To most of us, the topic of pension funds suggests concerns of aging, retirement and long-term economic security. In other words, we think about such personal questions as: Exactly how much money will I need to ensure comfort and a good quality of life in my senior years? Canadian public policy and the media reflect these preeminent household concerns, evident in recent discussion about the challenges presented to society in an aging population and increasing calls on government treasuries to guarantee the provision of adequate health care and income security programs. In this context, the role assumed by employer-sponsored (or occupational) pension funds is a vital one for many Canadian workers, retirees and their families.
Increasingly, public policy also views pension funds from an entirely different perspective: their fast-growing importance as institutional investors in the Canadian financial system. Employer-sponsored funds are not just a principal source of retirement income to many working people, they are also large and influential financial institutions that perform a current economic function in converting national savings into productive, value-added investment that can create jobs.
To what extent do these different roles positively converge? The singular priority of pension trustees and managers is to obtain optimal revenues from investing in a prudent fashion. Legislators and governments must be concerned about maintaining a social policy framework that accounts for trends in the Canadian retirement income system and anticipates an aging population. At the same time, there must be confidence that pension asset allocations act to facilitate national economic policy requirements. The challenge here is to find an effective and efficient way of maximizing the intersection of these distinct and occasionally conflicting imperatives.
Consideration of pension funds in this new light is long overdue. This report by the Canadian Labour Market and Productivity Centre (CLMPC) undertakes the task of examining pension funds in their second and less-well-known function as economic agents. In particular, Prudence, Patience and Jobs: Pension Investment in a Changing Canadian Economy looks at the role and performance of pension investment activity in fostering positive output, productivity and employment outcomes in an era of major change and restructuring. In so doing, it aims to increase appreciation of funds in this realm and help broaden and deepen public discussion.
The following is a Technical Report. A Summary Report for this document, forty pages in length and of the same title, is also available through the CLMPC.