Canada is home to some of the world’s most admired and successful public pension organizations. This was not always the case. As recently as the mid-1980s, many Canadian public pensions were invested largely or entirely in domestic government bonds, were funded primarily on a pay-as-you go basis, lacked independent governance, and were administered in an outdated and error-prone fashion. Over the past three decades, a Canadian model of public pension has emerged that combines independent governance, professional in-house investment management, scale, and extensive geographic and asset-class diversification.

The World Bank commissioned a report by Common Wealth to document the emergence and evolution of this Canadian model, distilling practical lessons for stakeholders in emerging economies working to improve their pension arrangements and retirement systems. Although a growing body of literature exists on the Canadian model of pension organization, this report is unique in two respects: its emphasis on the evolutionary journey of four Canadian pension organizations – Alberta Investment Management Corporation (AIMCo), Caisse de dépôt et placement du Québec (CDPQ), Healthcare of Ontario Pension Plan (HOOPP), and OPTrust – and its in-depth focus on Canadian pension funds that have received less attention than some of their peers.

   

On November 22, 2017, Managing Director and World Bank Group Chief Financial Officer Joaquim Levy attended the launch of the report “The Evolution of the Canadian Pension Model” at The Omni King Edward Hotel. Click here to read his opening remarks. Christine Hogan, Executive Director for Canada, Ireland and the Caribbean at the World Bank Group, also spoke at the Canadian Club Toronto event, which included a panel discussion with Kevin Uebelein (CEO, AIMCo), Kim Thomassin (Executive Vice-President, Legal Affairs and Secretariat, CDPQ), Jim Keohane (President and CEO, HOOPP), and Hugh O’Reilly (President and CEO, OPTrust).

Based on in-depth interviews with some of Canada’s top pension leaders and case studies of four funds (AIMCo, CDPQ, HOOPP, and OPTrust), the detailed World Bank report covers the essential components of pension plan organizations – governance, people and organization, investments, administration, plan design and funding, and regulation and public policy – and presents a four-phase framework for the evolution of pension organizations. It outlines 14 key lessons and draws out several success factors including:

  • Strong collaboration between diverse stakeholders – labour, government, business, and finance – and a sustained relationship built on trust
  • Strong, independent governance
  • Singularity of purpose – to run the organization like a business and focus on delivering retirement security for plan members
  • Presence of strong, ethical leadership at the top and throughout the organization
  • Recruitment and retention of top global talent with a competitive and performance-based compensation framework
  • Critical “founding” stage of a new or reformed pension organization
  • Governments creating the right regulatory environment
  • Investments managed in-house rather than outsourced to third-party fund managers

The report also highlights seven challenges that will shape the future of the Canadian pension model. Click here for a report summary/backgrounder.

Download the full report (PDF).