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I'm a Canada Pension Plan (CPP) expert. Any questions?

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  • Feb 4th, 2023 4:10 am
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Sr. Member
Nov 3, 2007
897 posts
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Cambridge
asbraich wrote: I'd prefer the ability to opt out and put mine/my employer's CPP contributions towards a locked in RRSP.

Unfortunately CPP is partially a welfare program where we subsidize the stupid/incompetents in Canada so we need to consider the social benefit.

Well there is a lot of people who don't have private pension plans and made low wages in the day, CPP is not welfare stipend sorry
Cambridge,Ontario
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tyreman wrote: Well there is a lot of people who don't have private pension plans
Yes, so what?
tyreman wrote: and made low wages in the day
Yes, so what? Their CPP will also be low as a result. But that has nothing to do with what I said regarding their potential to earn more retirement income if their contributions weren't locked into a substandard program.
tyreman wrote: CPP is not welfare stipend sorry
Yes, it's worse. One could argue that it's borderline theft to takes someone's money, earn a 8% return on average then return it to them in the form of an annuity as if you had only earned 2-3%. And only in that way ensuring nothing would be left to their heirs/estate except for a pitiful survivors benefit and $2500 bucks of chump change to bury you.
Sr. Member
Nov 3, 2007
897 posts
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Cambridge
I can certainly agree its not much really when you figure it all out,
One should even be able to personally to "top it up"....... but you can't even do that

As a trade worker for 30 years I happened to work for a lots of interesting people.....
I worked for a private think tank fellow who was doing a CPP study of some sorts for the Government who in the '87 era told me that they could pay everyone 1k a month..that was then!

I was shocked at this but really shouldn't have been


workers are entitled to it... it was deducted, so i guess that is why i would certainly hesitate to call it welfare
Cambridge,Ontario
Member
Jan 26, 2007
201 posts
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Hi Doug Runchey, can you please help me to understand CPP calculation for the following scenario.
My wife and I are immigrants came to Canada 15 years ago, and my wife was working just simple survival job with ~20 to 30 K/year. She stopped working (due to health issues) some 5 years ago and she is 61 y.o. now.
I was lucky and have job with higher than average salary for all the years we're in Canada.
When I try to simulate my wife income (per say from early taking CPP with Tax software), I see there's "penalty" ~20% due to fact that a part of my salary, which should benefit from basic amount shifted to my wife is reduced (due to taking my wife CPP in simulation).
I know my wife would be "penalized" for zero contribution years..., but I don't understand severity and how to calculate it. I want to understand how missing contribution years are impacting CPP at 65 y.o. in the case of my wife - specifically if she is not contributing anymore to CPP.
Can you please kindly advise.
Thank you,
Rad.
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Wow Dogger, you've been at this for a few days shy of a decade now.

Congrats on that milestone!

And thank you for all of this valuable information.
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Jul 11, 2009
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asbraich wrote: Yes, so what?



Yes, so what? Their CPP will also be low as a result. But that has nothing to do with what I said regarding their potential to earn more retirement income if their contributions weren't locked into a substandard program.



Yes, it's worse. One could argue that it's borderline theft to takes someone's money, earn a 8% return on average then return it to them in the form of an annuity as if you had only earned 2-3%. And only in that way ensuring nothing would be left to their heirs/estate except for a pitiful survivors benefit and $2500 bucks of chump change to bury you.
I agree.

I would rather have the option to out, and have additional room in my RRSP - for both my and my employer's contribution room.

Why should low income seniors be treated any different than low income middle aged or young workers? There are social programs already in place for those people.
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Mar 10, 2018
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does it matter?
a bit OT but just logged in to CRA account after long time. I see the CPP link on right side bottom is working now. You can login CPP account and check details.
Tried new coffee and doughnut. Found same old stale thing. expected bill of six bucks but it was 600 million. Big mistake so the guy said don't worry it is on the house. going back to McD.
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callernamet wrote: a bit OT but just logged in to CRA account after long time. I see the CPP link on right side bottom is working now. You can login CPP account and check details.
When you say CPP account, do you mean Service Canada?
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[OP]
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Dec 12, 2012
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Nofirstname wrote: Hi Doug Runchey, can you please help me to understand CPP calculation for the following scenario.
My wife and I are immigrants came to Canada 15 years ago, and my wife was working just simple survival job with ~20 to 30 K/year. She stopped working (due to health issues) some 5 years ago and she is 61 y.o. now.
I was lucky and have job with higher than average salary for all the years we're in Canada.
When I try to simulate my wife income (per say from early taking CPP with Tax software), I see there's "penalty" ~20% due to fact that a part of my salary, which should benefit from basic amount shifted to my wife is reduced (due to taking my wife CPP in simulation).
I know my wife would be "penalized" for zero contribution years..., but I don't understand severity and how to calculate it. I want to understand how missing contribution years are impacting CPP at 65 y.o. in the case of my wife - specifically if she is not contributing anymore to CPP.
Can you please kindly advise.
Thank you,
Rad.
Hi Rad - Ignoring the "enhanced CPP" (which we can do because she hasn't worked since 2019) the formula is the same for everyone at age 65 (immigrant or Canadian-born). Convert each year of earnings to a % of the YMPE for that year, total your "best 39 years", divide by 39 and multiply by the base maximum ($1,288.33 for 2023).
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nielboy wrote: Wow Dogger, you've been at this for a few days shy of a decade now.

Congrats on that milestone!

And thank you for all of this valuable information.
Hi NB - Thanks for the acknowledgement! Let's see if I can stick around for another 10 years.
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Mar 10, 2018
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does it matter?
will888 wrote: When you say CPP account, do you mean Service Canada?
correct. It was not working or link was removed after CRA hack I think.
Dogger1953 wrote: Hi NB - Thanks for the acknowledgement! Let's see if I can stick around for another 10 years.
Great job Dogger1953 salute.
Tried new coffee and doughnut. Found same old stale thing. expected bill of six bucks but it was 600 million. Big mistake so the guy said don't worry it is on the house. going back to McD.
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Mar 9, 2012
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asbraich wrote: Yes, so what?



Yes, so what? Their CPP will also be low as a result. But that has nothing to do with what I said regarding their potential to earn more retirement income if their contributions weren't locked into a substandard program.



Yes, it's worse. One could argue that it's borderline theft to takes someone's money, earn a 8% return on average then return it to them in the form of an annuity as if you had only earned 2-3%. And only in that way ensuring nothing would be left to their heirs/estate except for a pitiful survivors benefit and $2500 bucks of chump change to bury you.
I don't disagree with you. At least for this generation of payers into the CPP program.

Back when it started, the rate was 1.8% on $5,000 (that $5,000 would be $43,250 in 2022). in 2022, rate was 5.7% on $64,900. And in 2023, it will be 5.95% on $66,600. Exemption has remained at $3,500 since 1996 (it used to be indexed).

The CPP is a forced savings for Canadians. Nothing more. It also forces companies to contribute towards this savings (I have no issues with this).

Here is the problem with CPP: For younger people, and even older folks, we have never experienced the lower contribution (it has been going up almost yearly since I started contributing) nor have we been given any breaks for exemptions. Also, CPP is taken on a large share of our salary when adjusted for inflation. According to the charts I have seen, we're paying CPP on income that is 150% higher than when it was first instituted and about 3.3x the actual rate, than in 1966.

For example, if we had the same rate as 1966: For our 2022 tax year, we would have paid $684 for CPP vs the $3,500 we actually paid. (It would be 1.8% of $43,250 MINUS $5,200 exemption, if everything is adjusted for CPI/inflation).

So it was underpaid for years, and now the younger workers have to pick up the tab of this Ponzi scheme.

And you're right, the returns CPP make, and what we pay into it, we are getting ripped off large. A $2,500 death benefit is a joke for someone that dies at 65 and never collected a cent of CPP. It had been indexed until about 1997 ($3,580) and then reduced in $2,500 in 1998. Again, if adjusted for inflation, it would be $4,000 today (based on original numbers - or $6,000 based 1997 amount)

Another things about CPP getting out of control, contribution wise, is that it will mean in the future, some who may have qualified for GIS won't. There will also be more people having their OAS cut-back. I won't fall into either category so it means nothing to me, but for many it will. Have a smaller paycheque today, when you retire, you don't qualify for GIS or OAS (or not a full amount of either).

I had calculated that, if your CPP value only goes up by inflation (so no growth), it takes about 15 years for you to get all of your money back out of it. That means the average male will lose money, since life expectancy is 79 years. Women gain a couple years on CPP -- but again, this assume poor performance that only matches the CPI.

CPP actually does have good returns. And as I mentioned before, those who paid into it years ago never paid their proper share. Back then the government knew they didn't have enough contributions, but passed this CPP legislation, with the idea of screwing workers in the future. And they did just that.
Why can't we all just get along?
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Nov 24, 2013
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jeff1970 wrote: I don't disagree with you. At least for this generation of payers into the CPP program.

Back when it started, the rate was 1.8% on $5,000 (that $5,000 would be $43,250 in 2022). in 2022, rate was 5.7% on $64,900. And in 2023, it will be 5.95% on $66,600. Exemption has remained at $3,500 since 1996 (it used to be indexed).

The CPP is a forced savings for Canadians. Nothing more. It also forces companies to contribute towards this savings (I have no issues with this).

Here is the problem with CPP: For younger people, and even older folks, we have never experienced the lower contribution (it has been going up almost yearly since I started contributing) nor have we been given any breaks for exemptions. Also, CPP is taken on a large share of our salary when adjusted for inflation. According to the charts I have seen, we're paying CPP on income that is 150% higher than when it was first instituted and about 3.3x the actual rate, than in 1966.

For example, if we had the same rate as 1966: For our 2022 tax year, we would have paid $684 for CPP vs the $3,500 we actually paid. (It would be 1.8% of $43,250 MINUS $5,200 exemption, if everything is adjusted for CPI/inflation).

So it was underpaid for years, and now the younger workers have to pick up the tab of this Ponzi scheme.
While I don't feel Dogger's great and helpful thread is the best place for this, I will say that you are glossing over both the history of CPP and where it's going.

While it's correct to note that CPP contributions started lower and the program was funded on a PAYGO basis, benefitting initial/older contributors, the paradigm shift in the '90s (it's been that long) to higher contributions coincided with changing the model to an actual pension plan, with an investment board. PAYGO rates that were sub-3% were phased up to a 4.95% contribution rate that remained in place for 15 years, and technically* remains in place today. This was the catalyst for the growth in the assets backing CPP, and the program is now sustainable out the 75 years it's intended to be.

*I say the 4.95% is still technically in place because of the other piece you've glossed over, which is CPP2, or the CPP expansion that began to be phased in in 2019. Of the 5.95% we're contributing today, 4.95% still goes into "old" CPP, while the additional 1.0% is segregated into a "new" CPP. These additional contributions fund an expanded CPP benefit which also started being phased in in 2019. Anyone currently working or who has worked since 2019 will be eligible for higher CPP benefits, and it's us that are actually getting a pretty good deal on this based on the formulations.

CPP Investments is up to over $500B in assets under management. Our pensions are backed by real money, and the current contribution rates enable a ~33% income replacement at 39 years of contribution, indexed, with survivorship.
Newbie
Jan 25, 2023
1 posts
I have been looking for an answer regarding CPP that maybe someone here can help with. I cannot find it on the CRA website.
When I currently go onto My Service Account, it gives me an estimate of my CPP age 60/65/70 (I am currently 58 and retired last May).
Is the estimated amount on My Service based on what you have contributed so far? Now that I have retired, will the amount be negatively impacted since I won’t be contributing additional funds to CPP for the next 6 years.
I have contributed 40 years but only 20 years the maximum.
Just wondering if the amount that I can see changes(drops) with no further contributions, or if that amount is based on what my actual contributions have been so far and should not drop lower.
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Mar 9, 2012
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Mike15 wrote: While I don't feel Dogger's great and helpful thread is the best place for this, I will say that you are glossing over both the history of CPP and where it's going.

While it's correct to note that CPP contributions started lower and the program was funded on a PAYGO basis, benefitting initial/older contributors, the paradigm shift in the '90s (it's been that long) to higher contributions coincided with changing the model to an actual pension plan, with an investment board. PAYGO rates that were sub-3% were phased up to a 4.95% contribution rate that remained in place for 15 years, and technically* remains in place today. This was the catalyst for the growth in the assets backing CPP, and the program is now sustainable out the 75 years it's intended to be.

*I say the 4.95% is still technically in place because of the other piece you've glossed over, which is CPP2, or the CPP expansion that began to be phased in in 2019. Of the 5.95% we're contributing today, 4.95% still goes into "old" CPP, while the additional 1.0% is segregated into a "new" CPP. These additional contributions fund an expanded CPP benefit which also started being phased in in 2019. Anyone currently working or who has worked since 2019 will be eligible for higher CPP benefits, and it's us that are actually getting a pretty good deal on this based on the formulations.

CPP Investments is up to over $500B in assets under management. Our pensions are backed by real money, and the current contribution rates enable a ~33% income replacement at 39 years of contribution, indexed, with survivorship.
You sort of missed my point though. The money we pay today (in addition to the original 1.8%) doesn't all go to us -- it goes to retires who didn't pay enough into it. The money we get, when we retire (and I used 33% for this) is significantly less than our contributions plus investment returns. As I said, if you're the average mail, you lose, and this is with the assumption that CPP failed when investing.

CPP rates, started increasing in 1987, and we haven't looked back.

My other point is that certain benefits (death benefit) not only hasn't kept up with inflation, but in fact was reduced by 43.2%. $2,500 to help buy someone that paid into it for years is a cruel joke.

Also has not kept up: exemption amount. What has kept up and well beyond, is max you have to pay. 2024 and 2025 even bigger surprises. So here it is here where things get strange. Someone earning the max (to pay CPP) year after year, with all these increase, will stop fully funding themselves over the next few years.
Why can't we all just get along?
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Dec 12, 2012
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DPowzie wrote: I have been looking for an answer regarding CPP that maybe someone here can help with. I cannot find it on the CRA website.
When I currently go onto My Service Account, it gives me an estimate of my CPP age 60/65/70 (I am currently 58 and retired last May).
Is the estimated amount on My Service based on what you have contributed so far? Now that I have retired, will the amount be negatively impacted since I won’t be contributing additional funds to CPP for the next 6 years.
I have contributed 40 years but only 20 years the maximum.
Just wondering if the amount that I can see changes(drops) with no further contributions, or if that amount is based on what my actual contributions have been so far and should not drop lower.
Service Canada's "estimates" are actual calculations based on your current average lifetime earnings (after escalating all of the earnings to today's dollar value and applying the 17% dropout). The impact of this estimate is as though you keep earning the same average adjusted earnings level for 83% of the time from now to age 65. If you watch closely, your estimate will likely decrease most months from now to age 65, but it won't decrease any further after age 65.
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Feb 3, 2013
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Victoria
Hi Doug
The January % bump worked out as you had predicted for those who applied for CPP in December. Thanks for bringing that anomaly to the our attention.
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Feb 13, 2007
12 posts
Hi @Dogger1953 if applying retroactively in December 2022...does it matter what day in December is selected as a start of the pension? Should it be Dec 1 or 31 and does it matter? Is the deferral increase due to age lost for the month of December?

Thanks in advance. Just trying to figure out the best scenario.
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mack68 wrote: Hi @Dogger1953 if applying retroactively in December 2022...does it matter what day in December is selected as a start of the pension? Should it be Dec 1 or 31 and does it matter? Is the deferral increase due to age lost for the month of December?

Thanks in advance. Just trying to figure out the best scenario.
Hi Mack - CPP benefits are always considered as payable effective the 3rd last banking day in any month (except for December, where they now pay prior to December 25th), so "No" you can't pick a specific day in any month. As long as you pick any month in 2022 as your effective date, you will receive the 6.5% CPI increase in January 2023. If you take it earlier than December 2022 though, you will lose the additional 0.7% per month age-adjustment factor, so I wouldn't recommend any effective date earlier than December 2022 unless you have some reason other than the CPI increase for doing so.
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Feb 13, 2007
12 posts
Dogger1953 wrote: Hi Mack - CPP benefits are always considered as payable effective the 3rd last banking day in any month (except for December, where they now pay prior to December 25th), so "No" you can't pick a specific day in any month. As long as you pick any month in 2022 as your effective date, you will receive the 6.5% CPI increase in January 2023. If you take it earlier than December 2022 though, you will lose the additional 0.7% per month age-adjustment factor, so I wouldn't recommend any effective date earlier than December 2022 unless you have some reason other than the CPI increase for doing so.
Ok great! Thank you!

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