Wednesday, February 25, 2009

Québec pension loss: 40 big ones

Pension plans have certainly taken a beating. But this is huge. The Caisse de dépôt et placement du Québec, which manages public service pensions in the province as well as the trust fund for workers' compensation and automobile accident benefits -- and most significantly, the Régime des rentes du Québec (RRQ), had a huge loss last year -- $39.8 billion, or about 25% of its book value.

Perhaps most Canadians outside of the province have never heard of the Caisse, after all they pay into the Canada Pension Plan and not the RRQ as Québecois do. But the Caisse's investment strategy is behind a lot of the success of industries of all sizes and all sectors, primarily in the province but also across Canada. To be fair, it has made some of the same basic investment mistakes that private sectors plans have; but to lose that much public money so fast is quite embarrassing. And while current payments are of course protected, one has to wonder about the status of future benefits.

Some have repeated the accusation today that Jean Charest called the early election in the province last year to get ahead of what was going to be a nasty announcement. I highly dispute that -- most people in a minority situation would want to get out of it as soon as possible, no matter what the warning signs were outside the political realm. Also while the board is appointed by the Cabinet it does operate at arms' length and no one wants to be seen as being too interventionist when it comes to pensions. There has to be a lot of questions asked and it is good that they are going to be in a public inquiry.

But it's worth remembering that if someone tried to lose $40 billion on purpose in pension money in the private sector, those responsible would go to jail. I'm not suggesting criminal intent here, but I don't expect the SQ or the Mounties to be raiding Caisse headquarters any time soon.

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Anonymous said...

Some have repeated the accusation today that Jean Charest called the early election in the province last year to get ahead of what was going to be a nasty announcement.
Then you should follow Quebec politics a little closer...

BlastFurnace said...

Well, actually I do, Jason ... and while it may have been a factor in the snap call, I don't think it was the overriding one. Still one only hopes there will be a relatively quick recovery, otherwise people will take to the streets like they have in Paris, Athens and Dublin -- as they should. Even federalists don't want to be taken for suckers.

Canajun said...

I don't understand why people are so surprised about this. Those of us with NO pension plan (the vast majority of non-civil servant non-union employees)can only look on a 25% drop with envy. Most of us have seen numbers closer to 30% or even 40% drops in our RRSPs and investment savings. And no one is guaranteeing our payouts or calling for a public inquiry (wasting nmore of my tax dollars) to get to the bottom of it.
Pension plan holders may just have to share the pain with the rest of us.

BlastFurnace said...

The losses reported yesterday, as I understand it, pretty much wipes out the gains of the previous two years. Overall, there is a net gain over the last three years of 3.5%, better than the average but it still could have been far better -- there should have been the kind of prudence that made the CDP so respected until now.