Focus on CPP Reform

[SmokeOnTheWater]

The relity is until it is finalized the current increases proposed can mean up to $2,232.45 a year more off a persons pay cheque.

As of January 2016 the maximum contribution for CPP is $2544.30
How did you come up with $2,232.45 extra per year ?

Maximum Contribution (EE) 2544.30

http://support.intuit.ca/quickbooks/en-ca/iq/Company-File/CPP-and-EI-Contribution-Limits/INF15415.html

[Veovis]

You missed that they were going raise the max income from 54,900 to 82,700. That's another 5.5% (new rate due to raise thought they MAY make is less on that portion but not certain)

Instead of $2544.3, you may then pay $4712.40 and increase of $2168.10. That's a lot of extra cash out of people pockets. especially if both work.

The details were from your quote in case you missed them for the calculations. Even if they do reduce it to 4% on the over, it will still be at least $1,112 per member of the family out of their pockets.

To argue it is yet more "help" to the middle class is laughable, but it will get great support as most people hear "you get more money" but in reality you will over your life have far less.


CPP is calculated as such - 82700-3500=79200*.0595=4712.40

[occasional thoughts]

I take minor offense to the change to the CPP being labelled as "reform". It is not, it does not fix anything about the CPP that was broken or distorted that I know of. It just boosts the contribution rate and the downstream benefit.

I have followed the story and debate semi-casually over the last few days. I find (at least) one glaring issue with almost everything said that is favourable about the decision: it does not help Canadians as a whole, it helps working Canadians. Those Canadians who are not working would only be helped by changes to OAS.

Having said that, being retired I'm receiving the CPP. It is good to get it, but I and I guess my various employers paid in to it over the years.

One thing that could be "reformed" about CPP is the death benefit. It has been miniscule and penurious and an insult for MANY years and an utter rip-off to those who paid in but never benefit.

[SmokeOnTheWater]

CPP is calculated as such - 82700-3500=79200*.0595=4712.40

Now 54900-3500= 51400 multiply by 4.95= 2544.30
Future 54900-3500= 51400 multiply by 5.95= 3058.30
Difference $514. per year

Future
First 54900 at 5.95= 3266.55
82700-54900= 27800-3500=24300 multiply by 4%= $972.
3266.55+972= $3276.27
Difference 3276.27-2544.30= $731.97

BTW I'm not arguing as this will not affect me. Just trying to figure this thing out.
CPP are much better at investing than the average Canadian and I believe that an extra $731.97 in their hands might go a long way compare to again the average ( not all ) Canadian. And I agree that this new plan is not for all as some would prefer to invest that extra money themselves.

[Hassel99]

Id rather just take care of myself, but I get that not everyone has that fortitude.

CCP does pretty well all things considered.

10.6% normalized over the last 5 years, 6.8% over 10 years.
Not too shabby

[SmokeOnTheWater]

Was reading this again.

The CPP premium on income between $54,900 and the new maximum, $82,700, will be lower — it is expected to be 4.0 per cent rather than 5.95 — a spokesperson for Finance Minister Bill Morneau said in an e-mail to CBC News.

So maybe you are not paying 5.95% for the first 54,900 after all but rather anything between 54,900 and 82,700 will be at 4%.
So 82,700 - 3500 multiply by 4% = $3168
So 3186-2544.30= $641.70 more per year
But 56000 -3500 multiply by 4% = $2100 .. less than now so probably not ?????

[SmokeOnTheWater]

Id rather just take care of myself, but I get that not everyone has that fortitude.

CCP does pretty well all things considered.

10.6% normalized over the last 5 years, 6.8% over 10 years.
Not too shabby

Better than 1% in a GIC or term deposit.

[Veovis]

You're double counting the 3500 reduction for starters, you also neglected the 5.95% instead of 4.95% in the initial. You counted it on the fist 54900 then again on the difference. They also suggested that the new rate between might be 4% but I bet they don't do that, therefore potential cost for the changes must be considered. Even if the new differential rate was 4% it is a total increase from previous total premiums of 1661.00 minimum (if you get 4% on the additional).

None the less added to the other measures removed from middle income families I'm not sure how this is considered help. Less money is less money and doesn't tend to help many people.

All in all this will be a measure that leaves families with less cash and the government coffers a little more and they all get to pat themselves on the back and say "we helped".

All in all it mean families see between 2000-4000 less income a year added on top of other tax reliefs families have also lost, middle class families can look to seeing up to 10,000 less money a year to spend on their kids, RESP, TFSA, RRSP or simpler Food.

[SmokeOnTheWater]

You're double counting the 3500 reduction for starters, you also neglected the 5.95% instead of 4.95% in the initial. You counted it on the fist 54900 then again on the difference. They also suggested that the new rate between might be 4% but I bet they don't do that, therefore potential cost for the changes must be considered. Even if the new differential rate was 4% it is a total increase from previous total premiums of 1661.00 minimum (if you get 4% on the additional).

None the less added to the other measures removed from middle income families I'm not sure how this is considered help. Less money is less money and doesn't tend to help many people.

All in all this will be a measure that leaves families with less cash and the government coffers a little more and they all get to pat themselves on the back and say "we helped".

All in all it mean families see between 2000-4000 less income a year added on top of other tax reliefs families have also lost, middle class families can look to seeing up to 10,000 less money a year to spend on their kids, RESP, TFSA, RRSP or simpler Food.

No, I didn't double count the 3500 reduction.
I gave both 4.95 and 5.95 results .. now and future.
CPP premiums is not part of the government coffers.
$10,000 less per year to spend .. ok whatever.

[Veovis]

I'm glad you think 10 grand is a minimal amount for a family to lose but many families don't have that to give.

I understand that the CPP is a separate fund, but so are RRSP's and I get that principle myself, in fact when I die my wife will get it unlike any CPP. (as noted the death benefit is a joke)

Increase rates isn't reform either.

Reform would look more like a comprehensive calculation that looked at individual and families contributions to future savings as a reduction of needed CPP. For instance you put money into TFSA and RRSP and depending on the amount put in (and not withdrawn) then the CPP increases do not apply to you, however people who are not saving and simply spending are then mandatory required to contribute to the new CPP increases for their future as they are not doing so themselves. In fact based on amounts saved CPP rates could decrease so people with good long term plans are paying a rate less than those that aren't bothering to. (with future payments adjusted accordingly)....it would take working out but that is what some form of reform would look like to help Canadians.....rate increases don't.

I know I hope to save in such a fashion that CPP with not be a need, but a benefit.

[occasional thoughts]

Just for the record, ref. previous post, I do believe the death benefit and the survivor benefit are two different things. The death benefit was $2,500 for funeral expenses (or a party or whatever, I suppose) for someone who contributed probably all his or her life like my mother but never started collecting the pension. I believe a spouse can collect a survivor pension. So the bottom line is the CPP is a form of kiting or theft of contributions benefiting people who live longer than contributors who aren't so fortunate.

[Glacier]

I'm glad you think 10 grand is a minimal amount for a family to lose but many families don't have that to give.

10 grand is two months take home pay for most families. It's easy to cut 1/6th of your expenses. Simply take your kids out of sports, music, and summer camp. Simply give them endless video game time instead. Much cheaper.

[SmokeOnTheWater]

I'm glad you think 10 grand is a minimal amount for a family to lose but many families don't have that to give.

I understand that the CPP is a separate fund, but so are RRSP's and I get that principle myself, in fact when I die my wife will get it unlike any CPP. (as noted the death benefit is a joke)

When I wrote " $10,000 less per year to spend .. ok whatever " it meant ok I will not argue with you as I think that number is wrong. Plus it would be deemed off topic.
CPP has survivor's benefit.

Survivor's Pension
The Canada Pension Plan (CPP) survivor's pension is paid to the person who, at the time of death, is the legal spouse or common-law partner of the deceased contributor.

http://www.esdc.gc.ca/en/cpp/survivor_pension.page

[Glacier]

Another excellent article by Andrew Coyne.

The minority who do not are concentrated in the middle- to upper-income range, notably among those whose employers do not offer pension plans. It’s not clear even then that they are under-saving, when less formal vehicles of retirement saving such as the equity in their houses or investments held outside RRSPs are counted. But in any case that is how much they have chosen to save, and it’s not obvious why the rest of us should force them to save more.

The usual argument is one of moral hazard: they may be declining to save enough privately in the expectation that the public will provide for them in their dotage. But it’s hard to think those currently living on above-average incomes would be satisfied with what OAS/GIS affords. So this amounts to saying they are irrational, and don’t know their own interests. That’s certainly possible. But then the question becomes why, because a few choose to save less, everyone else should be forced to save more.

This bears emphasis: the CPP doesn’t “help” people to save. It forces them to.

http://news.nationalpost.com/full-comme ... -agreement