CPP is one of the great ways that the government keeps our wealth locked away from us. 5% growth over 40 years is dismal when compared to historical averages of a well diversified portfolio. Regardless, there are many, MANY reasons why CPP is not good for Canadians who can save for themselves. Here I will illustrate a few of them:
1) Employer Contributions
I am 27 and earn $36,000/year and pay $1,651 to CPP, which my employer has to pay as well. If my employer did not have this expense to employ me they could pay me an additional $1,651 instead of paying to CPP. So effectively the employer contribution I am really making myself. Therefore I am paying $3,303.56 into this ponzi scheme.
2) Reduced Growth
Using the following calculator:
http://www.cortrustbank.com/FinancialTo ... ulator.cfm
...I have run 5% and 7% average annual returns over 38 years to take me to age 65.
7% annual growth on $3303.56/yr contributions gives $672,809.89 at age 65.
5% annual growth on $3303.56/yr contributions gives $397,496.47 at age 65
3) Reduced Income
Running the following illustration for 7% and 5% annual growth, then conservatively using 5% annual growth in the years where I am actually drawing income from this plan would give me annual incomes of $33,640/yr and $19,874.80 respectfully. At these income levels I never touch my principal. Compared with CPP that is 2-3 times greater income, depending on your growth assumption.
***Keep in mind that this is assuming that we will never touch our accumulated capital. In reality CPP does not hold an estate value (unless you have a spouse who gets a meager widow pension if you predecease them) so theoretically I should be able to draw down my capital annually toward my life expectancy OR purchase an annuity that will give me a much higher yield than 5% in retirement (Let's compare apples to apples here).***
a) I retire at age 65 and draw as much incoe from my $672,800 (still getting 5% ave growth) as possible for 30 years till I am 95 and I could draw over $43,000/year till I was out of money. If I died before I was 95 anything left would go to my beneficiaries.
b) A single life straight prescribed annuity for $672,800 would easily give me over $50,000 annual income tax-preferred.
4) More Restrictions
Being forced to pay into CPP means I cannot access this program until I am 60-65, even if I need the income sooner due to successful early retirement.
5) No Estate Value
CPP has litte to no estate value, meaning that my children and grandchildren, who could have benefitted from my $672,800 for many years into the future (Assuming I just lived on the income it could provide) will now have to live in poverty and start from near scratch as I had to because the Government stole their trust fund by making me put it into their CPP Ponzi scheme.
If Canadians insisted that the Government that we elect allow us to manage our own lives and insisted that our schools teach children financial management from an early age, then we would be much better off as a Nation. Period. There is so much wealth in this country but your government holds it in trust from you for your whole life and then doesn't pass it on to your desired heirs. But hey, this shouldn't bother you if they never tell you this. I could go on forever but if I can find a way to opt out of this program and stop having the government wipe my bumb for me I would do it in a heartbeat.