Time To Expand the Pension Plan?

Canada pension - Keith Thomson, CFP®, CIM®, FCSI®There is a lot of debate regarding whether or not the Canada pension plan should be expanded. In June, Finance Ministers will meet to further discuss and ultimately decide whether or not the Canada Pension Plan (CPP) should be expanded, according to the article. The plan put forth by the Canadian Labour Congress (CLC) would, over time, increase CPP benefits. Currently, retirees are eligible for a maximum of roughly $1,000 per month; however, the average individual receives barely more than $500 a month – under the CLC plan, benefits would double.1

Here are a few of the reasons given for expanding CPP benefits:

1.) Currently, two in three Canadian workers do not have a workplace pension plan. Therefore, an expansion of CPP benefits would greatly benefit them.

2.) Less than one in four Canadian tax filers made a contribution to an RRSP last year. In today’s economy, it can be very difficult for anyone to save money for retirement. Even those that are able to put money aside typically aren’t able to put enough aside. Expanding the CPP benefits would help protect those individuals and enable them to have a secure retirement.

3.) CPP benefits are mobile. While individuals used to stick with one job for the length of their working life, that is becoming rarer and rarer. In today’s working environment, individuals will likely change careers 3 or more times. CPP benefits can move across not only jobs but also locations (different provinces).

4.) One in three seniors currently receives payments from the GIS (Guaranteed Income Supplement), a program that will run a tab of approximately $10 billion dollars (this year) for the federal government. In theory, allowing individuals to save more for retirement via CPP expansion would free up funds in federal and charitable programs.

5.) Canadians currently pay less into their public pensions than most other OECD countries; Expanding the CPP would help “update” Canada and bring it in line with other advanced countries.1

These are only a few of the arguments for CPP expansion. Of course, there are disadvantages as well, which is why it is important for all Canadians—from Finance Ministers to the public—to carefully weigh each side of the issue.

1. https://rabble.ca/news/2013/05/top-10-reasons-its-time-to-expand-canada-pension-plan 

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Keith N. Thomson

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