What impact has the investment diversification strategy had in securing the pension system?
MM: There were three measures initiated to secure the contributory pension system. The key is a contribution rate which remains stable over the foreseeable future (50-100 years) forecast; a so-called steady-state contribution rate. A ‘steady-state contribution rate’ means that a rate is set such that the rate can stay just at that level more or less forever. The government said that if workers today can pay 9.8 percent towards pension plans, then workers in 2045, ’55, and ‘65 should also be able to pay 9.8 percent. Let’s design a system that will have a long term stable contribution rate. This will mean that the system is sustainable. The Canadian governments (federal and provincial) decided to set a steady state contribution rate at below 10 percent. Then it became a matter of addressing the rate of return on investments and the benefit structure to ensure that the steady state would in fact be sustainable. So to keep to a 9.8. per cent rate required reductions in benefits (most of wh
