I have received posts about issues with the Canadian Pension Plan. The have been forwarded to me by some of my well meaning cousins. The TaxPayer Federation of Canada investigated the claims and they issued a bulletin on this. It is below:
We are
forwarded a lot of emails about CPP and those who died before they collected
it. We did a thorough look at one back in 2013, and even though the emails we get now
are similar they have changed over time so here is a fresh look at the most
recent version.
The email
claims that CPP is ripping Canadians off, and the figures it uses are alarming.
We crunched the numbers, did the research and the results are conclusive, the
email is a hoax.
The email is
a revised version of an email written for an American audience about the American Social
Security program. Someone just replaced all the American references with
Canadian ones, and sent it around. Of course that means its claims about CPP
aren’t true, but the original email’s claims about Social Security weren’t true
either.
CPP has
problems, but we should criticize it with solid information. Here is a detailed
breakdown, claim by claim.
Claim
1: “THERE IS NO MONEY IN THE CPP FROM
THE GOVERNMENT OF CANADA”
True.
CPP funds come from employee and employer’s contributions. Unfortunately, this
claim is the only one we looked at that is true.
Claim
2: “ONE VERY MAJOR THING WRONG WITH THE GOVERNMENT’S CALCULATIONS OF ‘AVAILABLE
CPP’ IS THAT THEY FORGOT TO FIGURE IN THE PEOPLE WHO DIED BEFORE THEY EVER
COLLECTED A CPP CHEQUE!!!!! WHERE DID THAT MONEY GO?”
Partly False.
Your benefits from CPP don’t necessarily end when you die. Some of the benefits
are transferred over to your spouse and children. Your
spouse can collect up to 60 percent of your CPP benefits. Your children under
18 —or under 25 if they are a student— can collect a
$241 a month
benefit. CPP also has a one-time lump sum “death benefit” payment worth up to
$2,500.
Claim 3: “REMEMBER, NOT ONLY DID YOU AND I CONTRIBUTE TO CPP BUT YOUR EMPLOYER DID,
TOO. IT TOTALED 15% OF YOUR INCOME BEFORE TAXES. IF YOU AVERAGED ONLY $30K OVER
YOUR WORKING LIFE (SAY 45 YEARS), THAT'S $202,500. READ THAT AGAIN. DID YOU SEE
WHERE THE GOVERNMENT PAID IN ONE SINGLE PENNY?”
False. No one has contributed nearly that much. Contributions for CPP are 9.9%, not 15%, and up
to 1986, they were only 3.6%. If you and your employer made the maximum every
year from age 18 to 64, the total contributions are only $95,626.
Claim 4: IF YOU CALCULATE THE FUTURE INVESTED VALUE OF $4,500 PER YEAR (YOURS &
YOUR EMPLOYER'S CONTRIBUTION) AT A SIMPLE 5% INTEREST, AFTER 49 YEARS OF
WORKING YOU'D HAVE $892,919.98.
False: Average
contributions from someone
turning 65 in 2017 were only $2,035,
and they would be lower for anyone older than that.
Also, with five percent interest the contributions would only add up to around $200,000.
Claim 5: IF YOU TOOK OUT ONLY 3% PER YEAR, YOU'D RECEIVE $26,787.60 PER YEAR AND IT
WOULD LAST BETTER THAN 30 YEARS (UNTIL YOU'RE 95 IF YOU RETIRE AT AGE 65) AND
THAT’S WITH NO INTEREST PAID ON THAT FINAL AMOUNT ON DEPOSIT! IF YOU BOUGHT AN
ANNUITY AND IT PAID 4% PER YEAR, YOU'D HAVE A LIFETIME INCOME OF $2,976.40 PER
MONTH.
False: If you
withdrew 3 percent each year it would be less than $6,000. If you could get 4
percent each year from your annuity that would only be $660 a month. The
maximum CPP benefit is almost double that at $1,114.
Claim 6: “THE ENTITLEMENT: THEY ARE CALLING CPP PAYOUTS AN ENTITLEMENT. ENTITLEMENT
MY FOOT, JUST BECAUSE THEY BORROWED THE MONEY FOR OTHER GOVERNMENT SPENDING,
DOESN'T MAKE MY BENEFITS SOME KIND OF CHARITY OR HANDOUT!! “False: This is a
clue to the email’s American origins because in Canada we don’t often call
government benefits “entitlements”. Also, this isn’t true because the
government didn’t spend any of the CPP contributions. CPP contributions aren’t
used to fund other programs, and after reforms over the last few decades CPP is
well-funded.
Claim 7: THE REFUGEES: THE LATEST ESTIMATE (AS PER GLOBAL NEWS) IS THAT IT IS GOING
TO COST SIX HUNDRED MILLION ($600,000,000) TO BRING IN THE 25,000 REFUGEES. THE
GOVERNMENT (ACCORDING TO THE PUBLIC ACCOUNTS OFFICE) IS ALREADY FIVE BILLION IN
THE HOLE. HOW MUCH MORE WILL THEY TAKE FROM OUR CPP TO COVER THIS EXPENSE? “
False:
No money will be taken from CPP contributions to cover the deficit, which is
currently projected to be $25 billion. All contributions to CPP are spent on
CPP benefits and administration.
