The CBC reported today that Finance Minister Jim Flaherty and provincial financial ministers agreed to consider changes to the Canada Pension Plan as a way to address the problem of Canadians saving too little for retirement.

What’s being considered

  1. “Modest” increases in CPP benefits.
  2. The boost to benefits will be “fully funded”, which means either a increase in the employee portion and/or the employer portion of CPP premiums or, far more likely, an increase in the Yearly Maximum Pensionable Earnings (YMPE).
  3. The changes would be “phased-in” likely in a gradual manner over a number of years.

What’s ruled out

  1. A doubling in CPP benefits as demanded by the Canadian Labour Congress.
  2. A supplementary Canada Pension Plan that employees could opt to participate in.

My first preference would have been a supplementary CPP with the option of opting out but it is hard not to favour modest CPP changes that would allow retirees who haven’t saved anything on their own maintain a certain minimum standard of living. Without a plan to address the epidemic of little savings, those who have managed to save diligently will be made to support those who did not through increased taxes. As there are lot more of the spenders than the savers, modest CPP changes are in the best interests of both constituents.

This article has 64 comments

  1. BOOO.

    No to mandatory increases. Why wouldn’t the “optional” option work. People who want to manage their own affairs can do so. Those who don’t want to take an interest can simply have more deducted from their pay into the “supplementary” CPP. It would be as easy as filing in a box on your TD1 form just like you do if you want additional income tax withheld.

    What happened to taking some personal responsibility? What happened to the Conservatives? Did Jim F. have his brain swapped with Jack Layton?

  2. I’m 30 yo, and I’ve been told since high school that there wouldn’t be any CPP left when I retire, and I should not rely on it for my retirement.

  3. I agree… I’d like to have the option of “opting out.” I’m a little concerned about paying more for those that don’t make the effort and have the discipline to save now for their future. I realize that is not everyone… but for those lazy ones, oh well!

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  5. I would probably “opt-in” to increased CPP if I had the chance. As someone who won’t have a traditional pension, I’ll be living off my RRSPs, OAS and CPP.

    The CPP is a reasonably good deal, and if you want to increase your “annuitized” portion of your retirement portfolio, then it’s not a bad choice.

    That said, the big “pension crisis” seems to be less about keeping people out of poverty, and more about helping middle class people who can’t save and are facing an “alarming” decrease in their living standards upon retirement.

    Mike

    • One may be better off to ensure that this cpp fund is taken out of government hands and invested with investment firm. At leaflet they would earn money from it that would increase your retirement income. Bases in your contribution you would be much better off and your estate would be in better condition for survivors . So screw the government anyway they use the fund for general coffers as needed. If I had invested that money ove the 40 that fund would be
      Doubled.

  6. This is simply another transfer of wealth from the young to the old.

    I would guess readers of this blog are – on average – those who represent the younger portion of Canadian investors. If so, readers should be rioting in the streets over this as this is yet another of many such transfers… and more are coming.

    I have a novel idea – instead of encouraging more people NOT to save on their own (as this plan does), or making saving MORE DIFFICULT by those responsible enough to do so (as this plan does), let’s let people who don’t save enough be poor.

    All of these changes have the end result of making people rely more on government, and more under their control. These kind of changes – while small and seemingly harmless when each step is considered by itself – force people to sell away their freedom – not a good thing at all.

  7. Is the proposal that all persons will get the increased benefits even if they have not paid the increased premiums?

  8. You write: “Without a plan to address the epidemic of little savings, those who have managed to save diligently will be made to support those who did not through increased taxes.”

    How do you figure this? What benefits will people get through the tax system that they aren’t already getting? I don’t follow this particular piece of the argument. Can you elaborate?

    Virtually every individual over 65 who meets the residency requirements gets full OAS. Only 5% of Canadians have ANY OAS clawed back, and less than 2% have the entire amount clawed back. So unless OAS is increased, how will transfers to seniors INCREASE in the absence of changes to the CPP?

    You may say that GIS payouts would increase – except given the way that GIS is integrated with OAS, CPP and other income, there’s no net increase if GIS payouts increase.

    I’m missing something here.

    Thanks, Alexandra/MoneyGal

  9. Even though I am on the younger side of the spectrum, and am diligent enough to live frugally and save, these changes don’t bother me.

    I just finished Molevsky’s “Are you a stock or a bond”, and it gave some interesting food for thought, namely the effect of inflation during retirement. This isn’t something I have been ignorant about, but that there are different inflation rates for different demographics was something new to me. And the inflation rate for the elderly was significantly higher than the national average. Even though the book was written to an American audience, and the numbers were based on American statistics, our economies are closely related enough that similar trends appear in both places (the timing and numbers are different, but the trends seem to be there).

    That this measure would be a way to offset the effects of inflation for seniors is laudable. All the great things about our country (and yes, some of the problems too) are a result of the work of our parents and grand parents. I don’t want them to have to be poor in their later years (and not just because supporting them would reduce my ability to save).

    Increasing the CPP benefits should also reduce the amount of additional savings needed to fund a comfortable retirement, so though saving as much as before would be more difficult, only the individual can decide if it is still necessary.

    @Rob: Although I agree with the sentiment about letting those who don’t save enough be poor, I do think that there should be a lower bound (and definitely an upper bound) on what social programs should provide for the general populace. Allowing the gap between the wealthy and the poor to continually increase will probably bring civil unrest and create more problems than being wealthy is worth (in my opinion).

  10. Canadian Capitalist

    @Ghostryder: I have no idea why an optional supplementary CPP is not even on the table. Perhaps, the Finance Minister is worried that spenders will opt out en masse? (Pure speculation on my part here).

    @slacker: The CPP Investment Board indicates that the CPP is financially sound. I have no reason to believe otherwise:

    http://www.cppib.ca/faqs.html#f1

    @Rob: Details are sketchy at this point but I’d be very surprised if everyone will get the extra benefits whether they contributed or not. I’m assuming that CPP benefits will continue to depend on how much was contributed just as it is today. That would preclude those who never made the extra premiums from benefiting from the extra payments.

    @Dale: I don’t think so. See the comment above.

  11. It’s absolutely absurd that the generation (I’m talking about you baby-boomers) that has lived through the most massive expansion of the world economy, the stock market and wealth in general, not to mention the relative world peace, and having no concern over global climate etc. has not been able to put enough aside for their own retirement. They have lived it up and now they want a bail-out by the younger generation.

    If they can’t save in the best of circumstances they should be penalized with a poorer standard of living.

  12. Canadian Capitalist

    @Alexandra: Average OAS + Average CPP = $12,000 per year. Even under today’s rules, a single retired Canadian who has nothing saved and no traditional pension will start earning GIS. As more and more retirees fall into the same situation, the total amount of transfers will increase. These increases will inevitably be funded by taxpayers, including those who are retired and are receiving traditional pensions or earning income from their RRIFs.

    If the cohort of retirees who’ve saved little or nothing for retirement gets large enough, they’ll exert political pressure to increase their transfers. If successful, these increases will also be funded by taxpayers.

    Jon Chevreau reported Jim Flaherty making these remarks:

    “It’s apparent that there is a group of Canadians – it’s a minority – who are not saving adequately for retirement. And this will mean eventually that those who do save adequately for retirement in Canada will be asked to make it up for those who don’t. So we are going to try to address that issue in the near term.”

    http://opinion.financialpost.com/2010/06/11/pension-socialism-ottawa-wealth-transfers-account-for-70-of-retirements-essential-costs/

    @AKA: I agree and that’s why I’m okay with this proposal. I would have preferred a supplemental CPP with opt-out provisions because I do think a lot of Canadians will get automatically enrolled but won’t take the extra steps to opt out.

  13. OK, but OAS is *already* a current transfer from general revenues. More GIS is offset by less OAS. Less CPP is offset by more GIS. There is a ceiling on the transfers from government to retirees.

    The total dollar value of transfers may increase, but that’s a function of demography. More people with fewer savings actually only modestly increases transfers to that cohort, because both GIS and OAS are fully funded from general revenues. There’s no “additional” tax revenues required, unless the OAS/GIS rules change – and that’s not what’s even on the table.

  14. Coming back to say that what you are positing is only true if your hypothetical retiree not only has no DB pension and no other savings, but ALSO has no CPP (or only a modest amount).

    And that is not the situation for the majority of today’s retirees and it is even less so projecting forward (given the massive upswing in women’s labour market participation over the past 30 years).

    More retirees in the future will have MORE CPP coverage and income, not less. The CPP proposals essentially posit that Canadians cannot save on their own, and must have forced participation in a government plan. I don’t know whether that is true or not – but the suggestion that in the absence of increased contributions, more tax dollars will be required to support a cohort of impoverished seniors is a red herring.

  15. Canadian Capitalist

    I get how less CPP is offset by more GIS. I don’t understand how more GIS is offset by less OAS. GIS is on top of OAS depending on income from other sources. All things being equal, more retirees collecting GIS means an increase in total transfers.

    Yes, there is a massive increase in women’s labour market participation. Offsetting this is an increase in the number of single-person households.

    It is not a stretch to me that a large cohort of retirees with no pensions and little savings will vote themselves higher transfer payments. I would, if I were in that group.

  16. I think they should blend the MPs Pension Plan and the Public Service Employees Pension Plan with the CPP. Then the interests of the MPs and the bureaucrats will concide with that of taxpayers since everyone would be in the same boat. We are, after all, paying for all 3 plans.

  17. @DividendMan

    You took my words. The baby boomers wasted all the wealth that the post war expansion created by living beyond their means and not saving enough for their retirement and they now expect the following generations to pay more CPP so they can keep their ridiculously high standard of living!!!! That’s outrageous.

  18. testing

  19. If you ever watch ‘T’ill Debt do U$ Part’, if those people are typical Canadians, then it is no wonder so many people are so woefully preparing for retirement. Their common (mone)y sense is pathetic.

  20. The proposal would have made a lot of sense 20 years ago, when it was obvious that a large number of people would be retiring within a short amount of time and might need help. Putting it into place now when the people who need it are retiring is absurd, as they will benefit above what they contributed. It’s also putting a large strain on younger generations who (unlike their parents) had to pay a lot for their education and start their working lifes off at an older age and in debt.

    I can’t say I’m in favour of this at all. My parents were responsible, their siblings were not and can deal with it. Me, I can vote with my feet and I’m not likely to stay in Canada where I’ll get milked for the older generation’s mistakes.

  21. Just make the TFSA $12k per yr. and RRSP $12 k max per yr. , no income limit , using the KISS method every thing will be fine….CPP ? with the berth rate well below 2.2, its not going work out , unless 2x it every ten years .(260 billion by 2020)

  22. I believe the reason given for dismissing the “optional” plan is that it would be administratively cumbersome (i.e. cost a lot to administer).

  23. CC – what happens to current recipients is irrelevent to whether this is a transfer. The entire CPP has never been anything but a transfer from the young to the old since its inception.

    CPP contributions are taxes. My taxes are going up with these changes. I have 3 employees and will be on the hook for not only my own CPP, and the employer portion on each of the employees. My customers will ultimately have to pay this, because in EVERY business, the customers ultimately pay for everything.

    If my taxes are going up and people older than me are going to receive more – it is a transfer.

    Plain and simple the way I see it. If I am wrong, I am happy to be corrected and learn.

  24. Sean, your comment

    “I think they should blend the MPs Pension Plan and the Public Service Employees Pension Plan with the CPP. Then the interests of the MPs and the bureaucrats will concide with that of taxpayers since everyone would be in the same boat. We are, after all, paying for all 3 plans”

    might be the most brilliant suggestion I have seen written this year, It will never happen, but it simply and eloquently suggests to government that they are getting the deal of a lifetime, and they can also share the problem. Bravo.

  25. @ Sean, @ Rob:

    That’s great rhetoric, but given that everyone who draws an income in this country pays into the CPP, including bureaucrats and politicians, everyone already has a stake in the CPP.

  26. You work for at least 40 years contibuting the maximum and “encouraged” to work untill 70 when you are just about to croak (average life expectancy: 79) just so you get a measly $1000 a month? It’s NOT a “pension” plan, it’s a TAX! Watch ‘em pigs fly on the hill today!

  27. From 1966 to 1986 no changes were made to CPP…..even with more changes going forward now….the cash flow of CPP in 2026, will be way under water. It should have been a personal RPPF….Bommer taxes would have covered retied before 1993.

  28. Canadian Capitalist

    @Rob: I disagree. The CPP we have today is a true pension plan. CPP would be a tax only if contributions are mixed with general revenues and benefits paid out of it. That’s not the case. Also if enhanced benefits only fully accrue to those who made the full enhanced premium payments, how can it be called a tax? CPP is no different than a defined benefit plan. The level of benefits depend on the size and length of contributions made.

    @Sean: Canadians pay into the CPP 10% of the YMPE. They collect 25% of YMPE annually at age 65. Let’s do the math:

    Benefits collected = 25% of YMPE * 17 years (life expectancy of a Canadian aged 65) = 4.25 * YMPE.
    Premiums paid = 10% of YMPE * 36 years (I’m assuming the average Canadian worker enters the workforce at 25 and retires at age 61) = 3.6 * YMPE.

    It sounds awfully like a pension plan to me.

  29. It’s interesting to compare to one aspect of the Australian system. There, government retirement benefits are income/asset tested. If you were frugal and have carefully saved a portion of your income during your working years, you are rewarded by getting absolutely nothing from the government when you retire. If you were carefree while you worked and spent everything you earned, you are rewarded with a full government superannuation (i.e. retirement) pension.

    Hardly makes sense does it?

  30. I got curious and crunched the numbers in Excel. Assumptions:
    1. you start contributing at age 25 (since 15% of your lowest earning years are left out of calculation for CPP benefits, or 7 years if you are working from 18-65, let’s assume your earnings from 18-24 are 0) until the age 65.
    2. You claim a tax credit of 20% (federal 15% and around 5% your province which varies a tiny bit).
    3. The YMPE (your CPP contribution and benefits) increase 2% per year.
    4. When you start receiving the benefits, your marginal tax rate is 20% per year (I’m assuming you’ve retired).
    5. You receive benefits from age 65 to 82.

    Your return per year on your CPP contribution is around 2.16% per year. Pathetic.
    If someone’s curious, here’s the xsl I created to calculate this. http://www.mediafire.com/?inmzymwt4nj
    Note: before someone says something, I know the YPME isn’t exactly 40,000, but that shouldn’t make any difference for the purpose of calculating the return on CPP contribution.

  31. Mark could post a link to your above statement…..i know your wrong and Ledtim could you post your link in standard xl , because i Know your right , but open O will not open this file.

  32. Here’s the excel spreadsheet on Excel 2003 format:
    http://www.mediafire.com/download.php?mmzmik5iywe

    A correction on my above post:
    I hadn’t considered that the non-employee 4.95% portion of CPP is fully tax deductible, and is not just a tax credit. Considering that, your return would instead be 2.6% aftertax, assuming 40% marginal tax rate.

    Slightly more acceptable, but still pathetic considering that a GIC in a TFSA or RRSP would earn well beyond that, and that most Canadians don’t maximize their TFSA and RRSP.

  33. Another interesting thing I’ve found out playing around with Excel:
    Let’s say instead of contributing to CPP, you contributed the same amount into your RRSP every year, at an interest rate of 5% (return of 5 year GICs more or less), until the age of 65.

    Then, let’s say you move your investment into a more liquid and stable instruments with interest rate of 3% (bonds and savings accounts) and start withdrawing from it at the same rate as you’d get from CPP benefits. Your RRSP savings will last you until age 92.

    So, if you plan to live longer than age 92, you should be happy about a CPP increase. Otherwise, not really.

    Calculations:
    http://www.mediafire.com/download.php?wztoahjetxz

  34. Oops, terribly sorry about posting multiple times, but a correction on my last post. There was a typo on my formula.

    So, with the corrections, and with the same conditions set out in my last post, if you invested in RRSP instead, your RRSP savings will last you until age 107 if you withdraw the same amount each year as you’d get with CPP benefits.

    Terrific.

    Corrected calculations.
    http://www.mediafire.com/download.php?1yolwjmmjcm

  35. CC – I am surprised you feel this is a pension plan.

    Every pension plan I know of involves putting money aside today, investing it, and growing it for future use. The CPP – although now does invest a minisclue amount – is a system where my contributions are not being pooled but rather have always immediately been redistributed to retirees. (sounds awfully like a tax to me)

    This was easy and popular when there were 9 workers for every retiree – but that is no longer the case and people living far longer plus the wave of boomers retiring are going to crush it. I am not sure the exact numbers predicted (I heard at worst it gets to 1.4 to 1 in one study) but let`s say it gets to 2 workers for 1 retiree when the boomers are retiring in droves. Are you willing to pay essentially half a retiree`s benefit out of your paycheque`- I struggle with the fairness of that

    Secondly, it most certainly does go into general revenues. I write cheques every month for EI, CPP, EHT, Income Taxes, GST, HST plus HST soon, and the cheque is always made out to the Receiver General`. It has to be because almost 100% of it is immediately paid out to retirees. `They can say it is segregated, but I don`t believe it is. The enormous EI surplus isn`t being refunded for example (sounds awfully like a tax to me)

    Finally, it is not a pension because if you don`t contribute enough to the CPP, you typically will qualify for GIS or some other subsidy in its place. (sounds awfully like a tax to me)

    CC, I have tremendous respect for you and your opinions – but I am surprised you can clearly identify and rally against all the b.s. in the investments world, yet you are so accepting of it with government. If someone of your financial smarts and younger age sees this as a good thing for himself, there is little to no chance of change by the less financially enlightened masses.

    If you can endeavour to help me better understand your rationale, I would appreciate it.

  36. ledtim – the numbers are pathetic compared to saving and investing because it isn’t being saved and invested – it is a promise only with little to nothing behind it other than the power fo the government to tax

    the numbers are pathetic becasue everything the government does is bloated, inefficient, and has to pay for huge personal fully indexed pensions

    earn less than T-Bill rates over 40 years? great! – it works if you live past 107 years of age?

    sounds like a great plan – sign me up

    PS what is second prize?

  37. Canadian Capitalist

    @Rob: The CPP is a true pension plan because the liabilities are covered from contributions and investment earnings, not general tax revenue. The CPP does have a firewall between general federal government revenues and the CPP account. Take a look at composition of tax revenues here:

    http://www.fin.gc.ca/afr-rfa/2009/afr-rfa09_1-eng.asp#revenues

    You’ll see EI counted as general revenues, not CPP. The net contributions are swept into the CPPIB to fund future shortfalls between contributions and liabilities. The net contributions were $6.1 billion last year. If the Government had taken that $6.1 billion and spent it, I would totally agree with you that the CPP contributions are a tax. But that’s not the case.

    http://www.fin.gc.ca/n08/data/09-051_1-eng.asp

    I’m open to arguments that CPP is just b.s. by the Government. But I haven’t heard any evidence that it is so far. I can readily accept that CPP has risks including tweaking of benefits and/or fiddling with contribution rates. But that’s a risk with any pension plan, not just the CPP.

    I should also point out that the CPP has other benefits in addition to retirement benefits:

    http://www.servicecanada.gc.ca/eng/isp/cpp/cpptoc.shtml

    All of this would cost you premiums if you were to insure similar benefits on your own.

  38. Canadian Capitalist

    @ledtim: The CPPIB’s expects a real rate of return of 4.2% on its portfolio. Granted, that’s not the same as evaluating whether we are receiving value for our CPP contributions. So, let me take a stab at it.

    Assume you are contributing an inflation adjusted $4,700 from age 25 to 65 (10% of 2010 YMPE). Your total contributions in 2010 dollars would be $193,520. You can purchase a joint-life, no guarantee annuity today that pays you $1,057 monthy in nominal dollars for the total value of your contributions. The CPP will pay you an inflation-adjusted $934 with 1/2 that for survivors. It does not appear to me that CPP is such a bad deal after all.

  39. I am glad ledtim and Rob agree with me. It’s a tax. Any of the “net contributions” will eventually go towards the debt or allow the gov’t to borrow more.

    Since big brother has his filthy hands on it, expect the following:

    1) 10% of YMPE? are you kidding? expect 30% by 2020. Way higher than inflation.
    2) The increases in benefits after 65 will probably be less than 1% or not adjusted at all.
    3) Slog from 25-65? You want me to put fish in a box for 40 yrs? How many get the max anyways?
    4) Gov’ts often stops inflation increases on the tax credits in times of high deficits.

  40. Rob writes:

    >This is simply another transfer of wealth from the young to the old.

    Isn’t it all circular though? Because the baby-boomer generation is a disproportionately large group of people, won’t they just be leaving behind an equally disproportionately large chunk of cash in the form of inheritances to the younger generation?

    Unless they leave their money to their cat, I think it will all balance out in the end. It’s a relatively closed monetary system.

  41. Jim – Aging boomers at the end of their life and consumption can leave their money to whomever they want or they can spend it – the key fact is they get to choose. As a young worker, I have to pay into the CPP – no choice allowed.

    CC – for your annuity to CPP stab at whether there is value – I am surprised you take the difference so lightly when I see you worry about 5 basis points in your investment fees.

    I don’t see the “firewall” you speak of and, other than the first one – don’t really see the impact of the links you list as supporting your arguements – I see you list of revenues and that is well and good, but my cheques all go to the “Receiver General”.

    If it is a pension it should be voluntary. If it is a pension, I should be able to take the communted value of MY contributions. If it is a pension, it should be a rob Peter to pay Paul plan.

    I am afraid I still believe the CPP should stand for the Canada Ponzi Pyramid.

    CC – How about we take one last stab at this and you tell me how the CPP differs from a Pyramid Scheme? (granted a legal, and very large and broad pyramid scheme)

  42. You have to give the government credit though – they have the people so confused we can’t even agree on what is actually happening, never mind change anything. That can’t be easy to accomplish, but they have done it.

  43. … and whatever side of the debate you’re on, you have to admit, Canada Ponzi Pyramid is pretty clever

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  45. @Canadian Capitalist
    I’m not entirely sure how you’ve calculated your numbers, but it seems to me that you are ignoring the time value of money. In calculations like this that involves long time horizons, even a small difference in the interest/discount rate can result in large changes.

    Let’s say the discount/interest rate is an extremely conservative 3% and let’s assume inflation rate is 2%.

    Let’s compare the case between receiving CPP vs purchasing a joint life no guarantee annuity at age 65 with the amount you’ve contributed to CPP over 40 years. I’m assuming such annuity would yield 6.56% annually as listed here:
    http://www.canadianbusiness.com/my_money/rates/annuity_joint_life_no_guarantee/index.jsp

    My calculations indicate that if you live to be 83, the present value of CPP benefits at age 65 would be $434,731 vs $493,485.38 for the annuity. The difference would be even greater if you get more realistically bold with the discount/interest rate.

    Calculations:
    http://www.mediafire.com/download.php?drdltqj4jkn

    I have no opinion on the political ramifications of CPP or how it is/will be managed. But from just looking at the numbers, it doesn’t seem to be a good value at all. It seems to me if the government just forced people to contribute to their RRSP instead instead of taking their money for CPP, people would get significantly more bang for their buck.

  46. Canadian Capitalist

    @ledtim: You could argue that the 0% real rate of return I assumed is too conservative. Perhaps it is. But I have to make some simplifications. For one thing, like you pointed out CPP contributions are tax deductible for the employer and receive a tax credit for the employee. If you save that money in a taxable account intending to purchase an annuity, you are saving after-tax dollars. You’ll pay tax on interest, dividends and capital gains in the portfolio. One more adjustment: the average age of retirement in Canada is 62 years, not 65. I don’t know the average age at which a Canadian starts working, so 25 is a guess too. It could be higher or lower.

    Again, when you convert to an annuity, part of the payments are ROC and not taxable. The rest is fully taxable. CPP payments are fully taxable. But, there is another key difference you have to take into account. CPP benefits are adjusted for inflation. Inflation-adjusted annuities (if you can find them) tend to pay a lot less initial benefits than normal annuities. So, it is not directly comparable to an annuity that pays out in nominal dollars. You also have to put a dollar figure on the other benefits (disability and survivor benefits). It’s not easy adjusting for all these differences, that’s why I simplified it (a lot, admittedly).

    @Rob: I’m not dismissing the difference at all. Like I point out in this comment, I’ve made a lot of simplifying assumptions, the biggest of which are the low returns on contributions and inflation-adjusted versus nominal payment streams. I’m not sure you can make all the adjustments and successfully make an apples-to-apples comparison.

    Yes, you make a cheque out to the Receiver General. That’s who you make the cheque out for your Ontario taxes as well. You can bet that Ontario is collecting every penny it is due from the Federal Government. The money may all go into one account but that doesn’t mean there is no paper trail to divide it into different portions.

    I won’t claim to be a pension expert but I don’t think pension plans are optional. You also can’t just ask for to take the commuted value of the pension anytime you want. Rolling over the commuted value can only be done under a small set of circumstances.

    Calling it a ponzi scheme doesn’t make it so. Every pension plan that has retired and working members will have some of the contributions paying for some of the benefits. Are you saying every pension plan out there is a Ponzi scheme?

    You can make a case (as ledtim does) that you can probably do better investing on your own that contributing to a CPP. Perhaps. However, I want to point out two problems (a) Canadians left to their own devices will save too little and (b) Even those who manage to save just fine on their own will, on average, earn poor investment returns. I would personally like CPP to pay enough benefits that a retiree can have enough to cover basic necessities, so that even if they fail to save anything, their forced savings will provide for their retirement income.

  47. Canadian Capitalist

    @Rob: I totally understand businesses won’t be pleased at all if the CPP enhancements result in an increase in their portion of the premiums. But let me ask this: if the new proposals call for a boost in the employee portion of CPP premiums but not the employer portion, would you still think it is a terrible idea?

  48. Of course I am not saying every pension plan is a ponzi scheme – that why I have pointed out all the differences.

    There is a vast pool of money transparently in trust accounts and audited in true pension plans to cover the liabilities. Only recently did the CPPIB start charging more and investing it, but it remains a very minor portion of what is happening and only started a few years ago. Completely different.

    I would prefer a plan that did not charge me the employer portion, but that is just because it is better for me. I am still against it.

    Me being against it is the fact that – after doing hundreds of seniors tax returns over the years – I think seniors with nothing else other than this and OAS have it pretty good right now particularly considering they didn’t save enough, and improvements are therefore not an efficient use of our limited resources.

    Other uses such as repaying what we have already borrowed, or dare-I-say lowering taxes are far better options. My opposition is more my resistance to the ever growing role in government in our lives. I don’t think it is helpful to society, and in fact I feel it is very damaging. I also don’t think the trend can go on forever and when it ends, it won’t be pretty.

    I think we have beaten this to death and will remain on different sides of this debate. Thanks for your comments

  49. ledtim thanks for posting the old style xl…..CC that $55 billion Paul Martin took from EI would have been real handy right now (Kinse Econ?) As for CPP never getting tapped, just ask FED. gov. SWPP about the $30 billion taken out by Paul Martin an backed by future tax pay outs…..Insurance co’s pushing for these changes …just fallow the money pushing this so call up grade…

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  51. dj – I am interested in your comment but don’t quit understand what you’re saying … can you please elaborate?

  52. Canadian Capitalist

    @Rob: Fair enough. I think we’ll agree to disagree on this one.

    @dj: EI funds are part of general revenues so far. The inflow isn’t matched with outflow, so EI and CPP are not comparable. I also think you are referring to the money withdrawn from the public sector pension plans in the late 90s. Since the federal government is on hook to meeting any shortfall in the public sector pension plan, it was well within its rights to take out the surpluses. Of course, there are political risks to the CPP. But the risks are low considering any changes have to be approved by the majority of the provinces.

  53. Hi Rob, my point is Gov. can and do change the rules anytime they want….what was the point of paying down the debt, if they can run up a deficit any time they want…they are playing a cash flow(taxes) game….so changes are coming (spending cuts, Fees, higher taxes)….by 2015 the deficit will be gone, but the debt will be larger then it is now. EI was a good program (inflows in good times , out flows in bad times) all the cuts in transfer payment was just a big waste, at the end of the day we pay more an get less.

  54. Well CC , that surpluse in “all” DBPP’s belongs to the people who paid into it ! but Corp’s an insurance guys lobbied the Gov. to change the rules….Know wonder most DB’s are under water now. So gov. is going to cover this with taxes down line…..

  55. …any changes have to be approved by the majority of the provinces……how do you think the changes to EI happened…..they gave them the right to control the spending…..we have no control over this….a lot of people got voted in to make changes to MP’s pp…..they all rolled over like good dogs .

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  62. DOWN WITH CPP. first of all were saving for nothing. The baby boomers will take all the savings. 2nd of all over 60% of our CPP funds are invested into stocks that fund wars in 2nd,3rd,and even 4th world countries like Malyasia.If you think Canada is about peace keeping,guess again. One of the reasons I don’t work is because I refuse to fund a country that promotes warfare. When a country forces me to spend money on a social program that does more harm then good and doesn’t benefit me in any way shape or form I consider that unethical and absolutly blasphamous. Canadians need to get educated. Social capitalism has corrupted our politics,law enforcement,media,and more importantly are general populous.

  63. The problem with “opting out” is that people will want to “opt back in” when they haven’t saved enough. Of course people will say “tough luck for them” but it will just put more seniors on the street when they can’t afford to pay their living expenses. Sorry, opting out may sound like a good idea but overall it\s terrible.

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