Finance ministers reach deal to expand Canada Pension Plan

[Flash Walken]

Originally Posted by nik-

Well, the way you implied that only RRSP's were subject to market dips, I thought maybe you did.

I implied that morons aren't as good at managing their money as professional money managers with fiduciary responsibility to their clients.

Most people in Canada are morons.

[temple5]

I can support this so long as those who havent paid anything extra into the system arent getting any extra benefits. Example my parents who are close to retiring should not get any more money because of this than what they already contributed.

[Frequitude]

I am 100% in favor of this. Yes, I lean to the right, but personal health and partial retirement financial support are two places I believe there should be safety nets in place.

This is not a tax, it is a forced investment into a perpetuity (i.e. a DB pension). Its such a different risk profile from "I'll invest it myself" which effectively just gives you a pot of money that you have to hope you don't outlive. And that assumes people actually save at all, let alone invest it well.

I think this is for our own good. Force people to save give it to the sharp folks at CPP to invest more smartly than the average Joe.

Increases are required to keep the plan sustainable.

[Slava]

Originally Posted by Regorium

The employer's contribution is important because it adds to the cost of business, future raises/benefits and so forth.

They could also just give me that 4.95% in some sort of additional company match, and it'd be far preferable than getting a negative payout defined benefit pension 40 years later.

Basically, the boomers are starting to retire, and they will get 33% more payout even though they didn't pay the increased cost throughout their lives. Standard old white guys (and old white women now too, it is 2016 after all) making rules to benefit themselves.

When Quebec is the province that looks at the proposal and says that it's too expensive, perhaps there's something there.

While it might work for you personally to just give you the extra matching (and your employer might give you the matching) that doesn't apply across the board. Firstly it wouldn't be a surprise that employers would pocket that percentage as opposed to passing it along. Second, even if it was passed along as increased matching there is still a segment of the population that doesn't save. That segment might be larger than you expect. I know it makes zero sense...you're employer is essentially giving you free money to save for your retirement, but there are still people who don't do it.

The harsh reality is that the forced savings here provides a societal benefit because one way or another people are going to need help as they age. We can either force them to save and cover that eventuality or we can bite the bullet. That doesn't mean its every single person, and I understand that. I've never used EI personally, but I still think it should be there for a very similar reason.

[Red]

From https://www.thestar.com/business/per...ou-mayers.html

Who benefits most?
Young people and those in mid-career. Fewer and fewer people entering the workforce are being enrolled in company pensions. So this measure adds income support for them. Time is on their side to let the money grow.
Those who are already retired will see nothing, those over 50, very little.
Sousa says that some years from now, when people look back, they may appreciate this week’s achievement better.
“In the 1960s, when they were putting CPP in place, it was tough slogging. But today it’s not a question of should we have CPP, but, ‘My God, what if we didn’t have it.’ ”
It’s hard to disagree with that.
This makes the enhancement all the more important.

[Fuzz]

If I retire after 2019 will I get something?
Yes, but it isn’t clear how much. But someone retiring in 2020 having made one year of the increased contribution would get a miniscule amount. Someone retiring in 2030 would have 10 years of extra contributions.



That's good to see that it is not a handout to boomers.

[GGG]

Originally Posted by Fuzz

If I retire after 2019 will I get something?
Yes, but it isn’t clear how much. But someone retiring in 2020 having made one year of the increased contribution would get a miniscule amount. Someone retiring in 2030 would have 10 years of extra contributions.



That's good to see that it is not a handout to boomers.

This is really what will decide whether or not this is a tax to support boomers or not. The details of the ramp up will be important. If they leave your benefit as a % of that years max contribution then the boomers get a huge subsidy. If the redo the calc where its the value of your contribution that matters then it could work okay.

[Red]

Originally Posted by GGG

This is really what will decide whether or not this is a tax to support boomers or not. The details of the ramp up will be important. If they leave your benefit as a % of that years max contribution then the boomers get a huge subsidy. If the redo the calc where its the value of your contribution that matters then it could work okay.

In the recent days we heard that it is the younger generations that need most help. Record debts and shrinking savings paint a very grim picture for their retirement. The higher CPP is supposed to help out. Basically instead of just bare minimum that we have now, the CPP may have to provide for some other expenses, like debt repayment.
Current seniors are rarely in debt.

[MoneyGuy]

Originally Posted by VladtheImpaler

So... if I am reaading this right, I need to fire everyone by 2019, have them incorporate and become independent contractors? That way they can worry about their own CPP contributions. Right?

Yes, but if they're smart they'll build this increased cost into their contract price.

[VladtheImpaler]

Originally Posted by MoneyGuy

Yes, but if they're smart they'll build this increased cost into their contract price.

That will not be an option.

[the_only_turek_fan]

So right now the max income subject to CPP is $51,400 ($54,900 - $3,500 basic exemption).

The current rate is 4.95%.

The annual maximum contribution would then be $2,544.30 (0.0495*51,400).

They are saying the premium is going up by 1%. New premium is now 5.95%, and the maximum income subject to CPP is now $82,700 (lets neglect the exemption for simplicity)

The new annual maximum contribution would then be $4,920.65 (0.0595*82,700).

That is an increase of $2376.35 a year! That is a lot of money. Plus my employer needs to match that.

Is my math correct?

[Regorium]

Originally Posted by the_only_turek_fan

So right now the max income subject to CPP is $51,400 ($54,900 - $3,500 basic exemption).

The current rate is 4.95%.

The annual maximum contribution would then be $2,544.30 (0.0495*51,400).

They are saying the premium is going up by 1%. New premium is now 5.95%, and the maximum income subject to CPP is now $82,700 (lets neglect the exemption for simplicity)

The new annual maximum contribution would then be $4,920.65 (0.0595*82,700).

That is an increase of $2376.35 a year! That is a lot of money. Plus my employer needs to match that.

Is my math correct?

Yes your math is correct.

However, I did do a bit more reading about it and there's a couple htings that the articles did a poor job of explaining.

$82,700 is inflation adjusted to 2025 when the plan is fully phased in, so it is unfair to compare it to the 2016 structure.

Their target is 14% increase on the cap, so an apples to apples comparison of the increase in 2016 dollars would be as follows:

Current Max: $2,544.30
New Max: ((1.14 * 54,900) - 3500) * 0.0595 = $3515.61

[Fuzz]

I think so, but it is going to be phased in slowly. So they just nick you initially, then let you bleed out for a few years as the wound gets bigger.

[OMG!WTF!]

I suspected this might be the case...

http://business.financialpost.com/fp...-pension-plans

CPP is folded into the vastly underfunded public sector plans so you increase CPP payments which are funded, and that decreases the burden on union and other public sector pensions. Just a big ole civil servant subsidy.

[CliffFletcher]

Originally Posted by OMG!WTF!

I suspected this might be the case...

http://business.financialpost.com/fp...-pension-plans

CPP is folded into the vastly underfunded public sector plans so you increase CPP payments which are funded, and that decreases the burden on union and other public sector pensions. Just a big ole civil servant subsidy.

Well that sucks. My faith that the money will be there when I need it in 30 years just evaporated.

[Flash Walken]

Originally Posted by CliffFletcher

Well that sucks. My faith that the money will be there when I need it in 30 years just evaporated.

Why aren't you managing your own retirement portfolio like the rest of the genius' in this thread?

[nik-]

I'm not sure why you're being so flippant about this.

$2400 extra a year is not small change.

[Locke]

Originally Posted by Flash Walken

Why aren't you managing your own retirement portfolio like the rest of the genius' in this thread?

Maybe he'll start. I have no faith that CPP/OAS will be there in 30 years. How about you?

[Flash Walken]

Originally Posted by Locke

Maybe he'll start. I have no faith that CPP/OAS will be there in 30 years. How about you?

I think in 30 years we'll have transitioned away from many of the safety nets we now enjoy as a society towards a minimum income scenario where most of the people employed in the country are employed in resource extraction and bureaucratic efficiency.

Fortunately for you, I don't think accountants will last 20 years so you may be one of the first on the dole.

[OMG!WTF!]

Originally Posted by nik-

I'm not sure why you're being so flippant about this.

$2400 extra a year is not small change.

It's only $200/month.