# CPP Actuarial Report and Employer Poll



## sags (May 15, 2010)

Interesting results of a business survey........

_Enhancing CPP Backed By Employers

*Employers consider an expanded Canada/Quebec Pension Plan (C/QPP) to be the best way to improve Canada's retirement income system, says a Morneau Shepell ‘60-Second Survey for November 2013.’* However, when asked to identify the most cost-effective way to improve Canada's retirement income system, only 32 per cent opted for an expansion of the C/QPP. The second most popular response, at 25 per cent, was to do nothing other than launch a campaign to encourage Canadians to save more. The other possibilities were to require every employer and employee to contribute two per cent of annual pay up to $76,000 to a supplementary C/QPP DC arrangement (selected by 23 per cent) and to auto-enroll everyone in a pooled registered pension plan (PRPP) without employers being required to contribute. Fred Vettese, chief actuary of Morneau Shepell, notes over half were willing to increase employer contributions. "It is a little surprising that over half the respondents are ready to increase employer contributions, either in an expanded C/QPP or in an equivalent defined contribution arrangement. The general impression has been that employers were either unwilling or unable to contribute more to retirement arrangements in a fragile economy."_

http://www.bpmmagazine.com/benefits_news.php?date=2013-12-06#3302

The CPP Actuarial Report is out and has some really good news for Canadians.

Here is a snippet and a link to the full report.

_With the Canada Pension Plan’s legislated contribution rate of 9.9 per cent, *contributions are projected to be more than sufficient to cover the expenditures over the period 2013 to 2022*, says the ‘Twenty-Sixth Actuarial Report on the Canada Pension Plan.’ However, thereafter, a proportion of investment income is required to make up the difference between contributions and expenditures. *In 2050, 27 per cent of investment income is required to pay for expenditures.* Total assets are expected to increase significantly over the next decade and then will continue increasing at a slower pace. Total assets are expected to grow from $175 billion at the end of 2012 to $300 billion by the end of 2020. The ratio of assets to the following year’s expenditures is projected to grow from 4.7 in 2013 to 5.4 by 2025 and 5.9 by 2075. The number of contributors is expected to grow from 13.5 million in 2013 to 14.5 million by 2020 and contributions are expected to increase from $42 billion in 2013 to $56 billion in 2020. The number of retirement beneficiaries is expected to increase from 4.6 million in 2013 to 10.2 million in 2050._

http://www.osfi-bsif.gc.ca/Eng/oca-bac/ar-ra/cpp-rpc/Pages/cpp26.aspx#Toc-4a

No more fiddling around by Flaherty. It is the right time to make the needed changes to the CPP for future generations.


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## sags (May 15, 2010)

Conservatives voted down a motion by the NDP to enhance the CPP.

It wouldn't be surprising that the Conservatives would want to introduce their own enhancement, rather than vote for an NDP motion, but from other reports Harper and the government doesn't intend to make any changes.

CARP is warning the Conservatives that their support by seniors is eroding fast, and CPP enhancement will be a "ballot box" issue.

Harper already faces a restless caucus........and MPs don't want to face an issue like this for their own re-election.

http://www.theglobeandmail.com/news...-from-finance-canada-website/article15803299/

http://www.carp.ca/2013/12/09/tories-vote-cpp-expansion-seniors-warn-waning-support/


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## HaroldCrump (Jun 10, 2009)

sags said:


> CARP is warning the Conservatives that their support by seniors is eroding fast


Wait, why is that?
CPP enhancement should be increasing the contributions of currently _employed workers_, not the entitlements of the current _retirees _.

If contributions are increased, as well as current payouts, then it is simply a transfer of wealth, innit?
But then, perhaps that is exactly what the CARP wants.
A huge transfer of wealth from the working generation to the retirees.

The CARP sheds crocodile tears for the seniors in poverty, quoting some vague statistics that say Canada has one of the worst poverty rates among seniors in the G7.
However, very few of those seniors collect CPP, or collect very little.
They are primarily recipients of GIS and OAS.
Therefore, expanding CPP payout will not benefit them.

I am not familiar with the details of the NDP proposal, but if it involves raising contribution rates for current workers and increase in payout for current retirees, then it is simply a transfer of wealth.


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## MoneyGal (Apr 24, 2009)

It's all super vague. What does "enhance" mean? Who would benefit? Who would pay? 

That evil Harper, _refusing to increase benefits for current retirees beyond what they've earned through contributions_.


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## andrewf (Mar 1, 2010)

I agree that we need to be clear what we're asking for. Any changes in benefits should be based on new contributions. That means current retirees would not benefit, and near retirees would see little benefit.


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## sags (May 15, 2010)

CARP said the seniors voting in the poll clearly understood any CPP enhancement would NOT benefit them, but would benefit their children and grandchildren.

Mandatory employer/employee contributions would fund increases in CPP benefits for future generations to a level supported by those contributions and investment revenue.

The success of the CPP, is proof positive the CPPIB knows what they are doing, and they are doing it very well on behalf of Canadians. The current actuarial report said that by 2050.........the current CPP fund will only use 27% of "investment income" to pay benefits. The fund would remain intact and continue to grow for decades beyond that.

Many employers are in agreement, and view CPP enhancement as a simple, easy to manage way to increase future benefits to their employees.

Pooled pension schemes, which would benefit financial institutions more than the retiree, have been totally rejected by both business and governments.

As stated by the Ontario Premier, Harper doesn't even acknowledge there is a problem.


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## HaroldCrump (Jun 10, 2009)

sags said:


> As stated by the Ontario Premier, Harper doesn't even acknowledge there is a problem.


You do understand, right, why the Ontario Premier - Ms. Wynne - is all pumped up and charged up about an expansion of the CPP?
Why all of a sudden she has made it her personal favorite cause...

Hint : It has got nothing to do with ensuring a secure retirement for the poor hard working masses of Ontario workers.
She - and her party - have pretty much screwed that part up during their 10 year reign.

It has much more to do with the impossible and untenable fiscal situation that was bequeathed to her by her glorious predecessor.


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## fraser (May 15, 2010)

People need to keep in mind that an expanded CPP would take years or so to truly impact seniors. It will certainly have no appreciable impact on those 50 and over. Though this will no doubt be glossed over by our politicians.


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## sags (May 15, 2010)

fraser said:


> People need to keep in mind that an expanded CPP would take years or so to truly impact seniors. It will certainly have no appreciable impact on those 50 and over. Though this will no doubt be glossed over by our politicians.


A lot of current seniors still benefit from having DB pensions, but as the tide turns and more people end up in retirement with low income, the main stream media will pick up on it.........and there will be story after story about seniors living on the edge of poverty.

That is when real public pressure will be applied to politicians, and they will react as politicians always do.

I expect there will be large increases in the OAS/GIS for those at the low income levels..........and deeper clawbacks for those at the mid-upper levels to compensate for it. The qualifications for GIS eligibility will change and all assets will be included in the calculations, as well as income. The Harper government already tried and backed down, but it will come around again.

People have been rather quiet about the wealth disparity, retirement income, and other issues that will affect them and their children, but there are indications that things are changing.

Toyota workers have reached a majority of signed union cards so they can force a vote for a union, and there are rumors of West Jet employees seeking unionization as well.

I think history will repeat itself, and people will do what they have done in the past........band together for strength in numbers.


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## fraser (May 15, 2010)

I have to agree with Harold.

Premier Wynne has a much larger problem than pensions....it is called the next Provincial Election. Like many politicians, she will do anything to move public opinion of her Government....particularly if it is an issue under federal jurisdiction. It is very, very common for provincial politicians to do this.

Harper may have some very, very rough water ahead. Especially if the two lawyers involved in the Senate scandal are taken to their respective professional disciplinary committees. It could be that he will be looking for something, anything that will change the 'channel'. Even if Flaherty does not agree. At the end of the day, it is all about getting re-elected.


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## sags (May 15, 2010)

Food for thought...............

The "average" CPP benefit is less than $500 a month. The maximum is about $1000 a month.

Employers contribute 50% of the contributions, and earn 50% of the return on investment.

Without the "employer" mandatory contributions, the "average" would be less than $250 a month and the maximum would be about $500 a month.

Just saying..........how vital it is to have mandatory employer contributions.


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## fraser (May 15, 2010)

Absolutely.

And this is one of Flaherty's concerns. Doubling the premiums for employers and employees would essentially take a fair chunk of after tax money out of the the economy-five from the er and from the ee.

Employees at the $50K range would have approximately $140. less in after tax take home pay each month-about $1700. per year. I am not saying this is a bad idea, just that people need to understand the basics of the plan. 

Flaherty would see his income tax revenue decline and the total wage cost of the federal public service increase. Not great for his plan to balance the budget with the next two years.

I have no doubt that there are lots of people out there who somehow do not understand that a change in CPP like the one suggested will decrease their take home pay or think that somehow, like magic, that their projected CPP retirement amounts would double-notwithstanding their current age and contributions schedule. 

It is basic math but unfortunately Canadians have been falling behind in math scores vis a vis other countries!


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## HaroldCrump (Jun 10, 2009)

fraser said:


> Flaherty would see his income tax revenue decline and the total wage cost of the federal public service increase.


That is a very important consideration.
And it _should_ be the top-most consideration for Ontario govt. as well, which is purporting to create its own version of a gigantic public pension plan.

Given that Ontario is the heart of big government, as well as home to shining examples of fiscal prudence and public pension plan management such as OPG, HydroOne, OPA, etc. this will impose a tremendous burden on Ontario tax payers.

Ms. Wynne states that retirement security is her administration's top priority, and that there is a growing crisis.
Sorry, I couldn't disagree more with her.

For the premier of a province with a $10B deficit and a $275B debt, it is highly irresponsible to say so.
Top priority should be to reduce that deficit - by cutting spending.


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## sags (May 15, 2010)

Problem is.......kicking the can down the road only makes it more expensive in the future.


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## HaroldCrump (Jun 10, 2009)

sags said:


> Problem is.......kicking the can down the road only makes it more expensive in the future.


True, so which problem would you say is more pressing right now - the $275B provincial debt with another rating downgrade looming, or the "pension crisis" for hundreds of thousands of public sector workers in Ontario?
Which can should we kick down the road?

I am an Ontario resident, but I believe that if the Wynne govt. goes ahead with this provincial pension plan insanity, the ROC should have the right to cut off equalization payments to Ontario.


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## sags (May 15, 2010)

Contributions to the pension plan won't be forever "lost". 

They will re-invested by the pension plan into the economy immediately, and future benefits paid out will be taxable and also flow into the economy in the future.

Contributors will receive their money back..........plus the returns on their investment.

It would have higher economic impact than cash invested in RRSP, due to scale and investment expertise.

Investors in Ontario debt should consider it as a positive step towards Ontario securing it's future.


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## HaroldCrump (Jun 10, 2009)

sags said:


> They will re-invested by the pension plan into the economy immediately, and future benefits paid out will be taxable and also flow into the economy in the future.
> Contributors will receive their money back..........plus the returns on their investment.
> It would have higher economic impact


You are making the case for tax cuts 
Cut corporate taxes as well as personal taxes, and you could have the same economic impact.
More purchasing power in the hands of the middle classes, more potential for saving, spending, investing, etc.

Higher economic impact than the govt. siphoning off cash from income earners in the form of taxes and blowing it away on more pensions for the fatcats at OPG, H1, OPA, etc.



> Investors in Ontario debt should consider it as a positive step towards Ontario securing it's future.


Future liabilities are never a good thing for debt investors.
Esp. liabilities that are off book, not marked to market, and subject to all kinds of assumptions that can be manipulated.
Ontario bondholders will feel far better if the province showed the slightest willingness to reduce spending and waste, instead of increasing it.

There may be a time and place for handing out public pensions to all and sundry, but this is neither the time nor the place for the Ontario to do so.


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## fraser (May 15, 2010)

Politicians like Flaherty are concerned most about the short term-getting re-elected. Everything else is secondary.

Increasing CPP would have a very immediate negative impact simply because there would not be as much money going through the cash registers. Business would immediately look to cut back in other areas in order to offset their increase in CPP premiums-on spending or on wages.

There is a long term benefit for sure. But think of the impact on the voters if the economy slowed over the next two years and on average they had $1700 less per year in disposable income.

It is OK for Wynne to yack on about it because she would no doubt place the blame squarely on the shoulders of the federal Conservations if the public reaction to a slowing economy and less disposable income backfired.


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