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In its 2024 budget, Ottawa announced that former Bank of Canada governor Stephen Poloz would lead a group to explore how to make it more attractive for pension funds to invest domestically.Sean Kilpatrick/The Canadian Press

Anthony Pizzino is the chief executive of the National Association of Federal Retirees.

Canada’s economy could use a boost, but trying to mandate investment from pension funds is wrong-headed and unfair.

Yet in an open letter last month, that’s essentially what 92 business leaders from across the country have urged federal and provincial finance ministers to do. They argue that the ministers should amend the rules governing pension funds to encourage them to “invest in Canada” and suggest government “has the right, responsibility and obligation to regulate how these savings regimes operate.”

Now, the federal government has bent to their request. In Tuesday’s budget, the government announced that former Bank of Canada governor Stephen Poloz would lead a new working group to explore how to make it more attractive for pension funds to invest domestically.

At first glance, this sounds reasonable. But it’s a slippery slope to more political interference in pension-fund investments. And such a move reflects a deeper problem.

This is not about investing in Canada to boost the economy, as those 92 letter writers say; it’s about these business leaders seeing money they want spent on their corporations. Such a policy would amount to a business subsidy using Canadians’ retirement savings.

Hard-working Canadians do not want governments to play politics with their pensions. The money in Canadian pension funds, such as the Canada Pension Plan (CPP), represents their retirement savings. The funds are not there to provide a source of investment dollars for private corporations or to pump up the value of a publicly traded company’s stock price. Pensions are in place for a reason; they provide long-term retirement income security for Canadians.

Pension funds aren’t in the business of investing in things that might make money 25 years down the road. While they can invest in long-term investments, their interest is in investments that will make money now, to secure the retirements of their plan members – their raison d’être. They have a fiduciary duty. In other words, taxpayer-funded pension plans are not slush funds for corporations. Pension funds are there for the plan’s members, and must be responsible to employees and pensioners who should not be deprived of their retirement benefits.

Further, while pension funds are made up of contributions from workers and employers, the bulk of these funds is the result of earnings on investments that wouldn’t exist were it not for the original investments. Pension fund investors are savvy. If there were more money to be made by investing in Canadian public equities, pension plans would already be doing so.

We should not think of Canada as a small country, but economically, it is, representing less than 3 per cent of global GDP. Yet our pension plans are some of the biggest and most successful in the world. As such, there aren’t a large-enough number of profitable opportunities in which pension funds could invest without stepping on each others’ toes. The proposed policy could actually create artificial competition among pension plans for those limited potential investments.

It’s important to diversify and not concentrate all our investment eggs in one basket. Having a portfolio with investments around the world reduces risk and increases opportunities for growth, making Canadians’ retirements more secure.

There’s also the fact that most of Canada’s pension plans already punch above their weight when it comes to investment in Canada. Pension funds such as Healthcare of Ontario Pension Plan and Ontario Teachers’ Pension Plan already have more than a third of their funds invested in Canada. Canadian pension funds would rather invest here for a multitude of reasons, and they are doing so as much as is feasible.

In response to the business leaders’ letter, several former pension plan chief executive officers wrote an opinion piece in this paper denouncing this idea. In part, they argued that Canada is a global pension role-model, largely because its plans have been allowed to invest and grow without political interference.

Those former CEOs are right. A change to a sound policy of non-interference is ill-advised. We should not tamper with the independence of pension fund investment boards such as the CPPIB.

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