Thank you, Chair.
I want to talk a bit about the impact that inflation will have on CPP going forward. It's amazing the impact that time can have on money.
If, in fact, this does pass and there is a reduction of 0.4% in the contributions, it will save taxpayers about $3 billion, I think it was. As Albert Einstein famously said, the most powerful force in the world is compounding interest, and it sort of becomes clear as we look at the impact. The assets are projected to be, after the amendment in 2050, $239 billion lower, which is 8% of the total amount.
By 2100, it will be $8.3 trillion lower, or 30%. You see the delta, not just in absolute terms, which is obviously massive, but the percentage also increases. By 2100, the fund is roughly 30% smaller than expected. This shrinks the buffer available to absorb future shocks, and that's the worry.
So far, I'm certainly not convinced that the move to lower the contribution rate is by any means reckless. Given the affordability crisis, given the fact that we have the highest food inflation in the G7, given the fact that Canadians are facing three of the last four quarters in recession and given that the GDP per capita in the last 10 years has been the lowest since the Great Depression, I do understand the need to give Canadians a break, even a relatively modest one of 0.4%.
If we look going forward once again, because we want additional information in this subamendment about inflation, we can see that it also will affect the assets-to-expenditure ratio. This is one of the key sustainability metrics that actuaries will look at, and what this does is it says, based on a snapshot in time, how long, if there were no more contributions or investment growth, for how long we could sustain CPP.
Without the amendment or the reduction in contribution, the number in 2050 would have been 14.1. If the amendment passes, it's projected to be at 13. Now, there are lot of assumptions that go into that, some of which I've talked about before, the 4.05% rate of growth consistently.
We know with almost certainty that it won't be 4.05, but that does seem like a reasonable average going forward. Then, in 2100, instead of it being at 20.7, it reduces it to 14.5. A lower asset-to expenditures ratio means that the plan has less of a cushion built up for the second half of the century, when demographic pressures are the strongest, meaning that there'll be more retirees per worker. That could become worse if immigration had recently declined. If that trend were to continue, all that simply means is that there are fewer workers per retiree or fewer contributors per recipient. That could be a significant challenge if our fertility or birth rate were to stay the same or lower at the same time that immigration was reduced. It will create significant strain going forward.
That's why it's important, to get back to the subamendment, to not just say it in nominal terms but in real terms or in inflation-adjusted terms so that Canadians can understand the importance.
The other part that happens with inflation—the numbers are bigger later on, but arguably the leverage is greater earlier on—is greater dependence on investment performance. Investments' income share of total revenue falls more than previously expected—in 2050, 1%, and in 2100, 7%. By the end of the century, the plan becomes more dependent on the Canada Pension Plan Investment Board returns to keep it in balance. Any sustained period of lower than assumed returns will have a bigger impact.
All this goes to say that inflation is incredibly important when looking at long-term investments, regardless of whether you're looking at the CPP, a pension plan or your own RRSP. You couldn't be told that if you've saved $50 a month up until now.... If you're 60—I don't know the exact number, but let's say it might add up to $1 million—you'd say, “Well, that's great. If I'm 20, then I'll have $1 million for retirement.” Well, $1 million 40 years from now will be worth considerably less. What's more valuable is to have, at a rate of savings, what the actual amount is in inflation-adjusted numbers, so that you can gauge whether that is sufficient for your retirement.
Now, at 47 years of age, my retirement is getting closer, and so inflation will have less of an impact. However, if there were younger members here—maybe one who has a striking resemblance to Justin Trudeau—inflation would have a much greater impact going forward there.
With that, I think I've done as much as I wish to explain on the importance of this subamendment— of importance of including inflation in future projections with respect to CPP. At this point, I will rest my case, as it were.