Investing Social Security Funds: Principles and Considerations

Written by Edward Tamagno, a senior federal official responsible for the negotiation and administration of Canada’s international social security agreements, this paper discusses the growth of “hybrid” public pension plans that are publicly managed but partially or fully funded by investing surplus funds in capital markets.  Canada is in the process if creating such a system in the ongoing shift from a pay-as-you-go to partially funded Canada Pension Plan.  The paper examines the new financing arrangements for the Canada Pension Plan according to six interrelated principles and considerations that should underlie the investment of any country’s social security funds: clarity of objectives, independence from political interference, accountability to insured persons, sound governance, low operating costs and prudence in investments.  While it is too soon to pass any definitive judgements, so far the Canada Pension Plan reforms appear very promising.

ISBN – 1-894598-55-5