# CPP is a scam?



## BigMonkey (May 31, 2016)

When I run the numbers and try to justify CPP, it appears that CPP is such a big scam. The government says under the current CPP plan, it is projected to replicate around 25% of your annual income at retirement. So what that means... by saving 10% of my pretax dollar amount (4.95% from myself and 4.95% from employer) it is suppose to give me 25% of my retirement income. So...by this logic, if I save 40% of my pretax dollars that provides same rate of return as CPP, it should equate to 100% of my retirement income?

Rough calculation: (not adjusting for inflation on both the contribution and payout for simplicity sake)
My lifetime contribution: $2,544.3 CPP per year x 40 years of contribution = $101,772
Employer's lifetime contribution: $2,544.3 CPP per year x 40 years of contribution = $101,772
At retirement max CPP payout = $1,092.50 x 12 = $13,110

Total contribution pot: 203,544 (101,722 x 2)
Divide by 13,110 annual payout = ~15.5 years

What this means, if the government took my money, made 0% return and gave it back to me at retirement. The pot of contribution from both myself and my employer will last me 15.5 years after the age of 65 (aka age 80.5). Average life expectancy of a male in Canada = 81 (male = 79, female = 83)

How is this a savings vehicle at all? It seems like interest free money to government at best. If not a potential money maker for the government since lots of people work more than 40 years, and males are expected to die before they receive all the money paid in.


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## andrewf (Mar 1, 2010)

4% of the current 10% contribution is to make up for previous undercontributions by earlier generations. So think of it as 4% baby boomber tax on millenials, and 6% your actual CPP benefits.


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## Rusty O'Toole (Feb 1, 2012)

I think they mean 25% of your income the year you started contributing. At least, my CPP monthly check is slightly less than I earned per week when I started contributing in 1971.

And yes it is pretty much a scam at every level or to be precise a Ponzi scheme.


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## sags (May 15, 2010)

I believe past actuarial projections were more conservative than the actual investment returns of the fund have proven to be, and consequently the benefit levels are lower than they should be. As the size of the fund has continued to grow and the growth of the fund exceeded the estimated annual growth, the increase in the capital in the fund has naturally compounded more rapidly than was forecast. 

The CPP is well ahead of past actuarial projections and annual returns continue to beat the benchmarks year after year.

The question could be answered by requesting the CPPIB provide an assessment of the possibility of higher benefits, but governments haven't shown any indication it is information they are interested in acquiring or made public.

As a baby boomer, paying the maximum contribution into the CPP uninterrupted for 40 years since the fund started in 1967, I doubt that I will ever recover the compounded returns on my contributions plus the compounded return on "orphaned surplus" from natural attrition, in my life time.

When mutual insurance companies demutualize and allocate the benefits to policyholders, it isn't unusual for policyholders to receive much more than a return of their accumulated premiums, due to the effects of compounded returns on capital and orphaned surplus over many years.

A natural attrition rate is somewhere around 5% per year, so it is inevitable that a large amount of capital is locked into the CPP fund from past contributors who will never collect from the fund.

Perhaps then...........some consideration should be made to raise the paltry $2500 maximum death benefit.


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## ian (Jun 18, 2016)

CPP is not a Ponzi scheme and describing it in that manner is simply not reasonable.

CPP rates are high. For two reasons I believe. First off CPP is not an annuity pension scheme in the true sense of the word. It incorporates features that could be best described as falling into the social benefits area. Secondly, CPP suffered for years because of politicians who were well aware that the rates were too low but were willing to put CPP in the red rather than risk their own re-election. Nor did the plan, like most others, comprehend the impact of increase longevity. This went on for years until Paul Martin, with Cretien's approval, decided to fix the problem. The fix was expensive because CPP had been underfunded for so long.

We are retired and in our early sixties. We did well on CPP. Our children are paying for it. I only had about 10 years at the max. contribution rate. My spouse, because of the child rearing provisions in CPP, got most of her initial contributions (no interest assumed) out in two years of CPP payments.

Cleary, if one is in their 30's or older CPP is not as attractive as it could be. No discussion there. But there are two other realities that may have a bearing on future CPP rates. My understanding is that CPP plan is extremely well managed by their independent investment board and has been returning higher than average returns for the past several years as compared to the industry standard. The second reality is that investment returns are expected to decline and remain low for the next ten years. I don't know what impact these two things will have on the future, or indeed if they will still be valid statement in five years.

I doubt whether many Canadians would be saving ten cents for their retirement if it were not for CPP.

The real disgrace is actually the EI rates and the amount of money that successive government siphon off into general revenues.


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## sags (May 15, 2010)

If retirees were only receiving a return of their contributions, they would receive more in benefits than they contributed.

But retirees should receive their contributions plus the return on their own capital plus orphaned surplus, accumulated over the years.

Looking at historical stock market charts for the past 40-50 years.....it becomes less clear retirees are receiving full benefits.

http://www.macrotrends.net/1319/dow-jones-100-year-historical-chart


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## NorthernRaven (Aug 4, 2010)

ian said:


> CPP is not a Ponzi scheme and describing it in that manner is simply not reasonable.
> 
> First off CPP is not an annuity pension scheme in the true sense of the word. It incorporates features that could be best described as falling into the social benefits area. Secondly... the rates were too low...CPP had been underfunded for so long.


Yes. Simply calculating what sort of return you yourself might theoretically have got from investing your CPP contributions is a moot point. Aside from funding past low contribution rates, CPP also has a disability insurance component, and so on. One would have to disentangle and fund these, or wave them away in one's alternate world.


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## gibor365 (Apr 1, 2011)

> How is this a savings vehicle at all? It seems like interest free money to government at best. If not a potential money maker for the government since lots of people work more than 40 years, and males are expected to die before they receive all the money paid in.


 CPP money go to pay CPP government workers juicy salaries and bonuses + government pension... Obviously scam for regular people


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## Rusty O'Toole (Feb 1, 2012)

The definition of a Ponzi scheme is that you promise to pay your investors interest or dividends but actually just give them back part of the money they put in. In other words it is not self sustaining unless you have a steady stream of new contributions, and if those contributions stop or even slow down the whole scheme is a bust.

Another thing people forget about pension plans is that when the pensioner dies the pension plan keeps the capital. Some people never live long enough to collect anything, some collect for a year or two, some longer, but eventually all die and the capital accumulates. Yet the longer these schemes go on the deeper in the hole they get. Wonder where all the money goes.


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## sags (May 15, 2010)

I don't believe they are "in a hole".......just waiting for an opportune time to raid the fund.

It didn't take very long for Provinces to sign on to expanded CPP to save themselves social costs. 

It will take even less time for them to vote to split up a "surplus".


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## dubmac (Jan 9, 2011)

I like the analysis provided in the original post.
Interesting that it would take 15 yrs or so to draw down on it - (til men reach 80, the age of life expectancy).
I'm OK with it. To me, it's forced savings. and it isn't just about me - it's about my wife too. She'll get some $ when I'm gone based on my work history. 
I haven't heard any scary stories where people didn't get what they expected insofar as a payout in retirement from CPP.
I mean, what if I live to 94 - like my grandpappy did - wouldn't that mean I'd twice the expected payout?
But I'm happy knowing that when I do retire, CPP is but one income stream that I expect will produce a reliable income stream.
Maybe I'm just mellowing with age.


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## AltaRed (Jun 8, 2009)

As has been said elsewhere, CPP is more than just a pension. It has disability benefits, a death benefit and a survivor benefit. And it is fully indexed to CPI. And there is no raiding of the surplus as it is a separate entity overseen by an independent CCPIB. It is not commingled with other government revenues. The CCP has a global reputation. Get over it.


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## BigMonkey (May 31, 2016)

I am all for a government central savings plan, as not everybody would be saving adequately otherwise. If the funds are properly invested and follow their mandate appropriately, this would result in everybody being better off later on in life, as no one wants to see friends, family, or their neighbours be in a situation where they have inadequate money later in life. 

I also like how it forces all employers to help contribute to everybody's savings plan, as companies are driven by profit and are obviously cutting back on pension plans which is why the government has stepped in with the CPP expansion. Collectively, these companies essentially shot themselves in the foot by cutting back on pension, thus forcing the government to say "no no", you now have to help your employees. For example, my employer has a DC plan that matches 3% (less than CPP at the 5%) which is hardly enough to save adequately for retirement if this was my sole retirement vehicle.

The thing I don't like, is if the funds are invested ineffectively, doesn't provide a reasonable rate of return, or the funds returns have an ulterior motives motive. I am unaware of this 40% going towards the baby boomer which seems unfair and IMO falls into the realm or Ponzi scheme. As it is using current contributions to fund prior shortfalls from the older generation.

Question for anybody out there for those who have DB plans. If your pension is to provide 70% of your best 5 years earnings average. Does the CPP expansion make up a portion of this 70%? Thus you/your employer would have a smaller annual contribution requirement?


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## Rusty O'Toole (Feb 1, 2012)

I'm all for a government pension program. Wish it could be run honestly and on a mathematically sound basis. With a little extra thrown in to stimulate the economy and a little thank you to the old buffers who paid the taxes and did the work for 50 years.


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## AltaRed (Jun 8, 2009)

Boomers (born in 1946 or later) have paid into CPP since they started working circa 1966. They have mostly paid their way, with the exception that contributory rates were not high enough in retrospect (partly politics and partly longevity has increased). That changed as already pointed out, albeit it should have changed earlier than it actually did. 

The bandits who really made out were those born in the 20s and 30's since they paid very little into the plan, but received disproportionate benefits. IOW, don't beat up on the boomers so much. Beat up on your grandparents, most of whom have passed, or are in their 80's and 90's now.


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## ian (Jun 18, 2016)

The biggest challenge, IMHO, to a government run pension scheme is politics and politicians. This is partly what got CPP into difficulties. Ten years ago Paul Martin took politics out of the equation. 

Mr. Martin made a decision to increase rates that was not politically popular at the time but was necessary because the plan was going the same way as US social security in terms of sustainability. The other thing he did move the CPP investment portfolio administration into the hands of professional pension investment fund administrators. The latter has proven to be an excellent decision. The former was strictly based on math/actuarial tables.

We are where we are on this. CPP is ranked among the top Government pension schemes in the world.


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## gibor365 (Apr 1, 2011)

> We are where we are on this. CPP is ranked among the top Government pension schemes in the world.


 Ranked by whom?!


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## ian (Jun 18, 2016)

As by Mercer Global Pension Index. Here is some data about the others.

http://www.telegraph.co.uk/finance/...s/9902745/The-best-pensions-in-the-world.html

http://globalpensionindex.com/wp-content/uploads/RRF18205_MMGPI_Report_MINISTERSLETTER_WEB.pdf

(page 6)


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## andrewf (Mar 1, 2010)

gibor365 said:


> CPP money go to pay CPP government workers juicy salaries and bonuses + government pension... Obviously scam for regular people


This is BS.


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## AltaRed (Jun 8, 2009)

andrewf said:


> This is BS.


Yeppers. Gibor has really flipped on this one.


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## mordko (Jan 23, 2016)

CPP is inefficiently run. http://business.financialpost.com/fp-comment/cpps-hidden-costs-pension-plan-no-model-of-efficiency

It's not really a pension plan in a normal sense of the word but a scheme to redistribute money between generations and from those who work throughout their lives to various target groups.


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## andrewf (Mar 1, 2010)

It _was_ a scheme to redistribute between generations when it was established. Now, it only distributed within generations. For instance, there are transfers from men to women, and from the childless to those with children.

And agreed about the CPPIB becoming bloated in its management. I think it does need to be reigned in.


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## james4beach (Nov 15, 2012)

mordko said:


> CPP is inefficiently run. http://business.financialpost.com/fp-comment/cpps-hidden-costs-pension-plan-no-model-of-efficiency


That article is focusing on the total fees of the CPP vs net assets. They point out that there are some hidden expenses that are not properly being disclosed. Conclusion: "the total cost of running the CPP has grown from $0.6-billion to $2.0-billion, or from 0.54% of assets *to 1.15%*, over the last seven years."

I think it's good that people are critiquing and CPP and holding it to account for its fees.

Apparently the CPP is under-reporting the total expenses. An increase of management fees from 0.54% to 1.15% seems like a real bloating of fees.


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## AltaRed (Jun 8, 2009)

Agreed that management fees have ballooned beyond reasonableness. A fund of this size shouldn't be mroe than 0.75%. But it is very improper to call it a Ponzi scheme or anything of that nature. The CPPIB is having to seek out alternative investments above and beyond bonds and stocks for the same reason everyone else is. Bond returns have weakened considerably. But at least CPPIB doesn't have political influences (or persuasions) like the QPP does in terms of preferentially investing in Quebec investments.

One can cray foul that contributory rates are too high now as part of the makeup for past sins, and they probably are but I don't think it stacks up poorly against other plans such as Ontario Teachers, etc, and if longevity tables do not keep climbing higher, I can see downward adjustments happening in the next decade or two. There is reason to believe than the current boomers (and/or Gen Xers) may be the healthiest generations we wil ever see and longevity tables may stall.


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## kcowan (Jul 1, 2010)

AltaRed said:


> There is reason to believe than the current boomers (and/or Gen Xers) may be the healthiest generations we will ever see and longevity tables may *stall.*


Can you explain what stalling longevity tables are?


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## Market Lost (Jul 27, 2016)

Rusty O'Toole said:


> The definition of a Ponzi scheme is that you promise to pay your investors interest or dividends but actually just give them back part of the money they put in. In other words it is not self sustaining unless you have a steady stream of new contributions, and if those contributions stop or even slow down the whole scheme is a bust.
> 
> Another thing people forget about pension plans is that when the pensioner dies the pension plan keeps the capital. Some people never live long enough to collect anything, some collect for a year or two, some longer, but eventually all die and the capital accumulates. Yet the longer these schemes go on the deeper in the hole they get. Wonder where all the money goes.


Instead of just speculation that there is some ponzi scheme, you could actually just go over to the CPPIB website and do the research.

http://www.cppib.com/en/home.html


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## Market Lost (Jul 27, 2016)

BigMonkey said:


> I am all for a government central savings plan, as not everybody would be saving adequately otherwise. If the funds are properly invested and follow their mandate appropriately, this would result in everybody being better off later on in life, as no one wants to see friends, family, or their neighbours be in a situation where they have inadequate money later in life.
> 
> I also like how it forces all employers to help contribute to everybody's savings plan, as companies are driven by profit and are obviously cutting back on pension plans which is why the government has stepped in with the CPP expansion. Collectively, these companies essentially shot themselves in the foot by cutting back on pension, thus forcing the government to say "no no", you now have to help your employees. For example, my employer has a DC plan that matches 3% (less than CPP at the 5%) which is hardly enough to save adequately for retirement if this was my sole retirement vehicle.
> 
> ...


The CPP will help the employer, not the employee, at least if they have a consolidated DBP. It means that the employer will have to pay less out in pension as CPP will pay more, but there is nothing to say that the contribution will go down. It's should be no surprise that it was that slime bag Wynne who was the major sponsor on this increase as it means Ontario, and Teachers will be saving tens of millions each year in pension payouts.


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## AltaRed (Jun 8, 2009)

kcowan said:


> Can you explain what stalling longevity tables are?


Not continue to creep up for the population as a whole. They may even retreat given the changes in personal lifestyles.

Added: I still foresee upward creep for certain demographics, e.g. the boomers who are already 50+, i.e. they will outlive their parents, but that is not likely the case for the population as a whole. Video games, smartphones and such will likely have a negative impact on those now in their teens through their 30s. It is well documented that obesity is on the rise amongst the young and distracted driving is now killing more people than drunk driving as 2 simple examples.


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## Market Lost (Jul 27, 2016)

AltaRed said:


> Boomers (born in 1946 or later) have paid into CPP since they started working circa 1966. They have mostly paid their way, with the exception that contributory rates were not high enough in retrospect (partly politics and partly longevity has increased). That changed as already pointed out, albeit it should have changed earlier than it actually did.
> 
> The bandits who really made out were those born in the 20s and 30's since they paid very little into the plan, but received disproportionate benefits. IOW, don't beat up on the boomers so much. Beat up on your grandparents, most of whom have passed, or are in their 80's and 90's now.


Doesn't sound like a fair fight, but if you have a few hanging around, I'll get the boxing gloves on.


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## andrewf (Mar 1, 2010)

AltaRed said:


> Not continue to creep up for the population as a whole. They may even retreat given the changes in personal lifestyles.
> 
> Added: I still foresee upward creep for certain demographics, e.g. the boomers who are already 50+, i.e. they will outlive their parents, but that is not likely the case for the population as a whole. Video games, smartphones and such will likely have a negative impact on those now in their teens through their 30s. It is well documented that obesity is on the rise amongst the young and distracted driving is now killing more people than drunk driving as 2 simple examples.


I think you are underestimating the impacts of medical advances. I mean, we're getting close to effective stem cell treatments for diabetes. That's just one chronic illness.


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## AltaRed (Jun 8, 2009)

Perhaps, but until such breakthroughs (when they come) become mainstream, millions of 'under 40s' will continue to destroy themselves. Designer drugs have suddenly become a public emergency in some jurisdictions for example. Time will tell but I really think actuarial tables will flatten out, at a minimum.


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## james4beach (Nov 15, 2012)

Although I share the concern about their ballooning management expenses, I do not think it's a scam, or a ponzi scheme.

This is a good system overall and we're lucky to have it. As a millennial myself I hope it continues to stick around.


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## andrewf (Mar 1, 2010)

AltaRed said:


> Perhaps, but until such breakthroughs (when they come) become mainstream, millions of 'under 40s' will continue to destroy themselves. Designer drugs have suddenly become a public emergency in some jurisdictions for example. Time will tell but I really think actuarial tables will flatten out, at a minimum.


Is hardcore drug use really that much more extensive than in the past? Compared to falling fatality from car accidents, drunk driving, etc.


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## AltaRed (Jun 8, 2009)

andrewf said:


> Is hardcore drug use really that much more extensive than in the past? Compared to falling fatality from car accidents, drunk driving, etc.


I believe we have only begun to see the effects of designer drugs. Specifically, I am thinking about Fentanyl. See the deadly effects http://www.cbc.ca/news/canada/briti...le-to-stop-ovderdoses-on-the-street-1.3762446 and http://www.cbc.ca/news/canada/british-columbia/delta-police-nine-overdose-warning-1.3744776

The even newer Carfentanil is extremely deadly. An amount the size of a grain of salt can kill. http://globalnews.ca/news/2939935/w...eet-drug-is-causing-mass-overdoses-in-the-us/


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## andrewf (Mar 1, 2010)

Opiates are not new drugs. Abuse is likely to be limited to a small minority. I think lifestyle illnesses like obesity, heart disease, diabetes, cancer are likelier to have meaningful impacts on longevity.


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## Market Lost (Jul 27, 2016)

andrewf said:


> Is hardcore drug use really that much more extensive than in the past? Compared to falling fatality from car accidents, drunk driving, etc.


No, drug use isn't any worse, and if you want to get down to the real problem, alcohol is still the most damaging. It's just that fentanyl is in the public's consciousness, but it's been around for years. Before fentanyl became the "it" drug there was heroin, crack, Oxycontin, Valium, and other, but nothing is really any different.



andrewf said:


> Opiates are not new drugs. Abuse is likely to be limited to a small minority. I think lifestyle illnesses like obesity, heart disease, diabetes, cancer are likelier to have meaningful impacts on longevity.


Exactly. Drug use is small potatoes compared to a terrible diet, and sedentary life.


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## Market Lost (Jul 27, 2016)

AltaRed said:


> I believe we have only begun to see the effects of designer drugs. Specifically, I am thinking about Fentanyl. See the deadly effects http://www.cbc.ca/news/canada/briti...le-to-stop-ovderdoses-on-the-street-1.3762446 and http://www.cbc.ca/news/canada/british-columbia/delta-police-nine-overdose-warning-1.3744776
> 
> The even newer Carfentanil is extremely deadly. An amount the size of a grain of salt can kill. http://globalnews.ca/news/2939935/w...eet-drug-is-causing-mass-overdoses-in-the-us/


Carfentanil is a large-animal opioid, and isn't going to be taken by anybody, at least not any that are around. 

I actually heard about this about a year back from a friend of mine who is a vet in BC, and he was telling me that this stuff is so deadly that even a needle stick injury is deadly without a quick dose of NARCAN (Naloxone). One of his colleagues actually almost died a few years back when she was trying to sedate a horse, and stuck herself. If it wasn't for the fact her assistant gave her a quick dose, she would have been dead in less than 20 minutes.


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## MrMatt (Dec 21, 2011)

AltaRed said:


> I believe we have only begun to see the effects of designer drugs. Specifically, I am thinking about Fentanyl. See the deadly effects http://www.cbc.ca/news/canada/briti...le-to-stop-ovderdoses-on-the-street-1.3762446 and http://www.cbc.ca/news/canada/british-columbia/delta-police-nine-overdose-warning-1.3744776
> 
> The even newer Carfentanil is extremely deadly. An amount the size of a grain of salt can kill. http://globalnews.ca/news/2939935/w...eet-drug-is-causing-mass-overdoses-in-the-us/


Fentanyl is awesome, I know people who have had broken bones, the morphine it was clear that they were still not in good shape. The fentanyl was great, they were much less stressed throughout the affair.

Sure there are serious drug problems, but hard core drug addicts will try anything to get the rush.

It really bothers me that these very effective treatments for medical issues get hijacked by abusers and media so people start thinking they are evil, when in actuality they are very effective treatments for people suffering a medical issue.


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## AltaRed (Jun 8, 2009)

Those that play reckless with the street version of such drugs take their chances. Which is the real problem. There is no quality control on street drugs and they can contain anything the supplier/dealer wants them to contain. My point is that in BC in particular, street users are dropping like flies. If that momentum builds across the country, that brings down ages in actuarial tables. But I suppose if you are lucky (or smart) enough to escape those early years, and obesity and sedentary behaviour, perhaps then a millenial will live to 100. We shall see.


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## ian (Jun 18, 2016)

I would guess that alcohol, smoking, and lifestyle would be by far the largest drivers of the longevity tables.


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## Daniel A. (Mar 20, 2011)

So much for the topic. :confusion:


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## AltaRed (Jun 8, 2009)

Daniel A. said:


> So much for the topic. :confusion:


Yeppers, but we've already discredited the assertion that CPP is a scam. The debate then went on about continued creep upward of longevity which was one of the reasons contributory rates had to be increased. Will it continue? Will it flatten? Will it turn over? No one knows until the trend shows itself at which time contributory rates may need to be adjusted accordingly. Let's chat again on this in 2025 or 2035.


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## andrewf (Mar 1, 2010)

It really isn't a scam. It is perhaps a pension bundled with a tax bundled with a welfare scheme (disability benefits, etc.). It is perhaps a bit expensively managed.


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## mars (Mar 11, 2014)

I believe the other area people get upset by is that the CPP uses a return of around 4% to calculate their anticipated return and thus payout. Some believe they can manage their money better and thus receive a better return. This is possible, however, not necessarily guaranteed, just like any DB pension. The CPP has been exceeding their anticipated return for a few years and some believe with this increased return the fund should increase the payout. This sounds reasonable, but what happens in years when the return is less or even negative, should the payout be reduced to reflect the reduced income generated? The other thing to take into consideration is the employer is contributing an equal amount as the employee (unless you are an independent contractor who contributes both portions) and unless you had some arrangement with the employer to give you this amount if they didn't have to contribute to CPP, then you would need to make that amount up through your investing skills, that is you need to double your investment just to make up this amount. I am not one to believe all employers would be generous enough to give every employee 4.5% if they didn't have to pay into CPP.


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## andrewf (Mar 1, 2010)

I don't think you quite have it. CPPIB needs to achieve 4% *real* return to be sustainable for the long term. 4% real (after inflation) is something like 6% nominal, which is not half bad for such a high level of assurance of payout (it is quite safe). CPPIB has recently been surpassing that by a decent margin (closer to 5.5% real return). Each plan participant may have a higher or lower return. Later participants tend to have lower expected returns, since they are paying a tax to cover the undercontributions of their parents and grandparents.


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## andrewf (Mar 1, 2010)

In the long run, the employee is paying for both parts of the CPP contribution. Wages adjust for such 'payroll taxes' (in air quotes because you can argue it is not a tax).


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## latebuyer (Nov 15, 2015)

You can read a massively long cpp debate on red flag deals 

http://forums.redflagdeals.com/cpp-expanded-2004665/

One person argued cpp robs them of their ability to choose their own investments. I thought most millenials would support expansion but it appears some don't. As someone else pointed out, I'm looking forward to a base amount i can count on in retirement, however small.


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## ian (Jun 18, 2016)

The argument about robbing someone of investment choices has some truth...only to those who would or do actually save for retirement.

But, the statistics regarding how many people actually save, over and above CPP or employer plans, indicate that the majority of Canadians simply would not save this money on their own let alone invest it. The last numbers I saw from Manulife indicated that thirty something percent of people who could participate in an employer sponsored/matched DC plan choose not to do so. This number corresponds well to the number of non participants in my former employers plan.

If we did not have CPP, the Gov't would be forced into a higher GIS number. This is not just about helping people save, it is about protecting future generations from the tax burden of supporting seniors who have not saved dime one for retirement.


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## andrewf (Mar 1, 2010)

The other way to think about it is that you can treat your CPP benefits as a fixed income component, and invest the rest of your portfolio accordingly. 80/20 equity/bond split might be quite appropriate even for people nearing retirement if they have a sizable DB pension.

^ian, I think the forced savings is good for helping to deal with the moral hazard of senior anti-poverty measures such as GIS/OAS. I'd rather OAS be phased out and replaced with higher CPP benefits. People who earn during their lives self-fund their pension and cannot count on the generosity of the rest of society to support them in retirement.


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## Nerd Investor (Nov 3, 2015)

This is how I look at it. 
Even if I didn't have CPP I would likely look to annuitize part of my portfolio in retirement anyway, so this is just taking care of that for me and making up a "fixed income" component while I'm in my accumulation phase.


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## Daniel A. (Mar 20, 2011)

Phasing out OAS then going higher on CPP won't change a thing as even combined it will still leave people able to collect GIS .
OAS is not an anti-poverty measure, GIS is. 

The number of people that apply for CPP early is a real problem, I believe the average payout on CPP is less than 600.00 per month so people choose to take a 40% reduction who really can't afford to but so what there is always GIS and they will apply for that welfare.

One should not under estimate the power of CPP even those young people who look at it and think it does not look attractive today. In all the years I worked starting in 1971 it never looked like much, fast forward today it amounts to 25% of my pension. As a union person all my life I do remember when pension issues came up in negotiations young people were always more than willing to give up pension for higher wages. I think it is difficult for younger folks to think 30 years out and hard to imagine the power of compounding.


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## AltaRed (Jun 8, 2009)

Daniel A. said:


> Phasing out OAS then going higher on CPP won't change a thing as even combined it will still leave people able to collect GIS .
> OAS is not an anti-poverty measure, GIS is.


I agree. There is a very good reason to re-invent the GIS into a broader and better income supplement plan for those that truly need it.... and without age qualification. And reduce/eliminate OAS entirely. Increasing CPP does nothing for those already don't qualify for full CPP. Their earnings were never enough to exceed YMPE and/or or they never contributed long enough for full CPP in the first place.


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## NorthernRaven (Aug 4, 2010)

AltaRed said:


> I agree. There is a very good reason to re-invent the GIS into a broader and better income supplement plan for those that truly need it.... and without age qualification. And reduce/eliminate OAS entirely. Increasing CPP does nothing for those already don't qualify for full CPP. Their earnings were never enough to exceed YMPE and/or or they never contributed long enough for full CPP in the first place.


OAS as an ongoing, universal, pay-as-you-go scheme has a vague implicit bargain with those funding it. If you kill OAS, those that have paid the taxes for existing recipients do not get any corresponding benefit when their time comes - monkeying too heavily with OAS is like a retroactive tax increase... 

OAS of course is already clawed back, but that can be considered part of progressive taxation.


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## ian (Jun 18, 2016)

OAS may be 'clawed back' in some instances but keep in mind that OAS is not an entitlement based solely on age. We don't fund it in the same way we do CPP or EI. It is part of a social safety net that is funded from general revenues. No different than social assistance and all the child benefit programs.

I have will have absolutely zero issue if any part of my OAS is clawed back because it will mean that I have a good net income in retirement. It also means more money available for those who really need it.


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## NorthernRaven (Aug 4, 2010)

ian said:


> OAS may be 'clawed back' in some instances but keep in mind that OAS is not an entitlement based solely on age. We don't fund it in the same way we do CPP or EI. It is part of a social safety net that is funded from general revenues. No different than social assistance and all the child benefit programs.


Given that the clawback only starts at $73K or so of net individual income, OAS is closer to a universal program than part of a safety net. Anyone know what the eligibility rate for OAS is? Statscan has the median total income for those 65+ at $26K in 2014, so I'm guessing those seeing significant clawback are a fairly high percentile minority?


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## 1980z28 (Mar 4, 2010)

Great plan

will accept at 60

have to wait for 5 more years,,,bad me did not read any info when i sign up


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## AltaRed (Jun 8, 2009)

So if those seeing significant OAS clawbacks are that few, all the more reason to clawback obscene payouts to the wealthy. I don't care if those wealthy seniors would be 'enraged' for increased clawbacks. No one needs income support above $73k, never mind possibly as much as $146k for a couple. Re-allocate to those in need. Won't happen though. Ottawa has no balls for such changes.

The problem is GIS is a lame, inadequate program, and targeted only at those aged 65 or older. It is age discriminatory and doesn't really provide sufficient saftey net. The real answer is to take some of the richness out of OAS and apply it to a broadened and expanded GIS (or income supplement) program. Double/triple what currently exists for example.


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## 1980z28 (Mar 4, 2010)

AltaRed said:


> So if those seeing significant OAS clawbacks are that few, all the more reason to clawback obscene payouts to the wealthy.


I will not get a claw back

If you get a claw back well done

I will be happy to get any cpp,oas or gis

A Mechanics life is sad at the end,,only cheap car repairs,,,if anyone is close,,,i can fix your car for free you buy the parts,,,remember you will need to be retired and need to help


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## 1980z28 (Mar 4, 2010)

at work there is a driver that is 73 still driving a truck,,makes 120 k working ,,getting cpp,from 60 years old,,,maybe he gets a claw back


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## NorthernRaven (Aug 4, 2010)

AltaRed said:


> So if those seeing significant OAS clawbacks are that few, all the more reason to clawback obscene payouts to the wealthy. I don't care if those wealthy seniors would be 'enraged' for increased clawbacks. No one needs income support above $73k, never mind possibly as much as $146k for a couple. Re-allocate to those in need. Won't happen though. Ottawa has no balls for such changes.
> 
> The problem is GIS is a lame, inadequate program, and targeted only at those aged 65 or older. It is age discriminatory and doesn't really provide sufficient saftey net. The real answer is to take some of the richness out of OAS and apply it to a broadened and expanded GIS (or income supplement) program. Double/triple what currently exists for example.


For 2013, it looks like an estimated 2.4% (124K) of OAS recipients had it completely clawed back, and another 4.1% would have had partial clawback. The recovery amount would have "only" been about $1.1 billion (3.6% of total OAS payments). If you put a hard cap rather than a gradual clawback at the current OAS limit, you'd only save maybe half a billion, not enough to do any serious GIS do-gooding. If you capped OAS at actual, rather than pension-split income, you would get some more back, but likely not huge amounts. The recent modifications to the GIS "single" rate, welcome but not a large change in the scheme of things, are estimated to cost $775 million for 2020, by way of comparison.


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## AltaRed (Jun 8, 2009)

Clawback should have started much earlier than $73k, and be based on family income and be totally clawed back at some level like $80k. Maybe the recovery amount would have been $5 billion. That is what is wrong with the system. Way too much leakage for those not in need.


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## BigMonkey (May 31, 2016)

I think one the key benefits for CPP is that it is a forced savings plan for everybody. If there was no such thing as CPP. Millions of the population would not be saving that portion of their income and be worse off later in life. This would result in a country wide an OAS and GIS outflow. Ultimately resulting in everybody being worse off as OAS & GIS money comes the taxpayers within the country.

Although I am saver, I have looked at the amounts received between OAS, CPP, and GIS at retirement. It is actually quite a bit, so much so that I have even considered emptying that piggy bank and neglecting the need to save. 

Though if I had a defined benefit plan, I would probably neglect saving for retirement, since the combination of pension, CPP, OAS would likely be enough for retirement.


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