in Ottawa to sort through the options that would and would not go into the paper....

Now the CPP reform was moving on two tracks. Behind the scenes, federal and provincial officials continued to work through the particulars that made up the broader reform plan. Even where they agreed on the basics of an item in the reform, there were plenty of devils in the detail. The public track involved something entirely new. Governments had consulted the public before on major issues, but never in quite the way the CPP ministers ran their show – as a joint federal–provincial effort. It took longer than hoped to get the public consultation process rolling, but by the...

By June 1996, it was time to get down to the business of making some real decisions. Over the previous three months, the finance ministers – through their consultation process – had talked to hundreds of ordinary Canadians and to pension experts of all stripes. From this point on, outside voices were largely blocked out. The only thing that mattered was what happened inside the room when officials and ministers met. Paul Martin, for one, figured that when he looked around the table at a finance ministers’ meeting, he had all the political diversity he needed to make a deal...

Figuring out a new investment policy for the CPP – and an institutional structure to bring it to life – was one of the trickier tasks facing policymakers. It was complex and technical, and for that reason flew well under the radar of public and media interest throughout 1996. But the ten governments had launched their own study of the issue on 5 December 1995, at a meeting of finance deputy ministers (known as the Continuing Committee of Officials, or CCO) a week before the finance ministers’ meeting that decided to go ahead with public consultations. The deputies figured they...

The finance ministers’ planned meeting for October in Ottawa began to unravel in September when British Columbia kicked the struts out from under any chance that a deal might be struck soon. Without warning, the province’s new finance minister, Andrew Petter, rolled out a new set of proposals that challenged the emerging consensus for reform.

British Columbia’s reversal, which surprised and angered ministers and officials in Ottawa and the other provinces, followed a changing of the guard in the provincial government. In February, Glen Clark had replaced Mike Harcourt as leader of the governing New Democratic Party and premier of...

The needed spark for a deal was struck in, of all places, Asia. On 8 January 1997, Prime Minister Jean Chrétien took off on a trade mission for two weeks in South Korea, the Philippines, and Thailand with 400 businesspeople, officials, and nine of the ten provincial premiers in tow. Designed to do business with three key countries in Asia, the so-called Team Canada trip was also a chance for federal and provincial politicians to do some informal business with each other.

In his 2006 memoirs, Eddie Goldenberg, Chrétien’s senior policy adviser, revealed two conversations from that trip that helped...

The government wanted to get the legislation through Parliament by the end of the year, so it moved briskly. The bill was brought forward for second reading – approval in principle – on 7 October and debated for only a day before the government introduced a motion to allocate the remaining time for debate, a form of closure that prompted MPs from the Reform Party and the New Democratic Party to protest by walking out of the chamber. On 9 October, Bill C-2 passed easily by a vote of 202 to 69. The Reform and New Democratic parties both voted...

Federal and provincial officials had been far from idle through 1997 while Parliament worked on the legislation. They had to set up the new Canada Pension Plan Investment Board and write the regulations that would govern it. The first task was to find a board of twelve people to organize and oversee the new fund. Since they had written into their agreement a cumbersome process of board selection, that took some time.

On 23 October, Martin announced the make-up of the nominating committee that would seek out directors for the CPPIB. Heading the committee was Michael Phelps, chairman and chief...

Many of the key players in this chapter of Canada’s public policy history have reflected on the reform of the Canada Pension Plan and almost all have fond memories of – and no little pride in – the outcome, if not the hard work and tough negotiating that went into getting there. In a recent discussion of the CPP reforms, Paul Martin said, ‘you are really glossing over how tough these negotiations really were.’¹ One of his former officials had made much the same point in an earlier conversation.

The pride of the CPP reformers is evident, especially a decade...