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December 17, 2021

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



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...