CPP: Liberals Reach Agreement With Provinces On Reform

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CPP: Liberals Reach Agreement With Provinces On Reform

Post by Flaccidsteele »

Canada Pension Plan: Liberals Reach Agreement With Provinces On Reform

Another article:
CPP to sting in near term, help in long term
Under the proposal, contributions to the CPP by employees and employers would gradually increase over seven years starting in 2019. Once the changes are fully implemented in 2025, Canadians would pay between $9 and $42 more into the plan every two weeks.

The CPP changes would eventually provide future retirees with one-third of their average annual incomes, up from one-quarter. They would also increase the maximum amount of income subject to CPP by 14 per cent, to $82,700.

The reform would also provide a tax deduction — instead of a tax credit — on the increased contributions by employees. The federal government expects that adjustment to reduce government revenues by about $710 million by 2021-22.
Garth Turner's take:
This week the T2 gang unveiled Canada Pension Plan changes which will increase premiums for workers and employers by 20%, and eventually (in about two decades) up the amount paid out. The goal is to increase the CPP part of a worker’s retirement income from a quarter to a third – but only up to an income of $82,700, nine years from now. So for someone who averages fifty grand during their working lives, the benefit would go from $12,000 to $16,000.

As you may know, the average monthly CPP cheque is now $643. The OAS – pogey for wheezy, flaccid 65+ wrinklies – is $573, and it’s means-tested. So the average retiree collects less than $15,000 a year, which ain’t enough to live on anywhere. The changes, to be introduced in a couple of years, will cost taxpayers about $250 million annually, reduce overall employment and may actually make retirement harder (since people will save less).
On the surface it sounds like a (future) benefit for my cohort?
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Re: CPP: Liberals Rearch Agreement With Provinces On Reform

Post by OhGreatGuru »

Yes. Assuming you are in a young cohort. This is good long-term social benefit planning. I would have preferred to see it raised even more, but there were too many nay-sayers. It is a political compromise.

One slightly misleading statement in the quote; it is not 1/4 or 1/3 of average annual incomes. It is 1/4 to 1/3 of incomes up to the annual maximum CPP pensionable earnings. (AMPE I think is the acronym) That's no different than today - you don't contribute to CPP on income above the annual maximum. And your eventual benefit is based on what your contributions were compared to the annual maximums. But part of the change is to make a significant increase in the annual maximum.

I don't agree with Turner's opinion that improving CPP is bad for the economy or bad for retirement planning. But let's not start that argument al over again. The government got elected in part on a policy to improve CPP. The decision's made. Let's move on.
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Re: CPP: Liberals Rearch Agreement With Provinces On Reform

Post by iluvnascar »

This is just another unwelcome intrusion by leftist Governments under the pretense of "helping" us all retire richer. In reality, we already have that capability - with RRSP's; TFSA's; RRIF's; and so on.

Bill Morneau was just bending over backwards to satisfy Ontario's Queen of Lies, Kathleen Wynne....who did a good job blackmailing the Federal Liberals into doing the damage themselves and allowing Wynne to get out from under her ill-advised earlier initiative!

I found it interesting to read the low opinion that Morneau Shepell has of the CPP enhancements. That's Bill Morneau's family firm......but since Bill joined Justin Trudeau's Liberals, he has completely forgotten all the traditional laws of economics. he has become as good a smoke and mirrors guy as anyone. Way to go Bill! Here is Keven Libin's recent column re the CPP where he delves into the comments of Morneau Shepell:

http://business.financialpost.com/fp-co ... ced-to-pay
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Re: CPP: Liberals Rearch Agreement With Provinces On Reform

Post by patriot1 »

iluvnascar wrote: In reality, we already have that capability - with RRSP's; TFSA's; RRIF's; and so on.
Indeed we do, and only a fraction of the population makes full use of it. The amount of unused RRSP contributions continues to cascade, and the majority of adults don't have a TFSA at all.

Now the problem is if people don't plan for their retirements and end up poor in old age that costs the government (i.e. other taxpayers) money, directly through GIS and other subsidies to low income seniors, and indirectly through higher Medicare costs which are linked to senior poverty. Now if you're opposed to expanded CPP and also want to get rid of these programs, OK that's a consistent position. But don't oppose expanded CPP without recognizing this link.
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Re: CPP: Liberals Rearch Agreement With Provinces On Reform

Post by Koogie »

As is admitted, the current aim behind expanding the CPP is a further bit of social engineering meant to force those who wish to fail at retirement planning into being less of a failure at it (let's call them the grasshoppers).

However, for those who can plan ahead (let's call them the ants) why is there not an opt out clause ? If the ants feel that they could manage that money better than the government, why are they not given the opportunity ? It is after all a plan based on individual earnings and contributions, right? So if the ants opt out, it doesn't hurt the grasshoppers who remain (except perhaps in some economies of scale for the CPPIB, I suppose ?)

Is perhaps the answer to that because the grasshoppers would bolt at the first opportunity as well ? If that speculation is true then it would mean that the CPP really is a welfare state program forced on the people against their free will and not one of the "bedrock policies" of modern Canada beloved by its people.

Ahh, you say, but the government knows better than the people what they need. Hmm.. it is that sort of paternalism that rankles so many of us ants. It may be true of the grasshoppers (in the governments estimation) but not of the ants.

I know that is all a bit simplistic and FWIW, I was always mildly for the CPP when I was a wage earner. I always thought it was well run and probably one of the most effective programs of the welfare state and least damaging to individual progress. But these days the nanny state creeps on and on and increments like this CPP increase are when some begin to wish we could opt out of the heavy hand of father knows best.
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Re: CPP: Liberals Rearch Agreement With Provinces On Reform

Post by AltaRed »

I was an adamant resister of an expanded CPP program because of the extra burden on business and thus the GDP of this country, but have pretty much resigned myself to reluctant adoptance. There are simply too many people that will become a boat anchor to state support because they did not have the desire, will, discipline, fortitude to prepare for their retirement. The next iPhone7 is simply more important. So alas, it probably is the best solution for our middle class and for society overall to force savings and hopefully reduce the burden on society later in life.

That said, I don't think it will make much difference to OAS clawbacks simply because OAS clawback thresholds are so high that doubling CPP payments at retirement won't get those people remotely close to OAS clawback territory either. So not much, if any, societal recovery there.

Higher YMPE won't help the perennially poor who cannot or will not earn sufficient income to remotely come close to the new maximum YMPE values, never mind existing YMPE limits and consequently they will continue to be on social support in their elder years. I am guessing the new YMPE values won't move the needle in GIS payouts simply because those getting GIS never earned enough in the first place.
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by ghariton »

I remain an opponent of expanded CPP, although, in the grander picture, it probably doesn't matter much one way or the other.

As noted above, it is one more example of government deciding what's good for us, and then coercing us to follow its beliefs. It goes counter to personal liberty.

I like the CPP as an optional plan, which we could choose to contribute to, and the extent. It would be a welcome alternative to private sector financial plans for those who choose to go that route. Of course, the government plan would have to be actuarially sound and not subsidized by taxpayers, so as to maintain a level playing field.

I do believe that government should step in to help low income Canadians. whether because of disability, bad luck. etc. I do want a safety net, all the while recognizing that it must be designed carefully so as not to provide perverse incentives to not work or save. It seems to me that an expanded GIS is an easy fix.

Beyond that, I don't see why government should pay any welfare to the middle class (OAS) or run compulsory savings schemes (CPP). Indeed, I opposed the existing CPP on an early financial forum circa 1994, and I remember that I got Warren Baldwin to agree that CPP should be optional. I haven't changed my mind in the last twenty years.

A reason to oppose the CPP that I seldom see mentioned is that it is a payroll tax. It makes labour more expensive for an employer, relative to machinery. robots, etc., and contributes to automation and loss of jobs. It's not clear to me why this is a good thing.

But what about those members of the middle class who don't save enough, even though they could? Well, the safety net that is available for low income Canadians, also covers middle income Canadians if they need it. I have no sympathy for any argument that, because you lived a middle-income life when you were working, you are automatically entitled to live one when you retire. At most you should be entitled to the same things we provide to low income retirees. If it's good enough for them, why isn't it good enough for you, the middle-income wastrel?

A similar argument applies to health care in retirement. If a higher level of income saves money for the state because it reduces medical problems and outlays, the argument applies to both middle-income and low-income. If the savings are so significant, then they should be enough to bring everyone up to a middle-income level in retirement. GIS should be at $50,000 (before clawbacks).

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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by AltaRed »

ghariton wrote:GIS should be at $50,000 (before clawbacks).
I agree provided the threshold age is lower to qualify for it (while somehow not taking away inventives to work for able-bodied people). I don't dare comment on OAS given our previous discussions.

One more observation (without backing it up with accuracy): The current CPP YMPE of circa $54,900 catches a significant proportion of the workforce. Isn't the median income in Canada about $34k these days (StatsCan says $32,790 in 2014) with only about one third of those above YMPE maximum (again StatsCan 2014)? Raising YMPE doesn't help 2/3 or Canadians and surely the 1/3 above current YMPE can fend (save) for themselves.
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by Shakespeare »

In principle, we should have a Guaranteed Annual Income at a modest level (perhaps age-tested or disability-required).

In practice, agreement is impossible (as I expect further posters will prove... :twisted: ).

(I expect all of us have family members who can't make it on their own - and no amount of talking or shaming will change that. The simple truth is that there are a number of people who are, in today's work force, unemployable.)
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by izzy »

Shakespeare wrote:In principle, we should have a Guaranteed Annual Income at a modest level (perhaps age-tested or disability-required).

In practice, agreement is impossible (as I expect further posters will prove... :twisted: ).

(I expect all of us have family members who can't make it on their own - and no amount of talking or shaming will change that. The simple truth is that there are a number of people who are, in today's work force, unemployable.)
One of the big problems is that a Guaranteed annual income at a modest level already exists for seniors,it's called OAS and many here dismiss it as "Welfare"and seek to disqualify as many as possible.As long as that attitude persists any such guaranteed income for anyone else is very unlikely.The virtue of CPP is that it is compulsory for those in the workforce but it leaves out those who,for one reason or another are not in the workforce.As long as some of us see Welfare as a dirty word and those receiving it as "spongers on society " there can be no solution.
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by Shakespeare »

a Guaranteed annual income at a modest level already exists for seniors,it's called OAS
I was talking about GIS, not OAS. Bus transport, not your own car. :wink:
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by izzy »

Shakespeare wrote:
a Guaranteed annual income at a modest level already exists for seniors,it's called OAS
I was talking about GIS, not OAS. Bus transport, not your own car. :wink:
IMHO GIS is a guaranteed income at a minimal level ,with very careful money management enough to ensure survival only.
For a Guaranteed income to be worth anything at all it surely should be enough to ensure more than continued misery,those who need it rarely have the necessary skills to make it on GIS alone,if they did we would not see so many pan-handlers around!
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by Shakespeare »

IMHO GIS is a guaranteed income at a minimal level ,with very careful money management enough to ensure survival only.
So, as George said, increase GIS. And the clawback needs to be looked at carefully; it is a disincentive to work and should not be.
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by izzy »

Shakespeare wrote:
IMHO GIS is a guaranteed income at a minimal level ,with very careful money management enough to ensure survival only.
So, as George said, increase GIS. And the clawback needs to be looked at carefully; it is a disincentive to work and should not be.
Agreed,but that is not an argument against CPP which SHOULD be enough to remove those in the workforce from the equation.
If we accept the fact that many are improvident enough not to take advantage of RRSPs etc (and bear in mind the existence of risk means that even those who do save COULD end up in penury),then we still need a government ensured pension which is enough for those who have worked and contributed to society to live on even in the most remote and expensive parts of Canada.
I don't think we should look on CPP contributions as a payroll tax,rather we should consider them as an indispensable part of a normal employee benefit package,it is a pension plan after all!
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by Shakespeare »

I believe most employees look at "salary plus burden", not just salary.

All things being equal (which they never are) increasing CPP will result in a concomitant salary decrease for new hires and lower raises for current staff (after inflation adjustments).
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by AltaRed »

Shakespeare wrote:
IMHO GIS is a guaranteed income at a minimal level ,with very careful money management enough to ensure survival only.
So, as George said, increase GIS. And the clawback needs to be looked at carefully; it is a disincentive to work and should not be.
Izzy does not seem to grasp the principle of making GIS a whole lot better for a much wider portion of our population, not just survival level, and not just those aged 65 and over. OAS has turned out to be a targeted perverse gravy train for a voting demographic, most of whom don't need it.

And I agree with you
All things being equal (which they never are) increasing CPP will result in a concomitant salary decrease for new hires and lower raises for current staff (after inflation adjustments).
And especially those staff below current YMPE maximums if adjustments are made across the employee spectrum.
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

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izzy wrote:If we accept the fact that many are improvident enough not to take advantage of RRSPs etc (and bear in mind the existence of risk means that even those who do save COULD end up in penury),then we still need a government ensured pension which is enough for those who have worked and contributed to society to live on even in the most remote and expensive parts of Canada.
And thus a much enhanced GIS program. Make sure those that need it get it and not those cpls who can earn up to $72,809 each and not pay a cent of OAS clawback. Grotesque is what it is.
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by patriot1 »

ghariton wrote: A reason to oppose the CPP that I seldom see mentioned is that it is a payroll tax. It makes labour more expensive for an employer, relative to machinery. robots, etc., and contributes to automation and loss of jobs.
My view is that the demand function for labour depends on the total cost to the employer, who doesn't really care what the breakdown is between nominal salary, payroll tax, or benefits. Thus a payroll tax can't make labour cost to the employer more expensive - only a change in the supply / demand functions will do this. A higher payroll tax will result in other components of the total labour cost being pared back, as Shakes has noted.
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

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AltaRed wrote:
izzy wrote:If we accept the fact that many are improvident enough not to take advantage of RRSPs etc (and bear in mind the existence of risk means that even those who do save COULD end up in penury),then we still need a government ensured pension which is enough for those who have worked and contributed to society to live on even in the most remote and expensive parts of Canada.
And thus a much enhanced GIS program. Make sure those that need it get it and not those cpls who can earn up to $72,809 each and not pay a cent of OAS clawback. Grotesque is what it is.
I would agree with greater clawback of OAS only IF as a result the funds were to be integrated with CPP as a subsidy to provide a floor benefit for those who otherwise don't qualify.Given past history I am somewhat cynical, I suspect that it would be seen as an opportunity for a cash grab for the government and not an opportunity to enhance CPP for those in need.I look for example at the UK where a supposed increase in their state pension this year has been accompanied by measures that virtually ensure that many if not most will actually receive a smaller pension!
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by izzy »

izzy wrote:
AltaRed wrote:
izzy wrote:If we accept the fact that many are improvident enough not to take advantage of RRSPs etc (and bear in mind the existence of risk means that even those who do save COULD end up in penury),then we still need a government ensured pension which is enough for those who have worked and contributed to society to live on even in the most remote and expensive parts of Canada.
And thus a much enhanced GIS program. Make sure those that need it get it and not those cpls who can earn up to $72,809 each and not pay a cent of OAS clawback. Grotesque is what it is.
I would agree with greater clawback of OAS only IF as a result the funds were to be integrated with CPP as a subsidy to provide a floor benefit for those who otherwise don't qualify.Given past history I am somewhat cynical, I suspect that it would be seen as an opportunity for a cash grab for the government and not an opportunity to enhance CPP for those in need.I look for example at the UK where a supposed increase in their state pension this year has been accompanied by measures that virtually ensure that many if not most will in future actually receive a smaller pension!
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by izzy »

izzy wrote:
izzy wrote:
AltaRed wrote: And thus a much enhanced GIS program. Make sure those that need it get it and not those cpls who can earn up to $72,809 each and not pay a cent of OAS clawback. Grotesque is what it is.
I would agree with greater clawback of OAS only IF as a result the funds were to be integrated with CPP as a subsidy to provide a floor benefit for those who otherwise don't qualify.Given past history I am somewhat cynical, I suspect that it would be seen as an opportunity for a cash grab for the government and not an opportunity to enhance pensions for those in need.I look for example at the UK where a supposed increase in their state pension this year has been accompanied by measures that virtually ensure that many if not most will in future actually receive a smaller pension!
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

Post by AltaRed »

Of course a re-design of GIS has to be done properly. We can wish all we want but I think the system is going to remain f*cked the way it is because of powerful lobbys. Regardless, those who make $75k/yr do not, with certain disability exceptions, need subsidy and I don't know how outfits like CARP can whine with a straight face.
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

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I suggest CARP would be more accepting if they could be persuaded that they are giving something up in return for something that would benefit poorer seniors.
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

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izzy wrote:I suggest CARP would be more accepting if they could be persuaded that they are giving something up in return for something that would benefit poorer seniors people of all?most? ages.
How about what I changed your sentence too....?
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Re: CPP: Liberals Reach Agreement With Provinces On Reform

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AltaRed wrote:
izzy wrote:I suggest CARP would be more accepting if they could be persuaded that they are giving something up in return for something that would benefit poorer seniors people of all?most? ages.
How about what I changed your sentence too....?
We are talking about CARP you know-to change their stance they would almost certainly have to persuade their members who are ,by definition, seniors that other members would benefit.Sometimes its all in how you approach things!
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