Topic of the week
Canada is one of the rare countries where employee and employer contributions to the public pension system serve to finance pension funds. The funds generate income that serves to pay for current pensions. In measuring total government debt in Canada, the positive net worth of the public pension system is taken into account. This contributes to lower total government debt and to confer to Canada a mark of distinction in this regard.In response to the declining number of workers per retiree, other countries will be forced to reform their pension systems in order to rein in debt. If nothing is done in Canada, the positive net worth of the system will gradually be depleted. Not only is the sustainability of the system at risk, but so is Canada’s distinguished reputation on the financial markets.
Given that the public pension system is already in a net asset situation, the measures that will have to be taken in Canada will no doubt be less painful than those in most of the other countries.
Summary
Canada is one of the rare countries where the public pension system enjoys a positive net worth that serves to finance current pensions.
This net worth contributes to lower government debt and thus to confer to Canada a mark of distinction in this regard.
In response to the declining number of workers per retiree, other countries will certainly be forced to reform their public pension systems in order to reduce their impact on their budgetary expenses and, by the same token, on their debt. If nothing is done in Canada in this regard, the positive net worth of the public pension system will gradually be depleted. The system’s sustainability is at risk, as is Canada’s image as a paragon of financial health.
Given that Canada’s public pension system is already in a net asset situation, the measures that will have to be taken here will no doubt be less painful than those in most of the other countries.
