CPP: Unjust, or Just Too Complex?

[@DoReMeaCulpa]

While I am glad that CPP exists, I think the unfairness is in the fact that people are required to pay into this so-called "pension" yet it is not considered to be an asset like other pensions are. Therefore, if a contributor dies before being able to collect, they lose everything they contributed over the course of their working life and cannot pass the funds to a beneficiary. So it just ends up basically like an extra tax they were forced to pay. Seems to me it is especially unfair to single people since a spouse would at least get some survivor's benefit.

[@James_48]

It could be what you suggest but then it would cost magnitudes more. Just like an annuity with a survivor’s benefit costs much more than one without. Funds that end up not being paid out to early decedents are what helps to keep the overall cost of CPP where it is at are at today.

[@stationfire1984]

Young people don’t understand CPP. Thanks for sharing this and opening the conversation

I loved the comparison between countries.

[@charlenefritz]

So great you had the idea to present this. Thank you Mark! I learned a lot about CPP and most important, I feel less overwhelmed and can ask myself better questions as a result. Knowledge is power! I manage my Moms retirement investment accounts and as a result, see her CPP rolling in. I also can't help but wonder about myself moving forward into retierment in 20 years. You make a good non-bias presentation which someone in the government should probably be doing which you kindly pointed to. Service Canada needs to up their game and educate. Thanks again, well done video and info!

[@MountainFinance]

Good job Marc. There is a lot of people out there who are misinformed about the program or just plain don't understand it. I recently did a video on CPP as well and was surprised how well received it was. I really do believe there is an audience out there for retirement related content and I know you like to cover it which I think is great. I also think the way you present it is very friendly which is the best way to go in my opinion.

[@brucecampbell7347]

CPP is a great program. Most people don't have time, willpower or knowledge to invest for themselves. The government does not want people living in poverty as a general rule. CPP is also paid for life your RRSP is not guaranteed and once it is gone it is gone.

[@beaviswealth]

Thanks, Bruce. I do plan to create a video that specifically addresses the issue of killing the CPP and having each individual manage the money themselves. Although I'd love that personally, I think the results would be disastrous. Hope to get that up before too long. Cheers. - Marc

[@nathanhildebrandt2672]

​@@beaviswealth Say Im self-employed in SK, and make $60,000 a year. This means I'm forced to contribute to CPP 6,441 per year ($537 monthly). If that compounds @ 7%, after 45 years it comes to $2,048,503.64. Somehow the neighborhood of $717 per month is a good deal for me? And if I die before 65 years the state takes it all? To me it seems like an epic fail of a program?

[@brucecampbell7347]

@@beaviswealth I agree that people such as yourself, myself and some others that are on this channel may benefit if we had the ability to invest the money from CPP by ourselves, but we are in the minority. From a quick web search the average Canadian has 112 thousand in RRSP contributions. This is much lower then what would be required to live a comfortable retirement even by the most meager of standards. The average CPP payment is around 8600 a year, for the average 30 year retirement that would be over 258,000 dollars. Adding OAS to this of about another 6500 a year at 65 that is another 130,000. Combining OAS and CPP will equate to 390,000 for the average Canadian. Much more then the average person would think about saving for themselves. Forced savings is a good thing, because many people live for today and don't think about tomorrow.

[@James_48]

​@@nathanhildebrandt2672 There are a lot of additional factors to consider using your numbers. First, your contribution numbers are 85% of the maximum. Today, that CPP benefit would be about $1,120; that's 56% higher than 717. Secondly, yes, today you would pay $6,441 per year, but 45 years ago at 85% contribution to CPP would have been a measley $287.64 / year to get your $13,440 per year. But, let's say you started your 45 years today, and you contribute 85% of the maximum for the next 45 years. Any guess what your CPP payment will be 45 years from now? My back of the napkin math says it'll be around $3,653.48 / month. Also, while those of us who are not self employed don't always see it this way, the employer is making half of our CPP contribution on our behalf, but you can be damn sure they factor that into our total compensation package.

[@clarifyingquestions]

My thesis is that too many Canadians have not responsibly saved for their elderly selves and those who did will have to subsidize these people.

[@Carol8693]

700s great to know ✅ that’s one of the reasons why I love your videos and Brandon ‘s ❤️🙏. Cheers to all of us who are being educated by you two 🙏Highly appreciated! Thank you Marc .

[@JHM52]

The tragedy with CPP (and OAS) is the people who need it the most are least likely to benefit. I deferred my public pensions to age 70 and am currently receiving a little over $30,000 a year from CPP & OAS - I think the maximum is about $33,000.00 but my other income puts me in OAS clawback territory. It’s likely that anyone who defers their public pensions to age 70 has other income streams - the key there is to start young. $1,000/year invested at a very conservative 5% will grow to $130,000 over a 40-year career and most Canadians, even those with very little money, waste more than that every year.

[@rexertek]

The CPP Survivor's Benefit is unfair. If both spouses worked and contributed to their CPP, they both will receive CPP when they retire. If one spouse dies, and the surviving spouse is already collecting the max CPP payable, the surviving spouse will not receive any CPP survivor benefit. That means that the household income, when one spouse dies, will reduce by the sum of CPP+OAS (of the spouse that dies). So, all those years of contributions (employee+matched employer) from the spouse that died will not benefit the surviving spouse. This needs to be addressed in any applicable retirement income plan.

[@James_48]

I see both sides of this one. I do agree that capping the survivor's CPP at the individual maximum can be seen as punitive, but this formula also limits contributions. In other words, to make it possible to raise the survivor's pension above the individual maximum the cost of the plan would increase. The cost already takes into account that some people pass earlier than others so a change to increase the survivor's pension beyond what it is today will add a fair bit of cost. I haven't decided if it would be worth it. Ultimately, I agree with your final statement, a good financial plan will take into account the possibility that one partner in a relationship might significantly outlive the other and the plan must meet that individual's financial needs.

[@gamesfun5128]

Wow! That must be a great disadvantage for Widows! Gender should not be used as a negative outcome for Wives who have lost their Spouse. 😢

[@smallmj2886]

I think the biggest reason for the mistrust of the CPP is leakage across the border of American mistrust in Social Security. Their system is underfunded, so some people assume that our system has similar problems. A general mistrust of government in certain circles is another factor that is amplified by certain aspects of American media.

[@joedenatale4176]

Thanks Marc for this great video. Since I live in Quebec we contribute to the QPP not the CPP. I assume that it followed the same rules and regulations as the CPP and managed 5he same way. It be interesting to hear if they are similar or is there any differences. What is your view? Thanks again for the great content.

[@sandray7609]

My husband stayed home to raise our kids. He called CRA to find out what he would get given he was stay at home. CRA said he didn't qualify for the bump up because the child benefit was in my name instead of his. Who would know that matters? The system assumes the wife stays home. Our money was pooled so it's ridiculous. One of the quirks of the program that isn't fair

[@juliamartin3817]

Love this video, can the same be said for QPP?

[@randalmacnair1500]

This is a provocative piece. I regularly talk to people about retirement and my impression is that there is a very high degree of trust in the CPP. Could you direct me to the data that supports your assertion that there is widespread scepticism about the CPP program? I can't find anything online that indicated that there is this kind of concern. That said, your defence of the CPP is solid and should be shared. Cheers!

[@beaviswealth]

Hi Randal. Really appreciate you leaving your comment. I find mixed results when people speak about the CPP, but I know a significant number of our viewers feel the CPP doesn't serve them well. That said, in my own circle, I agree that most would say it's a reasonable part of an overall retirement plan. I did a quick Google search and up came rather negative articles from a number of sources. Perhaps anecdotal, but real in the minds of many. I think they key is to understand that the program is meant to supplement your retirement income, not provide it. That's a fact that's missed by many. For those unfortunate who struggle with health issues, that's a whole other ballgame. Thanks for watching. - Marc

[@randalmacnair1500]

@@beaviswealth Thanks Marc. Yes, I found some of those types of articles too but nothing to really back up the statement. You are (obviously) spot on with respect to the caveat "supplement." It will be interesting to see what happens as the generation that starts receiving the enhanced CPP in the future. I think that will make a big difference in reducing poverty in retired demographic in the future. As I mentioned, a solid piece and anything that improves financial literacy is a good thing. Keep up the great work!

[@James_48]

I agree. Sure, there are CPP detractors but I’m not convinced it’s to the degree suggested here. “A ton of distrust” & “huge cause of distrust“ are subjective statements I guess but they sound like hyperbole to me. I for one would have welcomed a more definitive rebuke of these perceptions / beliefs. CPP is complicated but there are lots of tools available to get a much better understanding of how to calculate one’s benefit.

[@MinnieOnCam]

Wow right now my ODSP is $1454 a month it goes up by $100 if I work in the previous month and net income under $1,000 so CPP-D looks very depressing. And it's depressing being disabled, self-employed and not making enough net profit to contribute to CPP

[@kimmykero2421]

Certainly the numbers you've shared especially the organic growth (net income from the various investments) is very encouraging! Unfortunately doubters or people who believe in conspiracies will remain mistrusting, perhaps in part because of their greater payout expectations from the program (ignoring the fact that CPP was never intended to fully replace income in retirement). Great video!!

[@beaviswealth]

Hi Kimmy. Thanks for watching and commenting. It shows that you have good insight. 👍 - Marc

[@stevephoung2372]

Thank you Marc, I always learn something from you.

[@JB-ku5ml]

years ago it was calculated they could pay 1k to pensioners but nah we cant do that

[@jasonstupak4535]

Great info, thanks Marc!

[@barryma7065]

Basically the longer you live, the better return you get. So let's stay healthy my friends

[@beaviswealth]

"let's stay healthy".... I like that. - Marc

[@TheRazzaManazza]

The faster you die, the less you need!

[@glennwebster6344]

Just started getting my CPP last year. What surprised me was the amount I got seemed to be based on last years income and not what I was earning at the time I started collecting. I think it should be based on current income status.

[@roberttaylor3594]

ABUSE OF THE CCP: in several US States the pension plans have been raided to fund various programs and never returned. I don't remember where I watched that story but it was. reputable news source...like CNN or something. Would be easy to Google. So when I heard about Alberta govt taking over the teacher pension plan I was a bit disturbed....I live in BC, but still...something to watch.

[@Exotic3000]

I own my own business. As such, I pay $7,000 per year, just for myself into the CPP. Yet, when I retire in a few years at 61, I will barely get $10,000 per year. So it’s total rip-off!

[@vancouverdiaries738]

Of all the objections, i feels like if we stop cpp, then in old age we have to see more crimes. Now atleast this pension puts food in plate to some people atleast. To run a healthy society, this contibutions can be helpful. I feel all this money which i am contibuting is for a peaceful society for upcoming generations. Also bit of money when i am retired

[@sherricooper5977]

CPP is a benefit that all of us should be thankful that this was put in place. But the government also realized there needs to be more welcome the rrsp, and now we're really lucky because we have the TFSA. I am just hoping tfsa rules don't change

[@beaviswealth]

📈📚 Join The Investing Academy ➤ bit.ly/theinvestingacademy Is the CPP system unfair? Or is it so complicated that Canadians can't figure it out, which then leads them to believe it's unfair? We'll discuss some of the major problems with the perception of Canada Pension Plan program.

[@momo35444]

what great knowledge!!! thanks for the awesome video Marc.

[@beaviswealth]

My pleasure, Momo! Thank you, as always. - Marc

[@jackcarter4958]

Thank you for the explanation and details Marc. To be honest though, at this point I do feel strongly that the CPP payments is a mandatory one-way obligatory contract with the government, when you pay to them now and they maybe give you something some day, if nothing else happens. Instead of wasting those $3,754 a year to CPP payments I'd prefer to have them invested in my RRSP. Considering the average pension now is just around $700, and if I leave Canada to retire in a cheaper country where I can afford to live without a job I won't get any AOS etc, so my pension will be half of that, if any... Maybe I don't get some things here, but so far I don't trust the system. If you don't think about your pension beforehand and start saving & investing now - you're gonna starve later.

[@beaviswealth]

I totally hear where you're coming from. I'm planning a video that speaks to exactly what you're saying, so hopefully you'll catch that in the next little while. Appreciate you watching the video and taking the time to comment. - Marc

[@James_48]

When you are contributing the max every year as you have described, you will almost certainly get much more than the average CPP but of course that will also depend on how soon before 65 you might choose to retire.

[@alienwizards3246]

CPP said it earned 1.3 per cent in its most recent fiscal year (ended March 31). That beat the fund's reference portfolio (an internal benchmark it sets for itself), which had a return of just 0.1 per cent, and brought the fund to a 10 per cent annualized return over the past decade. This is garbage performance why cant we opt out?

[@jmc8076]

Some recent news articles say govt still looking at raising age from 60 to 67 over time. Distrust of govts is very high now and TBF not without some cause.

[@GT-tm1ft]

The last Conservative government was going to raise the OAS start point from 65 to 67, but the Liberals stopped that from happening. Nothing like that was or is planned for the CPP.

[@CalmPlains]

Thank you for the video, however, I believe you missed a LARGE contributor to the mistrust... that being, the rampant government overspending and resulting (in combination with the carbon tax) inflation. It doesn't matter how well funded the CPP is, if the money is devalued to the point whereby the payments can no longer keep Canadians above the poverty line. This is a MAJOR source of distrust. We have seen the reckless and unprecedented spending and the inflation is already hurting retirees. Can you imagine the damage by the time some of us retire? No party has plans to pay down the now doubled debt, and the debt service is outrageous. How can we trust a government that tells us to behave with our money, when the government itself so flagrantly overspends our tax dollars, and far beyond.

[@dyingpentas]

$700 per month won't even over utilities and property tax. Better start saving today!

[@beaviswealth]

You know it. "Start saving today..." is the key. Thanks for watching. - Marc

[@68RedDragonz]

well... I am currently getting just under 11% return on my investments, but not all instruments have been around for my working career. Also, how long have low cost investment options where I can invest $20 as I get it been around vs my working and contributing since the mid-80s? Thought so. Finally... according to my last t4, $1761 in CPP contributions this past YEAR. How much is that going to get me even if I had been investing it all the whole time? Sorry naysayers, this ol' git is happy with the gov. returns and massive investment power of billions of dollars.

[@mrslcom]

It’s pathetic how small CPP pension is after a lifetime of contributions.

[@James_48]

I disagree. If you are retiring in 2023, if you worked for 45 years and paid the maximum CPP every year, the total you would have contributed is roughly $86,929 (this is the CPP maximum contribution back to 1978). In that scenario you would receive an annual CPP pension of $15,672 or $1,306 / month. So, in roughly 5.5 years you would receive back the sum of money you contributed. Now, obviously this doesn't take into account the time value of money, but I'm also not measuring the annual increase you'll receive to CPP, and for most people, if they start at age 65 they'll receive between 16 and 20 years of pension. 20 years @ 15,672 / year works out to $313,440. Not too bad. Moreover, if you're only getting the average of around $750/month, they you like only only contributed somewhere between 50 - 60k over your lifetime. I don't think it's such a bad deal when you consider this. Plus, if you defer, the return is much, much higher.

[@mrslcom]

Sure. However, the time value of money is significant because you started contributing 45 years ago while you are only collecting 15-20 years into the future. In addition, whatever higher amount you will collect in the future, in terms of today’s dollar, the present value is the same. So there really is no gain. Secondly, you only contribute half of the premiums, your employers contribute the other half. I’m not sure if that was taken into account in your calculations. Otherwise, the total contribution amount would be double.

[@kcirdorb9591]

If you delay CPP to age 70 but still work beyond 65 ...Do you still pay CPP premiums?

[@DoReMeaCulpa]

Yes, if you work past age 65 you still pay CPP premiums. I think you can even be working and paying into the plan while collecting CPP past age 65. This way your CPP payment will be more once you do fully retire.

[@James_48]

@@DoReMeaCulpa This is incorrect. Once you reach age 65 you have the option of discontinuing CPP contributions. To stop contributing, you must fill out form CPT30 Election to stop contributing to the Canada Pension Plan, or revocation of a prior election. Give a copy of the form to your employer, and send the original to the Canada Revenue Agency ( CRA ). However, if you choose the option to continue paying CPP you will qualify for the Post-retirement benefit (PRB). This will increase your CPP amount.

[@roberttaylor3594]

I trust the CPP. All the criticisms I have heard have been pretty spurious in my opinion. I ani't no smarty pants or nuthin, but if I read the info sloooooooowly, I can figure it out. It is clear everyone who isn't paying into it for whatever reason is clearly SOL, though. Working under the table is not a good idea in general. a common complaint: "everyone has it better off than me!"

[@James_48]

Agreed

[@Chahlie]

Sometimes it just doesn't seem to matter whether you worked and paid into CPP, as people on the 'old people's welfare' (or GIS) get the same income monthly as many other people who actually worked for it. It's bizarre. Now of course folks can sink money into their TFSA and still have zero income in retirement, and so get GIS.

[@James_48]

GIS isn’t a huge windfall but I hear you. I do think after the TFSA has been around for 30+ years there’s going to have to be some changes to the income test for GIS to include TFSA withdrawals. There’s too much risk of $1,000,000 TFSA holders getting GIS once we’re that far into the history of the TFSA. No doubt it’ll happen sooner than that but I don’t think to any great scale.

[@Andrew-uh2er]

The growth rate on CPP contributions is so poor that you would be better off, contributing the same amount and letting it rocked in a bank account with no interest for the same amount of time. By the time he retire, you would have more money in that account then you would be able to accumulate from CPP payments! Pretty sad how bad it is

[@MasterMind468]

So what are your thoughts on inflation, profit gouging, and how poorly millenials are paid these days? And please, do not be biased because you guys are stock market people. I’m a stock market person but i’m not a capitalist Asshole