Canada can print its own money though. They are effectively solvent no matter what. And sure, there might be some decent people working at decent DB pension funds.
But at the end of the day, what are they doing different that a target date fund from Vanguard/Schwab/Fidelity is not? Except the latter avoids agency risk and is super cheap.
And yet the health care works who have HOOPP also get it. As well as secondary school teachers (OTP), municipal workers (OMERS), etc. None of these entities can print money.
There's no guarantee that pensions will perform well of course (see Alberta). But as someone who spends a decent amount of time in /r/PersonalFinanceCanada, the random person on the street probably does worse.
> But at the end of the day, what are they doing different that a target date fund from Vanguard/Schwab/Fidelity is not?
1. Forced savings taken off their pay cheques no matter what, which solves a huge behaviour issue.
2. Run by folks who are better audited than individuals are personally, so results are readily available, and can be easily criticized for non-performance.
1. This is more easily accomplished as a federal program.
2. It is already very easy to write software that compares performance to an index.
Regardless, if the purpose of a DB pension fund is to protect people from their own proclivities, then a federal pay as you go system works better (cheaper, less agency risk). If the purpose is to supplement the amounts from the federal system, then a personal account at a brokerage invested in a low cost index works better.
I am not even sure why Canada invests its pension funds in the private markets. Canada can always issue new Canadian dollars anytime it needs to pay the benefits it has promised if tax receipts are insufficient. If anything, this leads to another perverse incentive of Canada’s government wanting to bail out businesses it has invested in.
1. I wouldn't object. But employers would have to kick in money too, and some may not want to because that could potentially effect the bottom line. With (US) 401(k) (CA: RRSP), it's up to the employee to contribute and many don't so that saves companies money.
2. The listed pension funds are not for working specifically for the government, but are for more publicly focused aspects (health care, education). But there are other options, like folks who work in (e.g.) the food industry (supermarkets):
But at the end of the day, what are they doing different that a target date fund from Vanguard/Schwab/Fidelity is not? Except the latter avoids agency risk and is super cheap.