Automatic adjustments of pension parameters are unlikely to be sufficient to meet the main objectives of the pension system. In particular, they need to be complemented by an automatic balancing mechanism which aims at ensuring a balanced budget of the pension scheme.
Backstop mechanisms in the Canada Pension Plan ensure a financially balanced pension system while explicitly prioritising a political solution in case of a deficit: the automatic balancing mechanism is only triggered if policy makers cannot agree on an alternative set of interventions.
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