Canada Pension Plan: Fertility Projections Panel 1: A Primer on Fertility Rates

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Canada Pension PlanFertility ProjectionsPanel
1 A Primer on Fertility Rates

• SOA Annual Meeting 2005
• Fertility Symposium

14 November 2005
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Presentation

• Canada Pension Plan key assumptions
• Total and cohort fertility rates
• Comparison of G8 countries
• Size and aging of Canadian population
• Sensitivity tests aging and financial impacts

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Canada Pension Plan - Key Assumptions

• Fertility rates
• Mortality rates
• Net migration rate
• CPP disability rates
• Retirement rates

• Unemployment rate
• LF participation rates
• Real-wage differential
• CPI increases
• Real rate of investment return

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Total and Cohort Fertility Rates()
TFR 1952-1976 3.1
Total fertility rate
Cohort fertility rate
Latest complete cohort 2001, born 1952-1956 1.9
Ultimate C/TFR 1.6 in 2016
TFR 1977-2001 1.6
TFR 1.5 2002-2009
() The cohort fertility rate is for a 29 year
old female in a given year.
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Cohort Fertility Rates
Children per woman
2.2
1.7
1.6
80
63
47
Birth years
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Comparison Between the G8 Countries
() Projections for Canada are based on the 21st
CPP Report. Projections for the other G8
countries are based on United Nations population
projections, 2004 revision.
() Projections for Canada are based on the 21st
CPP Report. Projections for the other G8
countries are based on United Nations population
projections, 2004 revision.
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Life Expectancies at Birth(with improvements
after each year shown)
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Evolution of Migration as of Population
net migration
Ultimate 0.54 in 2020
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Population Projections Size Aging

• The Canadian population is aging.
• Mean age in 2003 37.6 years
• 2030 43.1 years
• Population will continue to age from low
  fertility, increasing life expectancies, and
  aging of baby boomers.
• Net migrants relatively younger than population ?
  will impede aging of population.
• Population will continue to increase, but at
  declining rate due to projected low fertility.
• Total dependency ratio (lt 20 65) / (20-64)
  will increase from 61/100 in 2003 ? 78/100 in
  2030.

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Components of Population Growth(thousands)
Births and Migration
Natural growth lt 0 from 2030
Births
Deaths
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Age Structure of Canada
1975
Males
Females
1975
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Age Structure of Canada
1975, 2003
Males
Females
2003
1975
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Age Structure of Canada
1975, 2003, 2075
65
Males
Females
25
13
8
2075
2003
1975
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Sensitivity Tests

• OBJECTIVE Measure the effect of alternative
  assumptions on financial results of the CPP.
• Most sensitivity tests performed one assumption
  at a time, holding rest at their best-estimate
  levels.
• 2 tests performed per assumption ? wide range of
  potential experience.
• Low-cost scenario ? decrease in contribution
  rate.
• High-cost scenario ? increase in contribution
  rate.
• Changes in fertility rate have small short-term
  impact on financial position, but long-term
  impact can be significant.

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Sensitivity Tests - Fertility
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Age Structure UnderVarying Fertility Assumptions
2030
Females
Males
low fertility
best- estimate
high fertility
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Age Structure UnderVarying Fertility Assumptions
2075
Males
Females
65
30
22
25
low fertility
best- estimate
high fertility
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Sensitivity Test Fertility CPP
Asset/Expenditure Ratio
9.9 Ultimate Contribution Rate
Low cost 1.9 (Steady-State rate 9.5)
Best-Estimate 1.6 (Steady-State rate 9.8)
High cost 1.3 (Steady-State rate 10.1)
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Sensitivity Test EmploymentCPP
Asset/Expenditure Ratio
9.9 Ultimate Contribution Rate
Low cost LF participation rate in 2030 at 81
(Steady-State rate 9.3)
Best-Estimate LF participation rate in 2030 at
73
High cost LF participation rate in 2030 at 71
(Steady-State rate 10.0)
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Sensitivity Test Real Rate of ReturnCPP
Asset/Expenditure Ratio
9.9 Ultimate Contribution Rate
Low cost 5.1 (Steady-State rate 9.3)
Best-Estimate 4.1
High cost 3.1 (Steady-State rate 10.3)
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Canada Pension PlanFertility ProjectionsPanel
1 A Primer on Fertility Rates

• SOA Annual Meeting 2005
• Fertility Symposium
• Thank you.

14 November 2005