# CPP Expansion Talks



## sags (May 15, 2010)

Expansion of the CPP is in the news again, with meetings this month between the Finance Minister and the Provinces.

Finance Minister Morneau is committed to expanding the CPP, while others are opposed........ironically including his former company.

Both sides are ramping up the rhetoric supporting their side of the debate.

Those in favor point to the lack of retirement savings, the public cost of GIS (35% of retirees and rising), poverty among a segment of retirees and a looming crisis.

Those opposed point to the contributions from business as an additional cost, less money for workers to deploy independently, low returns for the investment, and there is no looming crisis.

It will be an interesting debate to watch as "experts" on both sides offer their opinions.


----------



## mordko (Jan 23, 2016)

Personally, I think the government should take 100% of everyone's earnings and then invest it on our behalf. It would remove the problem of poverty and inequality and ensure that all public costs are well financed. People can live on carefree for their retirements will be taken care of.


----------



## Daniel A. (Mar 20, 2011)

I did not realize 35 % of retired people are collecting GIS is that number real ?


----------



## OnlyMyOpinion (Sep 1, 2013)

mordko said:


> Personally, I think the government should take 100% of everyone's earnings and then invest it on our behalf. It would remove the problem of poverty and inequality and ensure that all public costs are well financed. People can live on carefree for their retirements will be taken care of.


Surely you are kidding right? Who would ever feel that the gov't should have more of our money than they take now?


----------



## sags (May 15, 2010)

Daniel A. said:


> I did not realize 35 % of retired people are collecting GIS is that number real ?


The Guaranteed Income Supplement (GIS) is an additional monthly benefit, targeted to OAS recipients who have a low income and reside in Canada. 

*One-third of Canadian seniors who receive the OAS pension also receive the GIS.*

http://www.aines.gc.ca/eng/report/index.shtml


----------



## Daniel A. (Mar 20, 2011)

Part of the problem as I see it is too many are applying for CPP at age 60 that can't afford it. The maximum CPP payout stands at $1,092.50 per month, although the average payment is closer to $500 a month.
Had I applied at age 60 I would have received 680.00 per month, I chose to wait and collect something closer to the max. I should get almost a 1000.00 as a result of waiting at age 64. 
I do believe changes are needed I'm sure you and I will agree but I do have a problem with those that put themselves in this boat.


----------



## slacker (Mar 8, 2010)

My employer has RRSP matching, 100% of my contributions, up to 5% of my salary.

When ORPP or CPP increases kicks in, they will simply drop the RRSP matching.

The end result is that the government is confiscating the private savings that I am already doing, and redistribute it as the government sees fit.


----------



## OhGreatGuru (May 24, 2009)

CPP is a contributory plan, and the retirement benefits you receive are directly in proportion to the contributions made. There is no "redistribution".


----------



## sags (May 15, 2010)

Daniel A. said:


> Part of the problem as I see it is too many are applying for CPP at age 60 that can't afford it. The maximum CPP payout stands at $1,092.50 per month, although the average payment is closer to $500 a month.
> Had I applied at age 60 I would have received 680.00 per month, I chose to wait and collect something closer to the max. I should get almost a 1000.00 as a result of waiting at age 64.
> I do believe changes are needed I'm sure you and I will agree but I do have a problem with those that put themselves in this boat.


Good point.

I have seen advice that seems counter-intutitive, if a person "needs" the CPP money to make ends meet they should delay collecting. If they don't need the money they should take it early........and presumably invest it.

It makes sense. If the CPP benefits are crucial to someone paying their bills, they should wait to collect every dime they can.

On the other hand if the CPP benefit isn't needed to pay the bills, it may be wise to take it at 60 and invest the benefit for a longer period of time.

I think the group you are talking about really need the money and took it early to solve a current need, but their future will be negatively impacted as you suggest.

The GIS would probably pay more if the CPP benefit was lower though.


----------



## GreatLaker (Mar 23, 2014)

sags said:


> I have seen advice that seems counter-intutitive, if a person "needs" the CPP money to make ends meet they should delay collecting. If they don't need the money they should take it early........and presumably invest it.
> 
> It makes sense. If the CPP benefits are crucial to someone paying their bills, they should wait to collect every dime they can.
> 
> ...


Good thinking Sags. Almost everyone I know says take CPP as early as possible, based on the bird in the hand concept... "If I die before the breakeven point I will leave money on the table. May as well take it early to ensure I get back as much of my CPP contributions as possible." is a typical analysis I hear from non-professionals.

This article from Michael Kitces is US based but it outlines the benefits of delaying Social Security as long as possible. 
https://www.kitces.com/blog/the-asy...cial-security-benefits-as-the-ultimate-hedge/



> Despite a growing body of research suggesting that most retirees would benefit by delaying the onset of Social Security payments, the majority who are eligible still elect to begin receiving them as early as possible. In no small part, this appears to be attributable to a “take the money and run” mentality from retirees, who simply don’t see the value of delaying as being worth the risk of foregoing benefits. And without a doubt, there is a material risk that the retiree will not live to the so-called “breakeven point” where the delay in benefits is worthwhile.





> it’s notable that delaying Social Security not only hedges longevity, it also hedges two other adverse scenarios that are otherwise harmful to the retiree: unexpectedly high inflation, and unexpectedly low returns. As noted in the charts above, an adverse outcome with either, or both, can go even further to leverage the value of delaying Social Security, decreasing the breakeven period and increasing the upside for materially outliving life expectancy.
> 
> Which means in the end, the true value of delaying Social Security is a triple-benefit of hedging longevity, poor returns, and high inflation, because of the asymmetrical way that delayed higher benefits compound in the later years. It won’t necessarily win for every client, but as any good hedge should, it wins the most in the times the client will need it the most.


Consider someone with a fully indexed pension, that when combined with CPP (taken at 60) and OAS meets 100% of their non-discretionary expenditures. Not much point in such a person delaying CPP, because the benefits explained in Kitces' article are not very relevant. Their workplace and government pensions already protect them from the possible ravages of inflation, longevity and low market returns on their retirement savings.

On the other hand, someone with a non-indexed pension, or worse, no pension, could get the benefit of the higher starting point for delaying CPP to 70, if they live a very long time. And the breakeven point for delaying CPP to 70 is age early-mid eighties, which happens to be around the life expectancy of someone 60-65 years old.

Delaying CPP means there will be more there for you if you live a very long time. Taking it early means there will be more for your beneficiaries if you die before the breakeven point. But you won't care because you will be, well... dead.


----------



## mordko (Jan 23, 2016)

OhGreatGuru said:


> CPP is a contributory plan, and the retirement benefits you receive are directly in proportion to the contributions made. There is no "redistribution".


Wrong. CPP engages in redistribution in several ways. People who work all their lives get a paltry return on their CPP tax. People who take extended holidays from work do a lot better. There is also inter generational transfer.


----------



## carverman (Nov 8, 2010)

Daniel A. said:


> I did not realize 35 % of retired people are collecting GIS is that number real ?


I certainly don't qualify for GIS and I collect OAS which is not included in the GIS qualification income calculation.
Certainly, if you have no employer pension and just CPP, it would be enough to qualify you.
My gov't pensions OAS and CPP (taken at 60) = $12,912 per year, so with only these two pensions, I could receive the single GIS allowance of $773.60
or about $9283 per year which is NOT taxable. This would give me a combined income (OAS+CPP+GIS) of $22,195, still having to pay tax only on the OAS + CPP. In most cases with additional personal deductions, that would result in no income tax payable. 

As a single divorced person, the GIS does not favour me. 
Income from OAS has to still be included in my tax return and added to my gross income. The net income (subtracting the perpetual alimony of $300 per month that I pay my remarried ex) deducted from my employer pension, leaves me about $33K net income. So I am still about $13K above the poverty line. 

Not sure about the 35% of retired people collecting GIS, but if the numbers are correct, then the cost of living these days does require more income than just the two gov't pensions, but a married couple receiving more benefits can live better than a single person on gov't pensions any day. 

*Table 1 – Single, widowed or divorced OAS pensioner*

Table 2 – Married or common-law OAS pensioner and spouse is also an OAS pensioner

Table 3 – Married or common-law OAS pensioner and spouse is not an OAS pensioner

Table 4 – Married or common-law OAS pensioner and spouse receives the Allowance

The maximum allowed income levels for these four different rate tables effective January 2016 through March 2016 are as follows:

Rate Table	Maximum Allowed Income *Combined income if a couple)* Maximum monthly GIS
*1	$17,304	$773.60*
2	$22,848	$512.96
3	$41,472	$773.60
4	$32,016	$512.96


----------



## sags (May 15, 2010)

mordko said:


> Wrong. CPP engages in redistribution in several ways. People who work all their lives get a paltry return on their CPP tax. People who take extended holidays from work do a lot better. There is also inter generational transfer.


The CPP is a guaranteed rate of return, so a comparison to "possible" stock market returns of contributions would be misleading.

For comparison, the "fairly safe" TSX index has given a negative return on investment for the past 10 years.

The CPP would probably be more favorably compared to a deferred annuity with a guaranteed monthly benefit.

I have no idea how that comparison would look.

I also question the benefit amounts that CPP is paying out as the fund is growing at a much faster rate than anticipated.

Perhaps the monthly benefit could be increased ?


----------



## sags (May 15, 2010)

Unfortunately the CPP debate will focus on only one aspect of the retirement income needs of Canadians.

There are other moving parts that should be part of an inclusive broader debate on the subject.

Statistics Canada has reported that the average age of retirement has risen from 61 to 63, and that more people past the normal retirement age of 65 are working than in the past.

From other studies we learn that 1/3 of Canadians are retiring with less than $1000 in total retirement savings.

We also know that 1/3rd of Canadians are receiving GIS benefits. (That could be misleading as qualifications are based on income rather than assets)

As to the above, many Canadians own a home, although an increasing number are obtaining mortgages or HELOCs in their retirement years.

Seniors are saying a shortage in small homes is driving up the price, so downsizing into a less expensive home and investing proceeds from the sale is being less possible.

There are also significant differences in geography. Someone living in a rural part of the country may be able to manage on government benefits of $18,000 per year, but it would be impossible in a big city.

According to one report I read, Canada spends significantly less in GDP on retirement supports than many other countries, so perhaps increasing OAS would be better than changing the CPP.

Problem with that is not everyone collects OAS or full OAS.

Too bad, we couldn't have a weekend debate on television with a huge round table panel discussion that brings all the issues into one place for discussion.

Perhaps then we could get a good handle on retirement issues and how to proceed from here.

As it is...........we get bits and pieces..........biased reports and opinions from all different viewpoints.........and end up with a piecemeal muddled up understanding.

Here is one interview that is interesting to read, that contains some real life situations and considerations.

http://www.cbc.ca/radio/thecurrent/...16-full-episode-transcript-1.3600226#segment3


----------



## sags (May 15, 2010)

I am not sure Canadians can count on our political representatives in Parliament and the Senate to solve the problem alone.

From watching and reading minutes from Finance Committee meetings, I got the clear impression that many of the members are "befuddled" by it all.

The appointments to committees are based on political motives, rather than the business, finance, or economic backgrounds of the MPs.


----------



## slacker (Mar 8, 2010)

sags said:


> For comparison, the "fairly safe" TSX index has given a negative return on investment for the past 10 years.


Your strawman is standing on shaky ground.

XIC cumulative 10y return is 56.8% (4.6% annual)

https://www.blackrock.com/ca/individual/en/products/239837/ishares-sptsx-capped-composite-index-etf?nc=true&siteEntryPassthrough=true


----------



## sags (May 15, 2010)

Not really........from 2007 to 2015 it returned almost nothing.

Lots of volatility and no guaranteed retirement benefit. Retirees can't wait around for 10 years for the markets to recover from losses.


----------



## slacker (Mar 8, 2010)

sags said:


> Not really........from 2007 to 2015 it returned almost nothing.
> 
> Lots of volatility and no guaranteed retirement benefit. Retirees can't wait around for 10 years for the markets to recover from losses.


You have shifted your position from "negative return on investment for the past 10 years", to "returned almost nothing from 2007 to 2015".

I see that we are throwing reality out the window here. You're a stupid head.


----------



## OnlyMyOpinion (Sep 1, 2013)

A suggestion that came up in discussion today was for a federal CPP plan that considers each person's recent contribution to their pension and/or RRSP plan relative to their income/YMPE. This suggestion came from the perspective of 'hey we have the data and technology to be quite surgical with this issue'. The CRA has all of the data necessary for tracking and calculations.
So, if you didn't contribute to a pension/RRSP ~last year, the gov't would adjust your CPP premium the following ~year to make up for it. If someone with income never contributed to a pension/RRSP they will end up with a larger CPP payout as a result of their increased CPP contributions over their working life. Some may 'choose' this by default or by inaction, while those who choose to save outside of the CPP via a pension or RRSP will not be forced into an 'enhanced' CPP system. Employee contributions would not necessarily increase to make up the difference.. 
No doubt there are lots of 'what ifs' and details to consider, but if the primary issue is the concern that (17%?) of Canadians are not saving for retirement themselves then this will target them and fix the deficiency. 
Some will have a '3-legged' retirement stool comprised of CPP, RRSP and pension, others will have a stool entirely built of CPP, but both will be assured of some minimal established retirement income.
???


----------



## OnlyMyOpinion (Sep 1, 2013)

sags said:


> Not really........from 2007 to 2015 it returned almost nothing. Lots of volatility and no guaranteed retirement benefit. Retirees can't wait around for 10 years for the markets to recover from losses.


Volatile yes: 9 years of TSX performance with 6 keepers and 3 skunks according to Norm Rothery's periodic table of annual returns. http://www.ndir.com/cgi-bin/PeriodicTableofAnnualReturns.cgi
But it's only in hindsight that I'd have known which square to choose. The solution - diversification.
BTW, I'm a retiree, I can wait around 10 yrs if necessary (hint - diversification).


----------



## sags (May 15, 2010)

slacker said:


> You have shifted your position from "negative return on investment for the past 10 years", to "returned almost nothing from 2007 to 2015".
> 
> I see that we are throwing reality out the window here. You're a stupid head.


No, actually my comment was..........._.For comparison, the "fairly safe" *TSX index* has given a negative return on investment for the past 10 years._

The TSX index is lower today than it was in 2007.


----------



## mrPPincer (Nov 21, 2011)

um, sorry sags, (I usually agree with your arguments, you're usually right imho, but), maybe you should have said for the past 9 years, it's june 2016, not june 2017.

tsx sans divs..
http://www.google.ca/finance?chdnp=...DEXTSI:OSPTX&ntsp=1&ei=YkdnV4CIJ9TDjAGp1JXQAw


----------



## slacker (Mar 8, 2010)

sags said:


> No, actually my comment was..........._.For comparison, the "fairly safe" *TSX index* has given a negative return on investment for the past 10 years._
> 
> The TSX index is lower today than it was in 2007.


TSX close value:

2016-06-17: 13901.77
2006-06-16: 11207.95

Not to mention the dividend yield in the 10 years.

It is clear that you don't know what you are talking about. Thanks for illuminating your level of knowledge in financial matters.


----------



## slacker (Mar 8, 2010)

BTW, if you don't know that dividend yield is a significant part of investment return, you are incompetent. If you know, but purposefully ignore it, then you are dishonest. Either way, you're not adding much value here.


----------



## sags (May 15, 2010)

mrPPincer said:


> um, sorry sags, (I usually agree with your arguments, you're usually right imho, but), maybe you should have said for the past 9 years, it's june 2016, not june 2017.
> 
> http://www.google.ca/finance?chdnp=...DEXTSI:OSPTX&ntsp=1&ei=YkdnV4CIJ9TDjAGp1JXQAw


Right you are...........I am wrong. The 2008 high was only 8 years ago.

_The S&P/TSX composite index climbed 0.35% or 53.36 points to end Wednesday at 15,109.25, 36 points higher than its previous peak close of 15,073, reached on June 18, 2008._


----------



## sags (May 15, 2010)

OnlyMyOpinion said:


> Volatile yes: 9 years of TSX performance with 6 keepers and 3 skunks according to Norm Rothery's periodic table of annual returns. http://www.ndir.com/cgi-bin/PeriodicTableofAnnualReturns.cgi
> But it's only in hindsight that I'd have known which square to choose. The solution - diversification.
> BTW, I'm a retiree, I can wait around 10 yrs if necessary (hint - diversification).


Absolutely diversification and the requisite knowledge and interest to invest are the keys to success, but unfortunately the vast majority of Canadians are incapable or uninterested.

It also probably isn't particularly useful to compare "investment returns" for CPP contributions to theoretical stock market returns.

In that conversation is the assumption that employers would match contributions ? In the mandatory CPP employer contributions represent 50% of the capital invested.

Comparing the return on CPP contributions to the return on GICs or deferred annuities might be more useful.


----------



## OnlyMyOpinion (Sep 1, 2013)

I do see the S&P/TSX Composite value (currently 13,901.77) to be down slightly in the 9 years since 2007 (it was 14,137.41 on June 15, 2007).
But I think it is important to consider the dividends paid out over that period that contribute to total return. Presumably an individual saving for retirement is utilizing the compounding of reinvested etf dividends rather than stripping it out for beer money? 
As a proxy, XIU (S&P/TSX 60 index etf) shows similar un-adjusted 10 year performance to the S&P/TSX Composite (28% vs 24%) But with dividends considered, the growth of XIU was 64% over 10 years.


----------



## sags (May 15, 2010)

XIU has done well considering.............but then the question often asked is if dividend paying companies have become overvalued as investors piled into them.

I have no idea about that and wouldn't even hazard a guess, but there are some who think a correction is inevitable.

This is the nutshell of that part of the CPP expansion argument though.

Higher contributions for a guaranteed higher payout versus a possible better outcome investing in equities or other assets.


----------



## slacker (Mar 8, 2010)

@sags: your position shifted again.

1st position: negative return on investment for the past 10 years
2nd position: returned almost nothing from 2007 to 2015
3rd position: XIU has done well, but probably overvalued

Basically, you don't know anything, and that's why you believe CPP is the answer.


----------



## sags (May 15, 2010)

Moving on..............Trudeau and Morneau are both in favor of expanding the CPP. 

Ontario is onside if the plan is broad enough for their liking. Quebec sounds unimpressed, Saskatchewan is opposed and has their own plan, Alberta and BC haven't said.

There has to be approval from 7 Provinces with 2/3rds of the population to make any changes, which is a good thing so no government can mess around with the fund.

We shall see which Provinces are in or out.

Morneau says there likely will be two options to choose from, and he wants to have one of them implemented before the end of the year.


----------



## OnlyMyOpinion (Sep 1, 2013)

sags said:


> In that conversation is the assumption that employers would match contributions ? In the mandatory CPP employer contributions represent 50% of the capital invested.


The conversation was more conceptual and half-baked. No, I think the intent was to suggest that if the problem is Canadians not saving enough, track what they do actually save (RRSP/pension contributions) and if it is not sufficient (whatever that is and however that is determined) then bump their personal CPP contribution the following year to compensate. I don't think it was intended that employers would have to help make up the individual's shortfall unless they chose to. 
There would be all sorts of objection of course, "why is my paycheck smaller this year, I need that money." etc. But presumably that person would benefit actuarially from being in an 'enhanced' CPP. On the other hand, those who max'd out their RRSP or had a pension plan would only get the current CPP and have to hope/ensure that their saving & investments were sufficient for their retirement needs. You decide whether the nanny or yourself is going to look after saving for retirement.


----------



## OnlyMyOpinion (Sep 1, 2013)

sags said:


> Moving on...


Yes, let's hope the name calling in this thread goes away. 

Do we know, are the feds aligned with what Ontario had planned? Are they simply looking at bumping employee and employer contributions to create a higher payout?
I find this in CTV news, _"The party cited a CIBC estimate that the average 35-year-old saves for retirement less than half the amount their parents did. The maximum monthly payout for CPP is $1,065 but the average payout is $618."_
How misleading, it makes it sound as if the avg CPP payout is nearly half the maximum because 35 year olds are saving less than half their parents did. The two are not remotely connected.

Why so much focus on middle class. Is this to say that we don't want the middle class to suffer a large drop in income when they retire, but those making less than $50k are considered poor anyway and should expect to remain that way into retirement? _"Those who aren't saving enough are the same people the federal Liberals want to help financially: Middle income earners. Research suggest those earning between $55,000 and $75,000 -- some studies put the upper limit above $100,000 -- are not saving enough for retirement, or don't have an adequate workplace pension."_


----------



## OnlyMyOpinion (Sep 1, 2013)

I still find this graphic summary of retirement scenarios from an older Jonathan Cheveau article interesting:

View attachment 10593


From: http://business.financialpost.com/uncategorized/four-retirement-scenarios-from-bare-bones-to-living-large


----------



## carverman (Nov 8, 2010)

OnlyMyOpinion said:


> Yes, let's hope the name calling in this thread goes away.
> 
> Do we know, are the feds aligned with what Ontario had planned? Are they simply looking at bumping employee and employer contributions to create a higher payout?
> I find this in CTV news, _"The party cited a CIBC estimate that the average 35-year-old saves for retirement less than half the amount their parents did. The maximum monthly payout for CPP is $1,065 but the *average payout is $618*."_
> How misleading, it makes it sound as if the avg CPP payout is nearly half the maximum because 35 year olds are saving less than half their parents did. The two are not remotely connected.


That "average" payout also depends on when you apply for CPP. In my case, applying at age 60, (now taking it for 10 years) they are
paying me $505.42 a a month. Combined with the OAS ($570.52 it works out to $$1075.94. 

Not enough to live on these days, if you are paying rent for an apt and need to put food on the table as well as medical supplies.

Of course, if I didn't have my Nortel (30% reduced pension) as well, I would qualify for GIS because my yearly income from the two gov't pensions would beonly $12,911.

What I also didn't include is the GST rebate ($103 every 3 months) and the OTB (Ontario Trillium Benefit) $68.42 per month.
While this may sound like I'm rolling in dough, I have to pay for my own homecare out of my pocket (disabled in a wheelchair) and even
'at 2hrs per day x 2 days per week (8 days per month), that uses up the CPP benefit I am receiving.



> Why so much focus on middle class. Is this to say that we don't want the middle class to suffer a large drop in income when they retire, but those *making less than $50k are considered poor anyway* and should expect to remain that way into retirement? _"Those who aren't saving enough are the same people the federal Liberals want to help financially: Middle income earners. Research suggest those earning between $55,000 and $75,000 -- some studies put the upper limit above $100,000 -- are not saving enough for retirement, or don't have an adequate workplace pension."_



Interesting discussion. Those earning up to $100k, should be saving a lot more for retirement, because if they reach retirement age
and still have their health, they won't have much money to enjoy their retirement (travel, golf course etc). However, those that
retire early or have to retire due to health reasons before age 65, will have a rude wakeup call in retirement, once they
find the health care system is not what it is cut out to be and supplemental health care can use a BIG CHUNk of your retirement income.


----------



## carverman (Nov 8, 2010)

OnlyMyOpinion said:


> I still find this graphic summary of retirement scenarios from an older Jonathan Cheveau article interesting:
> 
> View attachment 10593
> 
> ...


I'm wondering how they came up with $33K for Case 2; (Middle Income). 
They don't seem to give you the maximum payout regardless of your situation. 

Maybe a couple combined gov't pension payout might get close to that, but for a single person living off government pensions in retirement, that number is skewed. 

You would be lucky to get HALF of the $33K in maximum pension payouts.


----------



## Eclectic12 (Oct 20, 2010)

sags said:


> ... From other studies we learn that 1/3 of Canadians are retiring with less than $1000 in total retirement savings.


Can you provide some links for these studies?

The CBC link disagrees as it quotes the Broadbent Institute as saying "It found that one third of Canadians *who do not have an employer pension* turn 65 with only $1,000 in retirement savings."

The 2013 numbers from Stats Canada put the fifteen year decline in percentage decline of RPP coverage at just under 3%. 


Cheers


----------



## sags (May 15, 2010)

carverman said:


> I'm wondering how they came up with $33K for Case 2; (Middle Income).
> They don't seem to give you the maximum payout regardless of your situation.
> 
> Maybe a couple combined gov't pension payout might get close to that, but for a single person living off government pensions in retirement, that number is skewed.
> ...


A lot of these reports seem to assume that people will receive the maximum CPP and OAS.

There are a lot of people who won't because you have to contribute the maximum number of years at the maximum rate and collect at age 65 to collect maximum CPP and you have to live in Canada for 40 years after the age of 18 to collect the maximum OAS benefit.

As far as I know...............the GIS supplement isn't an automatic top up to $1500 a month. It is a calculation they use and the person may end up with less. OAS + GIS would be well below $1500 as I understand it.


----------



## sags (May 15, 2010)

Eclectic12 said:


> Can you provide some links for these studies?
> 
> The CBC link disagrees as it quotes the Broadbent Institute as saying "It found that one third of Canadians *who do not have an employer pension* turn 65 with only $1,000 in retirement savings."
> 
> ...


Ah yes, an important distinction that I missed.............._those who do not have an employer pension_............thanks for pointing that out.

It should be noted that not all RPP plans are created equal though. Some are good but many are totally useless and will never provide enough savings to retire.


----------



## sags (May 15, 2010)

The more studies that come out and the more discussion there is around CPP, OAS, and GIS...........and then there are survivor benefits, disability benefits, EI benefits, social welfare benefits and on and on, a guaranteed minimum benefit to everyone starts to make sense.

Everyone gets the same amount as a base income and if you want to live in poverty..............knock yourself out.

If you want a better life............get a job. If you want a better retirement..........save some money.


----------



## sags (May 15, 2010)

It is good for Canadians that Finance Minister Morneau is a pension expert and can wade through it all.


----------



## carverman (Nov 8, 2010)

sags said:


> It is good for Canadians that Finance Minister Morneau is a pension expert and can wade through it all.


Bill Morneau sits on the pension boards and is CEO of Morneau (Sobeco) Sheppell.
Morneau-Sheppell is currently responsible for administrating the Nortel pension and the pension windup in process.
So far as a Nortel pensioner, I have not seen any significant strides to complete this process.



> As executive chair of Morneau Shepell, the largest Canadian human resources services organization with offices across North America, Morneau led the firm through a period of growth from approximately 200 employees in 1992 to almost 4000 in 2015. Under his leadership the firm has gone through several significant changes, including the acquisition of Sobeco from Ernst & Young in 1997


Whether he can lead the M-S team to a successful conclusion of the Nortel DB pension deficiency, and still come up an action plan to expand the CPP, remains to be seen.

The CPP pension reform/Expansion is not a trivial undertaking. To increase any CPP benefits in the future would require a big change to the contributions of employer-employee, something that has to be co-ordinated with Wynne and her finance minister who are still thinking of implementing the ORPP pension plan.

Nobody wants more CPP pension plan deductions from their current paycheck and certainly not from two pension plan deductions. If the legislation between these two plans is not carefully co-ordinated for certain worker groups, these two plans will conflict each other.

Current proposed legislation 

*This act would ensure employers and employees across the province have the information needed to prepare for implementation, with enrolment starting in January 2017, and the collection of contributions phased in, starting on January 1, 2018*.




> Workers between *18 - 70 years old*: By 2020, every eligible worker aged 18 to 70 in Ontario would be part of the ORPP or a comparable workplace plan. A member would be required to stop contributing when they reach 70 years of age.






> *Self-employed and non-crown federally-regulated workers: Individuals who work in industries such as banks, telecommunications, railway and air transportation would not be eligible to participate at this time, due to the current structure of federal income tax and pension rules*. The province is currently in discussions with the federal government to support the participation of federally-regulated employees and the self-employed in the ORPP.





> First Nations: On-reserve First Nations employers and their employees would have the option to opt-in to the ORPP.


----------



## Beaver101 (Nov 14, 2011)

carverman said:


> Bill Morneau sits on the pension boards and is CEO of Morneau (Sobeco) Sheppell.
> Morneau-Sheppell is currently responsible for administrating the Nortel pension and the pension windup in process.
> So far as a Nortel pensioner, I have not seen any significant strides to complete this process.
> 
> ...


 ... at the end of the day, the only people who're going to really benefit from all of this changes are the so-called well-paid "experts" whether consultants, lawyers, etc, who are spearheading, administering, advising, etc. on the schemes.


----------



## Eclectic12 (Oct 20, 2010)

sags said:


> ... It also probably isn't particularly useful to compare "investment returns" for CPP contributions to theoretical stock market returns.
> assumption that employers would match contributions ? In the mandatory CPP employer contributions represent 50% of the capital invested ...


But that is the choice, is it not?

CPP or whatever one can do with what is available to one. As employer contributions ... YMMV as those with matching employer contributions may have the same benefit.




sags said:


> ... Comparing the return on CPP contributions to the return on GICs or deferred annuities might be more useful.


For those who would stick exclusively to those products ... maybe. Others with a broader diversification may not be seeing such low numbers.


Cheers


----------



## Eclectic12 (Oct 20, 2010)

sags said:


> XIU has done well considering.............but then the question often asked is if dividend paying companies have become overvalued as investors piled into them ...


Lots of talk along this line but little recognition that with 75% or better of the market paying dividends ... the more useful question is whether the *market* is over valued.
Worrying about dividend paying companies locks one out of whole sectors of the economy, with whatever implications that has.




sags said:


> ... This is the nutshell of that part of the CPP expansion argument though.
> Higher contributions for a guaranteed higher payout versus a possible better outcome investing in equities or other assets.


Hmmm ... the way the blanket claims of how little is being put aside for retirement are being spread around - it seems more of an argument that the gov't will have to pay for it anyway so granting access to more capital may result in less future shortfalls.

Whether the market or particular assets are over-valued is not part of the expansion question AFAICT.


After all, CPP depends on similar assets so if the market is truly over-valued to the point the managers ignore it ... CPP is going to have the same problems as the individual who is over exposed/does not react.


Cheers


----------



## Eclectic12 (Oct 20, 2010)

sags said:


> ... It should be noted that not all RPP plans are created equal though. Some are good but many are totally useless and will never provide enough savings to retire.


The question is why such an arbitrary, low value number is being throw about. 

Most RPP's I am aware of would smash through that in short order. Never mind that every province and territory has a median RRSP contribution of 2.4 to 4.2 times this number, for a *single* year's contribution. 

Never mind what changes the TFSA has made to what people are doing with their money.


Cheers


----------



## carverman (Nov 8, 2010)

Beaver101 said:


> ... at the end of the day, the only people who're going to really benefit from all of this changes are the so-called well-paid "experts" whether consultants, lawyers, etc, who are spearheading, administering, advising, etc. on the schemes.


The experts and those that have other investments will be ok in the future. 

It's the rank and file of workers out there (most of now part time and do not get any appreciable benefits). 
The ones that are really going to be affected in the increase in premiums are the low wage workers and part timers.
If they have to pay CPP and the ORPP in Ontario, as well as EI and any income tax deduction..it may not be very beneficial to them to keep working.

<name removed> Certified Financial Planner with Investors Group in London, Ontario, says any 
Canadian *over the age of 18 who makes at least $3,500 a year must pay premiums to the the CPP* “There are a few exceptions, but such situations are rare.” Self-employed individuals pay both employer's and employee's share of the premiums. *Premiums continue until you reach 70, as long as you are still working.* 



> If you continue to work past age 70, you no longer pay CPP premiums. If you take your CPP benefits at 65 and continue to work, you don't have to pay the premium, although you can elect to continue making CPP contributions, and these premiums will increase your post-retirement CPP benefits. *Those who opt to take CPP retirement benefits before age 65, while continuing to work, are required to continue paying *


With the cost of living increasing every year and the low dollar making any imported goods (such as fruits and vegetables) more expensive, rents going up based on allowable lease increases, property taxes going up, cost of owning and driving a car going up...the combined OAS/CPP is not going to be enough by 2020, when Ontario is saying that everyone working will have to pay ORPP as it is phased in over the next 3 years starting Jan 2017. 

This is going to be a double whammy for low income earners, and still doubtful how CPP expanded benefits and OAS and ORPP (payable at age 65), will be enough to sustain most Canadians without private pension plan or RRSP investments
20 or 25 years from now. 

If they can't afford to put anything away now,they sure as heck aren't going to be putting anything away when the increase in contributions forces them to pay premiums for both the CPP and the ORPP in Ontario.


----------



## sags (May 15, 2010)

Carverman..........I think Wynne has made it clear that it will be an either/or situation. Either the CPP or the ORPP. There won't be both.

The choice seems simple enough when it doesn't get bogged down.

A forced savings plan with a matching contribution from the employer and a guaranteed payout that is indexed to inflation.....or save your own money, plus employer money if they offer it, and invest it for whatever it ends up.

As I look back on my past, forced savings provide a decent retirement. We both have DB pensions and CPP benefits today because we had no choice.


----------



## OnlyMyOpinion (Sep 1, 2013)

The intended enhancement:
_"Under the agreement, which would go into effect in 2019, contributions for a typical worker earning about $55,000 would initially increase by $7 a month and employers would match those contributions.
The plan would be phased in over seven years until 2025 and it means when people retire their maximum annual benefits would increase by about one-third to $17,478."_
Based on $17,478, a one-third increase is $5,768/yr or $481/month maximum.

Dept of Finance new release: http://www.fin.gc.ca/n16/16-081-eng.asp


----------



## andrewf (Mar 1, 2010)

carver, Morneau has resigned his positions with his old firm. It would be an obvious conflict for him to continue while serving as Finance Minister.

On the agreement reached today, it is a very modest expansion (15% increase in contributions). I would have liked something a fair bit more aggressive.


----------



## carverman (Nov 8, 2010)

sags said:


> Carverman..........I think Wynne has made it clear that it will be an either/or situation. Either the CPP or the ORPP. There won't be both.
> 
> The choice seems simple enough when it doesn't get bogged down.
> 
> ...


I fully agree Sags; I was just pointing out that Wynne and her finance minister (Sousa) should be talking to the Feds and try to get this political boondoggle straightened out, so that the working "poor" pay only ORPP or CPP, not both.

DB pensions are on the way out and most private companies (not talking GM here), or the provincial gov't workers, are saving for their retirements already. 

It's the small to medium size companies that have no company pension plan, and in some cases may not be around in the next few years due to bankruptcy, or even just folding due to the economic conditions, leaving the pension fund stranded or perhaps just payouts to the workers on what the company thinks they should get as a lump sum to invest in their own retirement investments (RRSP).

Since the OAS does not require any contributions on the part of the worker, that is a given.
When the ORPP begins officially on Jan 1, 2017, the working poor should be given a choice: ORPP or remain with CPP.

If they chose ORPP, they should have a fact sheet that tells them that the $2500 death benefit (enough for a basic funeral cremation these days) is not going to be available to them if they chose the ORPP. 

Secondly, the ORPP has to be set up like a real pension plan that will have online information on : 1) it's investment portfolios
2) administration cost 3) projected growth over the next ten years (depending on the economy of course), and 
lastly expected ORPP monthly payout for a SINGLE PERSON and Married couples within 10 years of implementation of the plan, depending on qualifying age of retirement. 60 or 65 or 70...and I doubt that too many people will want to work to 70. 

You can get that information online with CPP. 

If it were up to me, I would stick with the CPP, frankly I don't trust Wynne or her money grubbing co-horts with the Ontario deficits, such as they are these days. 

Some of us remember previous gov'ts like Rae's "tire recycling" tax ($5 per tire) that ended up in the provincial coffers and nothing was done to further recycling..hence the huge Hagersville tire mountain fire.

It's fine for those that have DC or DB pensions like Wynne ( a former pedagogue with a hefty Ontario Teachers Pension), but for the rank and file, living in tomorrows economy will be tough slugging in spite of forced savings.


----------



## carverman (Nov 8, 2010)

andrewf said:


> carver, Morneau has resigned his positions with his old firm. It would be an obvious conflict for him to continue while serving as Finance Minister.
> 
> On the agreement reached today, it is a very modest expansion (15% increase in contributions). I would have liked something a fair bit more aggressive.


Yes, I was aware of that. Just pointing out that he was CEO (before he became finance minister) of Morneau-Sobeco (Morneau-Sheppell as it is known now) which is handling the former Nortel pension fund (or what's left of it) windup plan. 

I wasn't referring to the specific increase in contributions...15% phased in over x years isn't a lot, but the employers will have to match those contributions as well, and many are already balking about that..especially with the messy implementation of the ORPP in January. 

Bad timing? or Bad planning on both the provincial and federal gov't?

Trudeau's feds, we should give them a chance as they only have been getting started in the last 6 months. 
Wynne has been talking about the ORPP for a couple years now with some expensive TV advertising.


----------



## mrPPincer (Nov 21, 2011)

Carverman the ORPP has been cancelled. It's in the news on CBC radio one this morning.


----------



## carverman (Nov 8, 2010)

OnlyMyOpinion said:


> The intended enhancement:
> _"Under the agreement, which would go into effect in 2019, contributions for a typical worker earning about $55,000 would initially increase by $7 a month and employers would match those contributions.
> The plan would be phased in over seven years until 2025 and it means when people retire their maximum annual benefits would increase by about one-third to $17,478."_
> Based on $17,478, a one-third increase is $5,768/yr or $481/month maximum.
> ...


That may be fine for a worker earning $55K, but most workers in the work force don't earn anywhere that much. Especially those that have to work for minimum wages, or a bit above that. ($10.50 an hr to $11.25 in Ontario) for a 40 hr week = $420 per week to $450 per week $21,840 to $23, 400 per year...that's less than half of the "typical worker earning $55,000 per year)..and there is income taxes on that.



> CPP enhancement starting January 1, 2019 that would:
> increase income replacement from one quarter to one third of pensionable earnings—this means that, at maturity, a* Canadian with $50,000 in constant earnings throughout their working life would receive a yearly pension benefit of around $16,000* instead of the $12,000 they would currently receive, or $4,000 more per year; and
> increase the maximum amount of income subject to CPP by 14%, which is *projected to be equal to roughly $82,700 in 2025.*


The last bit
"increase the maximum amount of income subject to CPP worker contributions by 14% ($11,578?). So this would mean
the current maximum is now around 71,000? 
$4000 more per year with the expansion is about $333 MAXIMUM per month extra on top of the current maximum:


> Basically if you make less than $53,600 of income in 2015, you will not contribute enough to CPP to qualify for a point on the 39-point system. For those of you that make more than $53,600, you will probably notice that part way through the year, your paycheques will go up a little. This happens because you have paid the maximum amount of CPP for the year and no longer have a CPP deduction.


It's all smoke and mirrors..in the end no matter how much they play with the numbers, the average worker making just
a bit over minimum wage will have a hard time in retirement in 2025.

http://retirehappy.ca/how-much-will-you-get-from-canada/


----------



## Beaver101 (Nov 14, 2011)

mrPPincer said:


> Carverman the ORPP has been cancelled. It's in the news on CBC radio one this morning.


 .... HALLELUYAH! ... Now Wynne and cronies have to justify on how to keep all those ministers she hired continued on the Sunshine List. This "ORPP" project was a nothing much ado than to waste more of taxpayers monies. Boondoggles seem to a trendy word in Wynne's cabinet.


----------



## carverman (Nov 8, 2010)

mrPPincer said:


> Carverman the ORPP has been cancelled. It's in the news on CBC radio one this morning.


Well that's a bit of positive news in these financial times. Personally, the way they were going about it could end up a disaster for the workers paying into that fund when they reached retirement age. 

It was not a well thought out plan and didn't have the support of the Federal gov't nor the financial support of the taxpayers of Canada.


----------



## carverman (Nov 8, 2010)

Beaver101 said:


> .... HALLELUYAH! ... Now Wynne and cronies have to justify on how to keep all those ministers she hired continued on the Sunshine List. This "ORPP" project was a nothing much ado than to waste more of taxpayers monies. Boondoggles seem to a trendy word in Wynne's cabinet.


Yes, yet another boondoggle, but at least this one will have a happy ending. 
Future retirees will still have their financial support from the Canadian gov't...who according to the most recent changes proposed for our national anthem..."in all of US command". 

Wynne will be history in the after the next 3 years, and we will have a lot more deficit to deal with.


----------



## Eclectic12 (Oct 20, 2010)

carverman said:


> mrPPincer said:
> 
> 
> > Carverman the ORPP has been cancelled. It's in the news on CBC radio one this morning.
> ...


From what I understand, the ORPP has been canceled in principal. 
Whether it holds true depends on what happens with the agreement to expand CPP.


Cheers


----------



## Eclectic12 (Oct 20, 2010)

sags said:


> ... As I look back on my past, forced savings provide a decent retirement. We both have DB pensions and CPP benefits today because we had no choice.


Current studies indicate that education makes almost no difference in the participation rates, despite highlighting that not participating means that workers are walking away from employer matching funds.

Just like the old days of companies automatically enrolling people for the top cable package where people have to take action to opt out, inertia means that most won't make the effort so that forced enrollment translates to more savings for retirement.




carverman said:


> I fully agree Sags; I was just pointing out that Wynne and her finance minister (Sousa) should be talking to the Feds and try to get this political boondoggle straightened out, so that the working "poor" pay only ORPP or CPP, not both.


??? ... they've been saying for quite a while that they are talking to the Feds where the situation that both would be running is where the expanded CPP was watered down too much.


With what's been agreed to, the last criteria is whether the deal sticks.


Cheers


----------



## carverman (Nov 8, 2010)

Eclectic12 said:


> With what's been agreed to, the last criteria is whether the deal sticks.


I don't think they had a serious ORPP plan in the first place...




> Ontario’s Liberal government wants the Canada Revenue Agency to help administer the plan — slated to start in January 2017 — helping to keep costs down and provide for higher returns.
> 
> The province has said it will set up its own administrative system if necessary, although Premier Kathleen Wynne — who campaigned on the plan in the provincial election last year — would prefer to avoid duplication or have the federal government enhance the Canada Pension Plan to boost retirement incomes instead.
> 
> Sousa said the CPP, which provides payments averaging $6,900 a year, isn’t enough to provide for Ontarians in their retirement years unless they have decent pension plans at work — which 65 per cent don’t.


https://www.thestar.com/news/canada...efusing-to-help-run-ontario-pension-plan.html


----------



## ian (Jun 18, 2016)

Good. This change is really directed at those who will retire in 20-30 years. I believe that it is the right path to follow. We may not have a retirement crisis in the short term but we will in the long term given the current trends.


----------



## olivaw (Nov 21, 2010)

*Canada Pension Plan deal with provinces faster, easier than expected*



> *Deal that once seemed unlikely now expected to be finalized by July 15
> *
> 
> In two and a half years, Canadians will gradually start paying more premiums into the Canada Pension Plan.
> ...


----------



## Ag Driver (Dec 13, 2012)

What is the annualized ROI for the CPP fund since inception? I can't seem to find anything but current, 5, and 10 year numbers.


----------



## andrewf (Mar 1, 2010)

^ Would that number be meaningful? CPP has changed a lot since its inception. When it was started, it was not mandated to earn a high rate of return on its investments... it essentially loaned cheap money to the provinces.


----------



## Woz (Sep 5, 2013)

Ag Driver said:


> What is the annualized ROI for the CPP fund since inception? I can't seem to find anything but current, 5, and 10 year numbers.


Table 10 here has returns going back further: http://www.osfi-bsif.gc.ca/eng/oca-bac/ar-ra/cpp-rpc/pages/cpp26.aspx#Toc-tbl10

My quick math has the time-weighted rate of return between 1980 and 2012 as 8.6%. As noted in that report though, prior to 2001 CPP assets were traditionally limited to short-term investments and 20-year non marketable bonds in the form of loans to provinces.


----------



## sags (May 15, 2010)

Ontario Premier Wynne is taking some credit for pushing the CPP expansion to the top of the government's agenda, so I think Ontario is basically done with their own ORPP.

Unless as mentioned, the changes fail to meet the requirements for approval, which could put the ORPP back on the table.

I can't see that happening though. All the Provinces except Quebec and Manitoba have signed the agreement. Neither said they were opposed in theory, but wanted more time (Manitoba) or had other plans (Quebec).

At a time when the Federal government has plans to spread around tens of billions on infrastructure to the Provinces, it might not be a wise political decision to defeat the agreement and embarrass the Federal government.


----------



## Ag Driver (Dec 13, 2012)

andrewf said:


> ^ Would that number be meaningful? CPP has changed a lot since its inception. When it was started, it was not mandated to earn a high rate of return on its investments... it essentially loaned cheap money to the provinces.


I think it is meaningful. If they're going to take my money, invest it for me due to the fact that they deem that I am incompetent with my savings towards retirement -- then proceed to return it to me 47 years later at a rate of $500 to $1000 a month .... the CPP fund better perform substancially better then my portfolio!


----------



## carverman (Nov 8, 2010)

Ag Driver said:


> I think it is meaningful. If they're going to take my money, invest it for me due to the fact that they deem that I am incompetent with my savings towards retirement -- then proceed to return it to me 47 years later at a rate of $500 to $1000 a month .... the CPP fund better perform substantially better then my portfolio!


Even if it does perform better, you are not going to get that much more from your contributions over your working years. You get what they give you,
14% more than you would be getting now, depending on when you decided to draw it.

The gov't would prefer that you keep working to age 70 and pay CPP premiums and draw your OAS at age 70 too.


----------



## GoldStone (Mar 6, 2011)

To: Generation X, Generation Y and Millennials

From: The Baby Boomers

Re: Pension Savings 

Date: June 21, 2016

*Canada Pension Plan Memo*


----------



## GoldStone (Mar 6, 2011)

https://twitter.com/stephenfgordon/status/745397992451096576

If Wynne wants to take credit for CPP reform, well she can: "We were going to do something so stupid that everyone felt obliged to stop us".


----------



## andrewf (Mar 1, 2010)

From that link:



> Found the 'pre-pay' provision introduced in 1990s. 113.1(4)(d) of CPP Act
> http://laws-lois.justice.gc.ca/eng/acts/C-8/page-32.html#h-66
> 
> "(d) that changes to the Act that increase benefits or add new benefits must be accompanied by a permanent increase in the contribution rates to cover the extra costs of the increased or new benefits and by a temporary increase in the contribution rates for a number of years that is consistent with common actuarial practice to fully pay any unfunded liability resulting from the increased or new benefits."
> ...


----------



## GoldStone (Mar 6, 2011)

andrewf said:


> Found the 'pre-pay' provision introduced in 1990s. 113.1(4)(d) of CPP Act
> http://laws-lois.justice.gc.ca/eng/a...e-32.html#h-66
> 
> "(d) that changes to the Act that increase benefits or add new benefits must be accompanied by a permanent increase in the contribution rates to cover the extra costs of the increased or new benefits and by a temporary increase in the contribution rates for a number of years that is consistent with common actuarial practice to fully pay any unfunded liability resulting from the increased or new benefits."


I don't see how this verbiage precludes inter-generational transfers.


----------



## GoldStone (Mar 6, 2011)

*Jack Mintz: How the CPP expansion is a huge climb-down for Ontario’s Liberal government*



> Overall, this CPP expansion is teeny, neither much helping nor hurting Canadians.
> 
> ...
> 
> The real payoff is putting an end to the ORPP and ending this interminable discussion of CPP reform for now, without creating serious harm.


Amen.


----------



## sags (May 15, 2010)

The oldest baby boomers are now 70 (1946) and the youngest are 52 (1964).

According to Jack Mintz...........

_Current seniors or those close to retirement gain nothing, since they will neither pay contributions to the expanded CPP nor receive additional benefits._

A lot of baby boomers are already retired and the younger group will be 55 before the enhanced contributions even start.

How is this a transfer of wealth to the baby boomers ?

It seems more likely that the transfer of wealth will be a $300 Billion CPP fund from the baby boomers to future generations.


----------



## GoldStone (Mar 6, 2011)

sags said:


> A lot of baby boomers are already retired and the younger group will be 55 before the enhanced contributions even start.
> 
> How is this a transfer of wealth to the baby boomers ?


We don't have the details yet, but here's one possible scenario:

* Contribute at the new rate from 55 to 65 (10 years)
* Collect enhanced benefits for life (another 20-30 years)

Sweet deal, no?


----------



## GoldStone (Mar 6, 2011)

andrewf said:


> From that link:
> 
> 
> 
> ...


From the same link, blog author responds:

[Paragraph (d)] seems to say that any increases must be fully funded. However it doesn't say *who* is doing that funding. Fully funded is totally compatible with 35 to 45 year olds picking up part of the tab for 55 to 64 year olds.


----------



## sags (May 15, 2010)

GoldStone said:


> We don't have the details yet, but here's one possible scenario:
> 
> * Contribute at the new rate from 55 to 65 (10 years)
> * Collect enhanced benefits for life (another 20-30 years)
> ...


It would be a sweet deal but I doubt that is how it will be set up. If it is set up that way, people will delay retirement until they qualify for the higher benefits.

CPP benefits are calculated on an individual basis, so I would think the benefits would only reflect the length of time at the higher contribution rate.

For example.........25 years at the old rate and 10 years at the new rate.

We shall see what the final legislation reveals.


----------



## carverman (Nov 8, 2010)

GoldStone said:


> To: Generation X, Generation Y and Millennials
> 
> From: The Baby Boomers
> 
> ...





> It has come to our attention that you are not saving sufficiently for your retirement. This does not surprise us. We haven't saved sufficiently for our retirement either. Some of us have made enough money in the housing market to be relatively comfortable, and a good number of us have workplace pensions. Low-income Baby Boomers will be protected by Old Age Security, Guaranteed Income Supplement and the Canada Pension Plan. But middle-income Baby Boomers without workplace pensions - people making $60,000 or $80,000 a year - are facing a big drop of their standard of living upon retirement.
> 
> So we've decided to reform the Canada Pension Plan. You have to understand: we are doing this for you. It's for your benefit, so that you will have a secure retirement. Now we know you might be a little bit sceptical.


Good one...at least there are people out there with a sense of humour on a very serious subject....survival in your "golden years'..or NOT!
-------------------------------------------------------------------------------------------------------------------------------
I take poetic license..or is that an editor's license? to change a few words in the above statement for a better understanding of reality, as it will be in your retirement future.:biggrin:

Dear Baby Boomers, Gen X and Y, and all you Millennials out there expecting government handouts when you are too old to work and support yourselves and the gov't. 

It has come to our attention that you are not saving sufficiently for your retirement. This does not surprise us. We haven't saved sufficiently for our retirement while spending on things like there is no tomorrow. Now, some of us (you in Toronto and Vancouver) have made enough money in the housing market to be relatively comfortable by flipping houses in an overheated housing economy, so you don't need to apply for any gov't pensions,
as we will be asking how much profit you made in the last 10 years before your application.

A good number of you have workplace pensions, defined benefits and teachers lucrative pensions, you don't need gov't pension assistance either. Even if you do manage to qualify, we will claw it all back..after all the role of the gov't is to redistribute income. If you have too much of it, then you should share.

Now, you Low-income Baby Boomers who will be protected by Old Age Security, Guaranteed Income Supplement and the Canada Pension Plan. Quit whining that we the gov't doesn't give you enough to live on. 
Start reducing your expenditures such as cable tv and cell phone monthly contracts, sell or ditch that money pit car you have, cut up your credit cards and spend only what cash you have in your bank account for life essentials. 
Oh yes, remember to save a bit each month too in a TFSA..it's tax free after all. 

In conclusion, once you get used to living on the edge of what you call poverty, you will actually prefer to live that way unencumbered by all the debt that others have.

Ok, now you middle-income Baby Boomers without workplace pensions - people making $60,000 or $80,000 a year - facing a big drop of their standard of living upon retirement......
What the H** is the matter with you people? Can't you run a monthly budget and live within that budget. Expect a huge drop in income when you retire, as we the gov't, are not going to support you in the style you've been used to while earning this kind of income.

We suggest that you squirrel away at least 40% of your after tax income in your TFSA and RRSPs and live on what's left. 
You can do it, just stop spending using credit...and get over your head and declare bankruptcy..spoiled grown children!


So we've decided to reform the Canada Pension Plan. You have to understand: we are doing this for you. It's for your benefit, so that you will have a secure retirement. Now we know you might be a little bit sceptical about our motives, but frankly we need to do something because
spending is out of control and for some reason you expect the gravy train to continue after you retire and leave it up to the
gov't to support you in the life style you are used to? Not a chance!

You will get what you deserve and not a penny (or is that a nickel now?) more!
And remember your governments motto: "Waste not-Want not"...that is what you should expect in your retirement 25 to 40 years from now.


----------



## carverman (Nov 8, 2010)

GoldStone said:


> We don't have the details yet, but here's one possible scenario:
> 
> * Contribute at the new rate from 55 to 65 (10 years)
> * Collect enhanced benefits for life (another 20-30 years)
> ...


Hmm, doesn't that mean that for most, that manage to live beyond age 70, it's another 20 to 30 years of collecting
more than what you've paid into the plan in CPP deductions.
With all the baby boomers now in retirement or entering retirement..that's huge cash drain on the CPP and OAS.

While this current CPP reform may be sufficient for the time being, within 10 years, there will be a need for further changes...employers and workers will
have to pay MORE to support the ones drawing these benefits to age 80 and a few years beyond.


----------



## carverman (Nov 8, 2010)

GoldStone said:


> From the same link, blog author responds:
> 
> [Paragraph (d)] seems to say that any increases must be fully funded. However it doesn't say *who* is doing that funding. Fully funded is totally compatible with 35 to 45 year olds picking up part of the tab for 55 to 64 year olds.


The working pay for the retired ones collectiing...but who is going to pay for the 35 to 45 year olds in 20 years time, when it becomes their turn to collect
when the changing job markets will affect the next generation RFTs to pay these premiums?


----------



## ian (Jun 18, 2016)

The big winner is in Federal Government. CPP is included in the civil service DB plan. A higher CPP component translates into a lower DB component of the total civil service pension entitlement number. Same for Provincial plans that comprehend/include CPP in their entitlement calculations. Enhanced CPP should also reduce GIS payments down the line.

Given the schedule, I cannot see the revised CPP having much of an impact on anyone in their early/late fifties. There will be no free lunch. This is for the future generations. It is far too late in the day for those about to retire and have failed to plan/save. This change, IMHO, was long overdue.


----------



## sags (May 15, 2010)

Garth Turner described the real effect of the CPP expansion on most people's retirements.

_A good start would be to do the opposite of the plan the feds and provs came up with Monday night. As you may have heard, the CPP’s just been diddled. Starting in 18 months, everyone will pay more in premiums for benefits that do not fully increase for almost a decade. The average monthly surcharge will be about $35 and the maximum pension benefit will increase $330 a month. Of course, most people don’t collect the full amount, but only 60% of it. The max the public plan will pay is $14,000 a year, starting in 2025. The average payout will be about $9,800, or $815 a month.

Why is this a largely useless exercise?

Well, business hates it. Employers must match every dollar an employee puts into the CPP and receive no benefit for doing so. With a torpid economy, groups like the Canadian Chamber of Commerce say this extra grab sucks. Additionally, contributions now stop after an employee earns more than $54,000, but that ceiling is jumping all the way to $83,000. Says the Canadian Federation of Independent Business: “This is a devastating move for Canadian workers and the economy in general.”

But the real Achilles heel comes with this statement from our finance minister, Bill Morneau: “We have come to a conclusion that we are going to improve the retirement security of Canadians, we’re going to improve the Canada Pension Plan that will make a real difference in future Canadians’ situations.” What a load.

The max CPP now is $13,110 a year, but the average person has been collecting just $7,128. With the changes “that will make a real difference in future Canadians’ situation” the max will be almost $17,000, and the average $9,730. That’s $810 a month. Add in the OAS (at age 65) of $570, and the average annual pogey income becomes $16,560 (although it’s a safe bet the Old Age payment will be a bit higher in nine years).

So by saying this will “improve the retirement security of Canadians,” Bill and his provincial buds (all with defined benefit public pensions) are sending out a false message. Thirteen hundred bucks a month ain’t enough to retire on unless you’re a Chia Pet. This isn’t security. And don’t pretend the extra makes “a real difference” to anyone except (maybe) the destitute.

_

www.greaterfool.ca

If people still want to retire comfortably, they best find a job that provides a pension or save their own money. The CPP and OAS will still not be nearly enough on their own.


----------



## sags (May 15, 2010)

ian said:


> The big winner is in Federal Government. CPP is included in the civil service DB plan. A higher CPP component translates into a lower DB component of the total civil service pension entitlement number. Same for Provincial plans that comprehend/include CPP in their entitlement calculations. Enhanced CPP should also reduce GIS payments down the line.
> 
> Given the schedule, I cannot see the revised CPP having much of an impact on anyone in their early/late fifties. There will be no free lunch. This is for the future generations. It is far too late in the day for those about to retire and have failed to plan/save. This change, IMHO, was long overdue.


Good points. 

The increase is a small transfer of retirement income responsibility from the government to employers/employees. 

It is a start and not nearly enough, but given the politics it is probably the best they could hope for.


----------



## OnlyMyOpinion (Sep 1, 2013)

The 'three-legged' retirement stool is an oft used analogy where our retirement income is supposed to consist of gov't pension, company pension and personal savings. 
The gov't has merely tweaked their 'leg' to ensure CPP continues to provide about 1/3 of the recommended retirement income of younger, longer living Canadians. I think this was a responsible thing to do and much preferable to a patch work of provincial plans. At least it provides some social safety net (with a rather large mesh size). 
Challenges that might exist with the other two legs remain unaddressed, namely company pension contributions (whether DB, DC, or RRSP matching) and personal retirement savings rates.
It is a concern if the CPP changes lead people to believe that the gov't has 'fixed' the problem and they go through their working lives thinking their retirement has been looked after by these changes.


----------



## Jaberwock (Aug 22, 2012)

Those of us who live in Ontario should be thankful that the proposed ORPP will be cancelled, and Wynne-bag and her liberal cronies won't be getting their thieving hands on our pensions.


----------



## ian (Jun 18, 2016)

I get really tired of hearing people moan about not having enough savings to retire-especially those 10, 5, or less years away. I have heard this sad song from high income earners and from low income earners. 

They all seem to have a few things in common. The first is that they cannot or refuse to discern needs from wants-a lifelong state of self delusion. Second, they spend more than they make. Third, they save hardly a dime, if anything at all, for retirement. Fourth , they seem to have no issue in embracing debt/monthly payments-most especially consumer debt. It is no wonder their financial situation does not look good in the retirement years. 

Instead of blaming others they really need to take a hard look in the mirror and start exercising just a little more common sense. The blame game does not hold any water.



The revised CPP plan is a good thing but it will not solve the basic challenge that more and more people seem to have.


----------



## sags (May 15, 2010)

It also doesn't help that those who try to save end up paying ridiculous management fees that siphon off most of the savings.

My son's company started a mandatory pension fund. It was mandatory because they pay 1% and they gave employees a 1% raise to cover their contribution.............so free money to them.

Problem is that the company did what many companies do. They got hold of an insurance company who set it all up with choices of mutual funds that hold a basket of mutual funds......which probably hold more mutual funds.

At the end of the day, the total cumulative fees are hidden in the structure and it is likely that unless the mutual fund returns 2% or more a year, their contributions will go to pay the fees.


----------



## ian (Jun 18, 2016)

That is unfortunate. We had an employer fund offered and managed by Sun Life. Several investment choices...some of them with less than one percent management fees. I guess it depends on the employer. 

My guess is that there will be lots of employee/employer litigation on this in the future. I have read that some employers have off loaded pension admin costs that are legitimately theirs by selecting fund mangers with higher fees who in turn rebate part of those fees to the employer. The employer uses the rebates to offset their expenses.


----------



## sags (May 15, 2010)

My son's fund shows less than 1% fees, but I suspect that only represents the fee to manage the overall mutual fund. I suspect that every mutual fund they have within the fund also charges fees that are discounted from the returns and remain hidden.......so the cumulative amount of fees is much higher than less than 1%.

And of course, the fees are paid if the fund earns a return or loses 30%.

Maybe somebody who knows the situation better can chime in with the usual level of fees in these types of mutual funds.


----------



## Eclectic12 (Oct 20, 2010)

OnlyMyOpinion said:


> ... Challenges that might exist with the other two legs remain unaddressed, namely company pension contributions (whether DB, DC, or RRSP matching) and personal retirement savings rates.
> 
> It is a concern if the CPP changes lead people to believe that the gov't has 'fixed' the problem and they go through their working lives thinking their retirement has been looked after by these changes.


True ... but then again, knowing how many of my co-workers who go out of their way to avoid retirement savings until a late interest about five years years they had hoped to retire, I'm not sure that the situation is going to be any worse.

AFAICT ... it would only be deteriorating if people who had planned to save decide not to, based on the CPP changes. 




ian said:


> I get really tired of hearing people moan about not having enough savings to retire-especially those 10, 5, or less years away. I have heard this sad song from high income earners and from low income earners ...
> Instead of blaming others they really need to take a hard look in the mirror and start exercising just a little more common sense. The blame game does not hold any water.
> 
> The revised CPP plan is a good thing but it will not solve the basic challenge that more and more people seem to have.


Agreed ... though until something changes people's priorities & willingness to look at retirement far earlier than most do - it will remain an issue.

For my dad, the motivating moment was noticing how many of the "retired" people were picking up work on a fill-in basis. As he noticed this relatively young (plus was not sold on having the latest/best junk), the time frame to deal with it gave him a lot of flexibility.




ian said:


> That is unfortunate. We had an employer fund offered and managed by Sun Life. Several investment choices...some of them with less than one percent management fees. I guess it depends on the employer.


I don't think guessing is required. One of my previous employer's DC pensions was four funds total, with 2.5% or higher MERs. 

Fortunately, with DC plans becoming more common - the posts here on CMF seem to be showing the cheaper, particularly index based funds are far more available. The question is whether the employer asks enough questions or takes the first plan the financial institution offers.





ian said:


> My guess is that there will be lots of employee/employer litigation on this in the future ...


Without some sort of monkey business behind the scenes, I don't see how this would get very far. Not to mention that the people here on CMF are paying attention to costs while most aren't looking at their reports, let alone able to identify that cheaper choices are out there.

Most I suspect would also be hesitant to push their employer too much about it either.



Cheers


----------



## Eclectic12 (Oct 20, 2010)

sags said:


> My son's fund shows less than 1% fees, but I suspect that only represents the fee to manage the overall mutual fund. I suspect that every mutual fund they have within the fund also charges fees that are discounted from the returns and remain hidden.......so the cumulative amount of fees is much higher than less than 1%.


None of the plans I've had access to the details for have done this. As I understand it, the MFs would need to be Deferred Sales Charge or Front End Load MFs which I don't recall anyone saying they had in a DC or Group RRSP plan from work.




sags said:


> ... Maybe somebody who knows the situation better can chime in with the usual level of fees in these types of mutual funds.


The plans I had access to were 2.5% to 2.8% MER No Load equity funds.

MorningStar's 2009 study put fixed income MFs between 1.25% to 1.49% MER while Canadian equity funds were between 2.00% and 2.50% for No Load funds. Front End Load funds were 5% while the Deferred Sales Charge started at 5% but would drop to 0%, after year seven.

A 2014 article comparing 2009 MERs for twelve widely held MFs with 2014 MERs found most MFs increased their MER a token amount (0.1%) to recoup some of the HST. This had been added, after 2009 to MF costs. A few went down but most went up a bit.


Cheers


----------



## andrewf (Mar 1, 2010)

Jaberwock said:


> Those of us who live in Ontario should be thankful that the proposed ORPP will be cancelled, and Wynne-bag and her liberal cronies won't be getting their thieving hands on our pensions.


I am much happier with CPP expansion than ORPP, which I think was at much higher risk of being invested dubiously. Control of CPPIB is sufficiently diffuse (between feds and provincial governments) that the risk of politics influencing investment decisions is low.


----------



## sags (May 15, 2010)

Eclectic12

If I or you collected a basket of mutual funds, I assume each of the funds would have hidden charges deducted from the announced returns.

I am assuming the life insurance company mutual fund that gathers all these mutual funds, also charges a fee for doing so and that is likely the 0.5% fee that they post.

I have read articles about mutual fees that are hidden and piled on top of each other. I have read that mutual fund fees can consume more than 50% of the total return of the investments over time.

In any event.......even at 2-3 % the fees would be consuming all of the employer/employee contributions

I think the expansion of the CPP will benefit people like my son who aren't interested in investing.


----------



## Spudd (Oct 11, 2011)

sags said:


> Eclectic12
> 
> If I or you collected a basket of mutual funds, I assume each of the funds would have hidden charges deducted from the announced returns.
> 
> ...


Actually, the performance reported by mutual funds needs to include the effect of the fees (i.e. if they say 10%, and they had a 2% fee, then their real returns were 12%). http://funds.rbcgam.com/_assets-custom/pdf/cost-of-mf-investing_e.pdf

Your son's plan would need to provide a breakdown of fees, and he should be able to tell if there's an extra management fee on top of the MF MER fees. Usually there isn't, for these types of plans.


----------



## Eclectic12 (Oct 20, 2010)

sags said:


> ... If I or you collected a basket of mutual funds, I assume each of the funds would have hidden charges deducted from the announced returns.


The articles I have read say that the trailer fees are built into the MER.

So yes, where one wants to understand how much one's advisor is being paid for recommending a particular fund - it is murky but as long as it is included in the MER, one at least can tell what is being charged as a total.

The company sponsored plans have had a canned set of portfolios given as samples, where the individual can choose the percentages. I am doubting the financial institution that was contracted with is paying trailer fees to one particular person. Maybe someone who has seen the other side can comment.




sags said:


> ... I am assuming the life insurance company mutual fund that gathers all these mutual funds, also charges a fee for doing so ...


I don't believe that would be charged against the fund but charged to the employer who has contracted to provide the plan to the employees.




sags said:


> ... In any event.......even at 2-3 % the fees would be consuming all of the employer/employee contributions ...


Are you equating what you are seeing as a 2% fee expense with 2% of salary?
(As I say, I doubt from what you have written, you son's plan is at 2% but we'll go with that)

Say the employee is making $10K, the first year - 1% between employer and employee works out to $100 each or $200 put into the plan. At 2%, the MER works out to $4. If the investment stays under water for a long time, then yes it could be eaten up ... after a long time.

In the meantime, next year's contribution (assuming the market is down with no changes) is going to buy at a cheaper price.


I suspect there would need to be a long period where it is down to eat it all up. 




sags said:


> ... I think the expansion of the CPP will benefit people like my son who aren't interested in investing.


I think it will as well ... though where the company gave a raise to cover the pension contributions and the company matches, I'm not so sure the expanded CPP will end up as good in the long term, for those with a long time horizon.

Unless you've heard that your son's company has volunteered to give out raises equal to the CPP employee contributions?


Cheers


----------



## Eclectic12 (Oct 20, 2010)

Spudd said:


> ... Your son's plan would need to provide a breakdown of fees, and he should be able to tell if there's an extra management fee on top of the MF MER fees.


I thought I'd read somewhere that the rules changed so that the MER had to include operational, tax, trailer commission and management expenses.

That leaves the program fee, which as I understand it - is picked up by the employer. I believe they get to write this off as an expense.
So the only other expense would be if a FL or DSC MF group was chosen. Usually though, posts about these types are from individuals so it wouldn't surprise me if all of the employer sponsored plan were the NL variety. Certainly the ones offered as either a DC plan or a Group RRSP have all be NL.


Cheers


----------



## GoldStone (Mar 6, 2011)

*CPP management is bloated, expensive and unaccountable*

Quote:

In pursuit of higher returns, the fund has plunged into an increasingly esoteric, and risky, range of private investments, from shopping malls to drug patents to toll roads. Offices have been opened not only in London and New York, but Hong Kong, Luxembourg, Sao Paolo and Mumbai.

The results of this experiment are clear, at least to anyone who wades through the board’s opaque, ever-lengthening annual reports. The number of employees, from just five at the fund’s inception in 1999, has grown to roughly 1,200. Where total compensation for the CPPIB’s founding president, John McNaughton, was limited to just over $300,000, [recently departed CEO] Mark Wiseman pulled in 12 times as much last year. Indeed, the fund’s top five executives received an average of more than $3.4 million apiece.

Overall, operating costs have risen from $3 million in 2000 to $54 million in 2006 to $803 million in 2015. The growth in external management fees has been even more explosive: from $36 million in 2006 to $1.25 billion in 2015. Throw in commissions and transactions, and total costs added up to more than $2.3 billion in 2015. *It would not be surprising to find they exceeded $3 billion in the year just ended, or roughly one per cent of the fund’s assets.* By comparison, the management expense ratio on a large, passively-managed exchange-traded fund (ETF) can be less than 0.1 per cent.


----------



## mordko (Jan 23, 2016)

Excellent. So not only will everyone get large pensions, but CPP will also solve Canada's unemployment problem. And with such superb salaries and benefits CPP employees must be paying a lot of tax, so it will solve our debt problem as well. It's a win-win-win.


----------



## Spudd (Oct 11, 2011)

Eclectic12 said:


> I thought I'd read somewhere that the rules changed so that the MER had to include operational, tax, trailer commission and management expenses.
> 
> That leaves the program fee, which as I understand it - is picked up by the employer. I believe they get to write this off as an expense.
> So the only other expense would be if a FL or DSC MF group was chosen. Usually though, posts about these types are from individuals so it wouldn't surprise me if all of the employer sponsored plan were the NL variety. Certainly the ones offered as either a DC plan or a Group RRSP have all be NL.


As an example a friend of mine told me they had to pay $24 a year as an admin fee for their company pension plan. So something like that may be a fee they need to pay. I don't think there are any hard and fast rules.


----------



## Eclectic12 (Oct 20, 2010)

Weird they would forgo being able to write such a small fee off ... or was this a Group RRSP, which is not eligible for writing off the fees?

Where it is a pension ... that's the first annual fee I've heard of being charged to the employee.


Cheers


----------



## Spudd (Oct 11, 2011)

It's possible it was an RRSP, I'm not totally sure. Seems more reasonable, doesn't it.


----------



## londoncalling (Sep 17, 2011)

Retirees: CPP Payments Went up in 2022 (msn.com)

I think it is important to note the difference between the max payout versus the average payout to retirees. It is best to determine your personal payout as part of your retirement planning. Those interested in FIRE often miss this part of the equation. Others also forget that years spent in postsecondary often result in less years of max contribution,


----------



## sags (May 15, 2010)

The CPP is a beauty.......









The Fund | CPP Investments


ShareTweetShare




www.cppinvestments.com


----------



## andrewf (Mar 1, 2010)

Given how well CPPIB seems to be doing, I wonder if it might not make sense for the federal government to borrow a significant amount of money to have CPPIB manage as an endowment. Already CPPIB assets are getting close to where the federal debt would have been without COVID.

I think it is actually sensible for countries like Canada with stable financial systems to leverage the low cost of capital to make investments in the global economy, like Norway has done with its oil and gas natural resources. As long as those investments are largely unpolitical and largely international I don't see too much in the way of downsides.


----------



## james4beach (Nov 15, 2012)

andrewf said:


> Given how well CPPIB seems to be doing, I wonder if it might not make sense for the federal government to borrow a significant amount of money to have CPPIB manage as an endowment. Already CPPIB assets are getting close to where the federal debt would have been without COVID.


Are you talking about leverage? For example borrow for 20 years at perhaps 2.2% and invest that in the CPP portfolio?

~~ Checking performance ~~

Their 10 year return was 10.8% CAGR at 2021-03-31 with an allocation of roughly 80/20. Doing an estimate of a low fee global couch potato ETF approach, I calculate 9% CAGR. If I've interpreted their asset allocation correctly, the CPP's 10 year performance is impressive.

It's also worth pointing out that if you look at a longer term back-test of a similar global asset allocation to the CPP's, the current trailing return is likely on the top end of historical possibilities. Even if management continues to do a good job, we should expect to see:

trailing 5 year return occasionally drop to near 0%
an average return closer to 5% or 6%


----------



## andrewf (Mar 1, 2010)

Essentially yes.


----------



## ian (Jun 18, 2016)

The Canadian Gov't is currently borrowing money at well below the interest rate that CPP is realizing on their investments. 

I want the CPP to operate in the manner that it was envisioned and planned during the Martin years. As a completely separate institution from Government with zero political interference. Just wish EI operated in the same fashion and with the same independence.


----------

