Provinces once again interested in boosting Canada Pension Plan benefits
Canadians are twice as likely to support a Pooled Registered Pension Plan (PRPP) (64 per cent), rather than increase their CPP or QPP contributions (34 per cent) as a means to save more for retirement, according to a recent survey.
Do you feel the same way? The Canadian Federation of Independent Business certainly does. Or would you like to see greater access to CPP, as pension expert Monica Townsend argues? She's certainly convinced the Toronto Star's Martin Cohn.
Many advocacy groups had been pushing for a boost in future CPP benefits that would be funded by a phased-in increase in CPP contributions, paid for equally by workers and their employers.
Critics suggest that PRPPs aren't really "pensions" at all since employers don't have to participate in the first place and won't necessarily fund things if they do. Nor, unlike the CPP, will the resulting plans be able to provide a predictable, indexed benefit in retirement or the same sort of survivor and disability benefits.
Since workers in small businesses tend to move around more, it's nice to hear their PRPP will be able to follow them to their next job. But, it will be a long time, if ever, before such plans can match the ease of the CPP's universal portability, they argue.
The federal government previously considered augmenting the existing CPP but ultimately rejected the idea since an enriched plan would amount to an additional tax on business owners.
Later today, however, Canada’s finance ministers will be at it again.
At the top of the agenda: Increasing the year’s maximum pensionable earnings for CPP by $10,000 (it's currently at $50,100) and boosting the maximum benefit to 35% of pensionable earnings (it's now 25%) over the next 10 years.
That would mean a relatively modest increase in premiums of
less than $1,000 a year for many workers, half of which employers would pay through higher payroll taxes.
Would you like to use the CPP as a way to save more for retirement? Or do you think an PRPP could do the job more effectively?
By Gordon Powers, MSN Money
Posted by: Shane | Dec 17, 2021 10:05:42 AM
I believe that increasing the CPP is a move in the wrong direction! I believe more employers would participate in the PRPP and contribute along with the employees if they could control who is administering the plan.
Posted by: Ron | Dec 17, 2021 11:45:44 AM
Most Canadians are not capable/interested in administring their own CPP plan - therefore, I like the direction of increasing the CPP. However, It would be good if there was a was to opt out for those of us who want to do it on their own.
Posted by: Frank | Dec 17, 2021 12:51:33 PM
I believe in a large increase in the CPP ( contributions and benefits) . The amounts are too small now for seniors to live. I was forced to save through my company pension and CPP. We live very well. Empoyers who are not forced to contribute and participate will not.
Posted by: Peter | Dec 17, 2021 1:04:11 PM
Of course this should be done via CPP. The concept that more people will contribute via a PRPP because of choice is simply more misinformation. The public should be asked: If you could contribute X dollars to a pension plan that gave defined benefits to you and that has a history of solvency and predictable funding, would you do so or would you rather contribute to a fund managed by banks with non defined benefits and no track record of producing investment results?
The CPP should be changed so that people could OVER contribute to it regardless of their income level to a certain maximum. This would allow people with lower incomes to avoid using RRSP which are often managed horribly and move to a defined benefit plan like the CPP
Posted by: Shelagh | Dec 17, 2021 1:16:00 PM
The maximum contribution in 2012 is $2306.70/year for a maximum earning amount of $50,100/year, self employed would pay $4600/year. No matter how much you make above this you pay and receive no more. The amount at age 65 retirement is 986.67/month. Increasing these numbers would make a much more comfortable retirement for all. Especially doubling would cost $4613.40/year but your CPP at 65 would be $1973.34/month. This is an investment in our future.
Posted by: Dubious | Dec 17, 2021 2:18:36 PM
But only if they change all the rules ... If you're married the chances are that both you and your partner, if you’ve had decent jobs, could each qualify for something close to the maximum pension at age 65 — which could be an issue once one of you dies.
That’s because your individual pension and the survivor's pension can’t be more than the maximum allowed, currently $987 a month. Not really fair now, and worse later if they raise the benefits.
Posted by: AlR | Dec 17, 2021 5:22:33 PM
The Provinces and the Feds have previously withdrawn billions from CPP - this is documented.
They cannot possibly pay those hugh dollars back to CPP.
Now, I'm being asked to contribute more because of the shortfall !
This is legalized fraud.
Posted by: Keith | Dec 17, 2021 7:27:56 PM
My mom worked until she reached 65 then retired only to live to make 69. My dad retired early on disability but only after a year of fighting with the federal government to receive the benefits he was entitled to. The way I see it CPP is completly useless. I doubt even a quarter of what's paid out is ever actually circulated back to the people. It should be a choice regarless, and personally, if there was and I was making a decent wage, I wouldn't rely on a government plan to get me by. The government is good for taking away anything you earn throughout your life, but real slow and sneaky at never paying back. Anyway, at this rate your almost better off going on income assistance. Why pay into something that you more then likely won't benefit from. It's completly absurd.
Posted by: ravonar | Dec 18, 2021 10:42:24 AM
As an owner of a business that employs 13 support staff I can say that in addition to payroll we have the best medical and disability benefit for a group our size. This costs me $400 per month per employee above their pay. I would be very interested in increased CPP for my employees. We are too small for a defined benefit pension plan and I am not really interested in a defined contribution pension plan, mainly because anytime I have bought RRSPs through a mutual funds, I have lost money. Bonds are not the answer.
We are though looking at a matching plan for our senior staff through the Saskatchewan Pension Plan, we are looking at matching our senior support staff on a $1.00 to $1.00 ratio up to $1200 per year (the SPP only allows $2500.00 per year anyways). This will allow our staff making less than $50,000 per year to save up as if they were maximizing their CPP (which they cannot if they do not make $50,000 plus per year). As a group administrator, owner and operator the SPP seems to be a simple set up and forget plan. I can also have the payments come off my bmo airmiles mastercard :).
While the SPP has had some wild swings, I do like their low MER fees. I was getting hammered on my own investments with MER fees until I learned the rule of the #40; which I believe means take the number 40; divide that by your MER fees and that will be the number of years it takes for the MER fees to eat away at 1/3 of your investment. In addition to putting $2500 into the SPP for myself and my wife each year, we have a couple hundred thousand in RRSPs. We moved everything into the ATB Balanced Conservative Compass Portfolio for a more secure approach to investing. We have also since moved our childrens RESPs (I paid a stupid $5000 penalty to leave Heritage) and our TFSA which we max out every year - we chose to put less into RRSPs and everything into TFSAs - I know RRSPs give me a tax break now but when I am old, I want to take out money without adding it to my taxable income. I am 41 and my wife is 36, she says this email will put most people to sleep....cheers.