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  • Oct 13th, 2018 10:52 am
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[OP]
Deal Fanatic
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Apr 11, 2008
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CPP vs. DB Pensions

Has anybody done any calculation comparing CPP to a typical DB pension?

It seems to me that CPP which pays 0.6% of the income/year served with 5% contribution rate sucks. Am I missing something?
78 replies
[OP]
Deal Fanatic
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Apr 11, 2008
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Conquistador wrote:
Oct 9th, 2018 12:14 am
Are you trying to be serious here because this is one of the most ridiculous questions I've seen of late. There is absolutely no comparison between CPP and a defined benefit pension plan. Please troll somewhere else.
Huh? Care to explain? I am not a pension expert, but it seems to be a DB pension plan.

"A defined benefit pension plan is a type of pension plan in which an employer/sponsor promises a specified pension payment (CPP does), lump-sum (or combination thereof) on retirement that is predetermined by a formula based on the employee's earnings history (CPP does), tenure of service and age (CPP does), rather than depending directly on individual investment returns. (CPP does not) "
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Jan 5, 2003
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CPP is a DB pension, it's just a horrible one that everyone is forced to take part in. And this isn't really controversial :P
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Aug 29, 2011
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Horrible in that it isn’t making much money or horrible that all workers are forced to contribute to it?

Annual rate of return over the past 10 years has been 8%. That seems pretty decent to me.
Deal Addict
Feb 19, 2017
1225 posts
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Ya CPP is pretty much just theft it's so crappy. And when you die you cannot give it to your heirs either so it's just consumed by the government like tax dollars. Would be nice to be able to have my CPP to spend or save as I desire.
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May 10, 2005
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LoANeal wrote:
Oct 9th, 2018 8:52 am
Ya CPP is pretty much just theft it's so crappy. And when you die you cannot give it to your heirs either so it's just consumed by the government like tax dollars. Would be nice to be able to have my CPP to spend or save as I desire.
Tell that to all the people that do not have a company pension plan or significant RRSP when retired.
I strongly suspect that most people would not "be able to have my CPP to spend or save as I desire", otherwise they would have RRSP's already and not waiting for only the CPP.
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Feb 19, 2017
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Pete_Coach wrote:
Oct 9th, 2018 9:02 am
Tell that to all the people that do not have a company pension plan or significant RRSP when retired.
I strongly suspect that most people would not "be able to have my CPP to spend or save as I desire", otherwise they would have RRSP's already and not waiting for only the CPP.
People make bad decisions it shouldn't be my problem they do. I planned and saved when I was working minimum wage crap jobs for years. And with TFSA's now existing it's even easier. I, nor anyone else, should be burdened with the fact someone else was bad at planning or thinking ahead.
RFD is love. RFD is life. I wish I had an RFDer for a wife.
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LoANeal wrote:
Oct 9th, 2018 9:08 am
People make bad decisions it shouldn't be my problem they do. I planned and saved when I was working minimum wage crap jobs for years. And with TFSA's now existing it's even easier. I, nor anyone else, should be burdened with the fact someone else was bad at planning or thinking ahead.
Decisions are made based on a persons state and ability at the time . There are many that do not have the money to put aside after they have spent it all housing, feeding and clothing their families, let alone the approx $700K or more to have a RRSP annuity ($700K is what "they" are saying you need)..
Your presumption is based solely on your status and insinuating all others are bad at planning is wrong. Saving is not easy for many people.
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mrweather wrote:
Oct 9th, 2018 6:49 am
Horrible in that it isn’t making much money or horrible that all workers are forced to contribute to it?

Annual rate of return over the past 10 years has been 8%. That seems pretty decent to me.
You don't get the 8% because it's DB. I've read on a few places that the current benefits work out to 2-3%.

People look at the max payout and think that's what they'll get but it's rare to get that. The average benefit is $673/mo.
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Jan 15, 2017
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I did a rough spreadsheet calculation that shows that if I draw CPP at 65 and live to 80 I'll receive roughly $227,000 in benefits. I'm in my 50s, and I've probably paid in something like $100K.
Deal Fanatic
Feb 1, 2006
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This article does a decent analysis

https://retirehappy.ca/is-cpp-a-good-deal/

Summary - it used to be a better deal, it's now 2%-3.5% return. Not great, but at least we won't have as much social costs to pay down the road for all of the fools who don't save anything, or the unfortunate who can't, for whatever reason.
Deal Addict
Dec 28, 2008
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Toronto
taxrage wrote:
Oct 9th, 2018 12:53 pm
I did a rough spreadsheet calculation that shows that if I draw CPP at 65 and live to 80 I'll receive roughly $227,000 in benefits. I'm in my 50s, and I've probably paid in something like $100K.
Double the contributions as both you and your employer contribute.
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BryceS wrote:
Oct 9th, 2018 7:37 pm
Double the contributions as both you and your employer contribute.
Right, so from that perspective it's not bad for the contributor but poor overall.
Jr. Member
Nov 28, 2017
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taxrage wrote:
Oct 9th, 2018 7:56 pm
Right, so from that perspective it's not bad for the contributor but poor overall.
And if you live to 95?

It's a hedge, against both long life and inflation. It is also a pretty reliable fixed return which allows you to take on more investment risk in your own savings.
Sr. Member
Jan 19, 2008
941 posts
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Etobicoke
taxrage wrote:
Oct 9th, 2018 12:53 pm
I did a rough spreadsheet calculation that shows that if I draw CPP at 65 and live to 80 I'll receive roughly $227,000 in benefits. I'm in my 50s, and I've probably paid in something like $100K.
BUT you will most likely live longer than 80 if you have made it this far.

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