kEiThZ
Superstar
Quebec uses their provincial pension fund to invest in infrastructure. So it can be done.
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Ontario Budget Week
- Thread starter rbt
- Start date
Quebec uses their provincial pension fund to invest in infrastructure. So it can be done.
TOareaFan
Superstar
There is nothing wrong (or illegal) for a pension fund to invest in infrastructure...as part of their overall investment portfolio. It cannot, however, be a government controlled "slush" fund that is a debt substitute...that is what I don't fear.
Pension funds across Canada (in fact the world) have been allocating portions of their portfolios to infrastructure because they can negotiate very high returns....higher IRRs than they can get in other, more traditional, parts of their portfolios. Their target rates of return on infra exceed most of their other portfolios. But they are still a) independently managed/reviewed (ie. not instructed by government) and b) a portion (varies by fund) of the total.
1overcosc
Active Member
Big supporter of ORPP over here. Or rather, I should say, big supporter of public pension expansion. I would prefer a bigger CPP. But in the absence of this getting done (even with Trudeau replacing Harper, you still need provincial consensus), a provincial plan is needed. ORPP plugs up one of the biggest cracks in our system and it completely prevents a potentially huge poverty crisis in the future.
Plus, a mental health benefit in ways. Having the government take care of that gap and leaving less savings to have to plan & manage on our own takes a huge amount of stress off our shoulders.
I still very much believe that ORPP should be folded into CPP, mostly for efficiency reasons. Thankfully the government has designed ORPP such that doing so is easy.
Plus, a mental health benefit in ways. Having the government take care of that gap and leaving less savings to have to plan & manage on our own takes a huge amount of stress off our shoulders.
I still very much believe that ORPP should be folded into CPP, mostly for efficiency reasons. Thankfully the government has designed ORPP such that doing so is easy.
TheTigerMaster
Superstar
I don't know too much about the ORPP specifically, but I do 100% stand behind the goal of having a socialized seniors pension plan. Nobody wants to deal with a seniors poverty crisis.
Jonny5
Senior Member
Infrastructure assets are moving to long term low yields explicitly because pension plans have bid up the assets, desperately seeking yield that has evaporated in other asset classes. IRR's have dropped significantly, and continue to drop. There is a clear bubble already. It's happening because most pension money is dumb money, allocated by outsourced consultants and multi-manager asset gatherers, not by the pensions themselves. Interestingly, many, though not all, of our government run plans have bucked this trend. They still manage in house, like QPP proposes to do, and they are extraordinarily successful, some literally overfunded.
I do not know what you mean by "negotiate returns". Infrastructure is valued at a cost related to it's revenue and revenue growth potential. When the CPP buys an airport it does not get to "negotiate" how much revenue it will receive as a condition of the sale.
"Target rates of return" on asset classes are also frequently bullshit. Benchmarking infrastructure is extremely complicated since the assets are very illiquid. If the US stock market collapses tomorrow, how do you change the value of a toll highway in Mexico? This means infrastructure also has higher risk.
There's also tax leakage to be concerned with. Pensions do not pay tax on their income. Tax treaties ensure foreign pensions do not either. But the receivers of income via pension benefits do pay tax on the income. If all the revenue is shunted to German tax payers, what does the local Canadian jurisdiction get back in the end? Nothing.
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TOareaFan
Superstar
you negotiate returns on the price side. yes you can seldom control the cashflows back...but you can sure control how much you pay for them....and, yes, infrastructure yields have been bid down...but they still outstrip most other returns that are available to the funds.
kEiThZ
Superstar
This is exactly what I fear. They are going to use the ORPP to fund infrastructure at artificially low rates creating fund liabilities down the road if the pension fund doesn't generate sufficient returns to pay out its benefits obligations.
I'd have much more confidence in the ORPP if it were to be run like the CPP. The CPPIB is far more independent of government and definitely works for the benefit of pensioners, not government.
I wish the Feds would just allow different contribution levels by province. We have that with EI effectively. This would also allow for mobility around the country. Might even allow Quebec to fold in QPP.
BurlOak
Senior Member
If the Province is getting in the business of the CPP, maybe the City of Toronto should print their own money. Maybe Toronto could have their own military to prevent those 905'ers from clogging up the Yonge line.
I thought I read that this is the richest generation of retired people - showing that the current tools for savings are working (RRSP, TFSA)
I thought I read that this is the richest generation of retired people - showing that the current tools for savings are working (RRSP, TFSA)
Johnny Au
Senior Member
Later on, we could declare provincehood, and if that is not enough, independence.
Admiral Beez
Superstar
Is that what Paul Martin did with EI when he was federal Finance Minister - essentially showing a balanced budget due to a shell game with the money?
TOareaFan
Superstar
If you think EI and pension plans are the same thing....then we have little common ground to discuss from.
I know you mention provincehood in jest, but I'm actually in favour of that. The size of Provinces in the 21st century makes them less than ideal. To me, sub-national entities (Provinces, States, whatever you want to call them) should reflect a population with a common economic, political, and cultural identity. The relation between Northern Ontario and the GTHA fail on pretty much all 3 of those.
IMO, any major urban centre with a population in excess of 2 million should be its own Province, so that it can control its own affairs. Naturally though, this would shift more responsibility (for things like healthcare) to the Feds. Sections 91 and 92 of the Constitution were set up when people rarely went to school past grade 8, the major road between Toronto and Montreal was a dirt path, healthcare was privately administered, and the notion of "national defence" consisted of building forts along the St. Lawrence and Lake Ontario to protect from American invasion. That separation of powers needs a reset for the 21st century, and that reset should also feature a review of what a Province actually is and what it should encompass.
Johnny Au
Senior Member
There is already a Province of Toronto thread here in UT: http://urbantoronto.ca/forum/threads/the-province-of-toronto.18662/
1overcosc
Active Member
For currently retired people yes. The problem ORPP is meant to address is the savings gap in younger people who are still working. ORPP mainly helps prevent a poverty crisis that could emerge in 30-40 years with retired millennials. These days, more and more workers have careers involving more precarious scenarios: multiple part-time jobs, self-employment, contract employment, etc, which often lack workplace benefits such as pensions plan. And millennials will basically spend their entire careers working in this environment. Earlier generations don't have this concern.