CPP enhancement

[Thorin]

Hey, you know what I learned yesterday?  The federal government is enhancing the Canada Pension Plan.  It used to be set up so that we'll get roughly a quarter of our earnings when we retire.  It's being adjusted so that we'll get roughly a third of our earnings when we retire.

To accomplish this, CPP deductions from our cheques are going to go from 4.95% to 5.95%, although it's being phased in over several years.  2019's change is going from 4.95% to 5.1%, so 0.15% more of your paycheque is going into the CPP.  At the same time, EI deductions are dropping from 1.82% to 1.66%, so you won't notice a difference (for now).

https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-enhancement.html

I'm not sure how to feel about this.  I think I like it, more forced savings for the future will make the future easier, but at the same time ... forced savings.

[Mr. Analog]

I know how you feel, on one hand it's a good way to make sure people save but on the other hand _forced savings_

Sent from my Pixel 2 XL using Tapatalk

[Darren Dirt]

"EI deductions are dropping from 1.82% to 1.66%"

This part I like.

Because for MOST of us, it's virtually impossible to qualify for EI unless a very "lucky" combination of events.

And there's certain limits and other challenges re. staying on EI.

Makes sense why it exists, but if you look back over the last few decades of how the above has changes, it can be angering.


CPP is for everybody though, and I wonder how much time they spent on the math numbers to ensure it's sustainable at this increased payout. I guess we the voting citizenry can only trust that it's all good...

...

In 2024, employees will begin contributing 4% on an additional range of earnings. This range will start at the original earnings limit (estimated to be $69,700 in 2025) and go to the additional earnings limit, which will be 14% higher by 2025 (estimated to be $79,400).

welp.
So I guess that means for some of us on [still on a 6 year wage freeze ] now there will be an extra grand or so being paid for CPP? [starting 5 years from now, but stilll...]

[Tom]

I had thought the system was about to be bankrupt. this is probably just going to make sure all the baby boomers don't kill CPP till the rest of us qualify.

[Thorin]

To qualify for any EI, you have to have been employed by an employer and have worked a minimum number of hours in the last 52 weeks (665 in the Edmonton area, 12.7 hours per week, for regular EI, 600 hours for all other EI), except for fisher's EI, where you have to have made a certain amount of money ($4,000 in the Edmonton area).

You qualify for regular EI if your job ends through no fault of your own (laid off, contract ends, etc).  14-45 weeks, 55% of average cheque, max $547/wk.

You qualify for sickness EI if you have a sickness, injury, or quarantine that interferes with your ability to work.  15 weeks, 55% of average cheque, max $547/wk.

You qualify for maternity EI if you are pregnant or just gave birth.  15 weeks, 55% of average cheque, max $547/wk.

You qualify for parental EI if you are caring for a newborn or newly adopted child.  35 weeks, 55% of average cheque, max $547/wk OR 61 weeks, 33% of average cheque, max $328/wk.

You qualify for caregiving to children EI if you are caring for a critically ill or injured child.  35 weeks, 55% of average cheque, max $547/wk.

You qualify for caregiving to adults EI if you are caring for a critically ill or injured adult.  15 weeks, 55% of average cheque, max $547/wk.

You qualify for compassionate care EI if you are caring for anyone requiring end-of-life care.  26 weeks, 55% of average cheque, max $547/wk.

You qualify for fisher's EI if you are seasonally self-employed as a fisher.  The calculation is complex but based on how much you made and regional minimums.

By the way, I just learned about the caregiving and compassionate care benefits while looking this up.

I don't think it's hard to qualify for EI, just make sure not to quit your job without a new one lined up, and make sure not to do something that gets you fired, and then you qualify.  The people laid off from my work, for instance, will all qualify once their "garden leave" (aka severance pay and continued benefits in lieu of notice) is done.

For CPP, there are actuarials, people who sit and do math all day for work, who make sure it's self-sustaining.  It's their job, and they're good at it, better than I am at figuring this stuff out.  I'm sure it's not going to disappear or run out of money, as much as the doomsayers want to tell us (the people that I've heard yell about CPP running out never have any actual math backing their statements).  I'm not sure exactly how much we'll actually get in retirement, the CPP payment calculations are quite complex as they have rules about what years of your earnings to base it on and what years get exempted or not, and these new changes will be a hybrid for five or more years before settling on the new rules.

Still, interesting that the government of the day thinks it's a good idea to take a little more money off the paycheques to increase retirement payouts.  I think I agree, there are a lot of people that haven't saved properly and will have a very poor retirement (I know mine won't be all that great, although it shouldn't be "very poor").

[Thorin]

I had thought the system was about to be bankrupt. this is probably just going to make sure all the baby boomers don't kill CPP till the rest of us qualify.

Anyone claiming it's about to go bankrupt should put up the actual math showing it.  I've yet to see, in years of watching, anyone provide actual proof.

The increase in premiums discussed here is being matched with an increase in payouts when we retire.  Ten years ago (I think?  I'm getting old, exact years are scaping me now) there were increases that were indeed just to ensure longterm sustainability due to an increase of claimants.

[Tom]

For CPP, there are actuarials, people who sit and do math all day for work, who make sure it's self-sustaining.  It's their job, and they're good at it, better than I am at figuring this stuff out.  I'm sure it's not going to disappear or run out of money, as much as the doomsayers want to tell us (the people that I've heard yell about CPP running out never have any actual math backing their statements).  I'm not sure exactly how much we'll actually get in retirement, the CPP payment calculations are quite complex as they have rules about what years of your earnings to base it on and what years get exempted or not, and these new changes will be a hybrid for five or more years before settling on the new rules.

Those actuarials can only do so much with what they've been given. If the system doesn't take enough money in and/or the money that was taken in started getting used as general funds, or invested wrongly, well... things just won't turn out well.

It's basically been talked about for over a decade or two now. CPP going bankrupt esp once the baby boomers all retire.

[Thorin]

So in the late 90s there was a lot of negativity about CPP running out of money.  Deductions withheld from paycheques were increased because the actuaries showed that this could indeed happen, that the plan could run out of money to pay out in 50 years or so (so the 2040s).  People have never forgotten the negativity, and have never really paid attention to whether the situation had been turned around.  CPP is not going to run out of money.

Here's a blog post talking about it in 2011: https://retirehappy.ca/will-canada-pension-plan-cpp-be-there/.  Note that it says the assets in 2009 were about $116bn, up from about $35bn in the 90s.  And here's the latest CPP performance and assets: http://www.cppib.com/en/our-performance/.  Note that the assets are now about $368bn (as of 2018-09-30).  There's clearly a significant increase in the assets, faster than inflation.

Assume the blog post is talking about CPP assets of $35bn in 1998 (I'm not sure what year, so I'm picking that one as I haven't found an easy to find CPP assets per year).  Now, twenty years later, CPP assets are $368bn.  That's $333bn more, or 915% increase in asset value.  Inflation from 1998 to 2018 in Canada was roughly 46% (https://www.bankofcanada.ca/rates/related/inflation-calculator/).  Way faster than inflation.

Now, how much future liabilities (i.e. payments paid to retirees) and future assets (i.e. premiums paid by workers) are there?  And at present, how long does it project out to?  Well, the actuaries working for the CPPIB say it balances out to at least 75 years, and they plan to always keep it viable for at least 75 years, and they revisit the calculations yearly.  The CPPIB has in fact been getting returns on its investments well above what it needs for 75-year sustainability, they're $100bn above where, back in 2012, they thought they needed to be by 2018.

[Darren Dirt]

To qualify for any EI, you have to have been employed by an employer and have worked a minimum number of hours in the last 52 weeks (665 in the Edmonton area, 12.7 hours per week, for regular EI, 600 hours for all other EI), except for fisher's EI, where you have to have made a certain amount of money ($4,000 in the Edmonton area).

GRUNCH: my main focus is on how hard it is to qualify, when it comes to a job ending -- and to stay on it while job hunting for a Real Job not just Any Damn Job. From anecdotal evidence of others over the last 15 years (and also my own and my brother's experience, many years ago).

Thanks for the details though.

Sometimes being told there is a coming "net 20% increase" of something that you don't expect to actually be there in 20 years, it stirs up some unhappy feels. The EI stuff was secondary to the CPP jump. But, making more than 70k per year means I Am The 1% I guess. So I should shut my piehole since I am not part of the Agrieved Class so I must do more and more of My Fair Share.

I guess.

Not saying you're saying that.

idk what i'm actually trying to say tbh

[Melbosa]

Not saying you're saying that.

idk what i'm actually trying to say tbh

LOL I could hear in my head when I read this was: https://www.youtube.com/watch?v=xU3kzI2N_qI

[Thorin]

I think based on both what you've mentioned before about your income and the 2016 income decile chart, you're more like a 20%er as in, you're in the top 20%, as in, you're in the top two deciles.  You're probably a 13%er or 12%er, but they don't break it down that far.

Also, I think what you're saying is that you don't like when more of your wages are kept from you, even if it's being done in your own interest, and that you are skeptical that the government can manage your money better than you.  There are many people who feel this way, even though the CPPIB is doing a bang-up job compared to most money managers (9% return over the last ten years, which covers the entire Great Recession we just went through, while having a mandate to stay risk-averse in investments).  Most people don't bother looking up the actual facts, they just react based on how they feel.

[Darren Dirt]

Not saying you're saying that.

idk what i'm actually trying to say tbh

LOL I could hear in my head when I read this was: https://www.youtube.com/watch?v=xU3kzI2N_qI

" Quite the https://www.youtube.com/watch?v=gsoNl0MzDFA you've got there... "

Also, I think what you're saying is that you don't like when more of your wages are kept from you, even if it's being done in your own interest, and that you are skeptical that the government can manage your money better than you.  There are many people who feel this way, even though the CPPIB is doing a bang-up job compared to most money managers (9% return over the last ten years, which covers the entire Great Recession we just went through, while having a mandate to stay risk-averse in investments).  Most people don't bother looking up the actual facts, they just react based on how they feel.

Sorta.
But, some people "feel" things based on actual facts, not just... ??what else?? Do you think folks unhappy with being forced to do things want to be feeling unhappy, and look for excuses? I mean, I know we humans are all just basically "robots made of meat" as Scott Adams points out, and most of our decision-making is irrational and then AFTER THE FACT justified by a story we tell ourselves, but... well, tbh you as a human are also just as susceptible of confirmation bias. Not to mention taking your own impression (aka feelings) of a person (aka me) based on the past (what range of time, it is not clear) and openly applying that filter (aka pre-judice) to a new situation in the here-and-now, that I myself have even acknowledged I am not saying anything specific right now.

u be you, but I do my best to not exercise non-existent "mind-reading**" superpowers on others when looking for an https://www.youtube.com/results?search_query=argument+monty+python

^ PS: links to YT videos in place of words = my attempt at lightening up the @%&#ing mood here ... look deeper into that as you wish, idgaf

** And one final YT video, since "I think what you're saying is" seems a recurring pattern when you respond to me (and not to anyone else, and nobody else responds to me that way either) --
https://www.youtube.com/results?search_query=jordan+peterson+cathy+newman+so+what+youre+saying+recut

[Darren Dirt]

PS: re. "even if it's being done in your own interest, and that you are skeptical that the government can manage your money better than you"
Yes, I do not deny that H L Mencken (for example) resonates with me big time in these quotes... http://www.famous-quote.net/quotes-on-government.html
... and all government size and power has grown immeasurably since his era, so... somehow we should keep up the blind trust of Leviathan because, what, ordinary people once gaining positions of political power suddenly become magicians who know best? #MagicalThinking



...


Ah, @%&# it, let's stop the derail and just agree we are all to some degree addicted to dopamine and it just comes to different people in different forms.

I ain't angry. That's what they want me to feel, so @%&# 'em. (And you get to theorize who "they" is )

(this resonated with me -- maybe I found something you can agree with me on? ) https://twitter.com/BardsOfWar/status/1070874043568570370

"As far as possible without surrender be on good terms with all persons.
Listen to others, even the dull and the ignorant; they too have their story."
-DESIDERATA

quoted by the same Twitter account https://twitter.com/BardsOfWar/status/1069237156370178048

So... peace, bro, and Merry Christmas! Let's focus on that word, MERRY

[Thorin]

Well, I mean, I started this thread to show a new fact (CPP will give us a bigger next egg when we retire than originally planned). Then I tried to shed light on some what I considered incorrect statements by sharing more facts and numbers. Eventually I responded to you saying you're not sure what you're saying by recognizing (and I thought understanding) the general grumpiness in your post. I was intending to commiserate, guess you didn't take it that way.

Ultimately, I wasn't happy when I first saw the CPP deduction percent was going up, but after reading the details I saw that this would be a net benefit to me in the future. I also came to the conclusion that 9% per year over the last ten years is a really good return for a risk-averse portfolio, so I think the CPPIB is doing a good job managing my future pension money.

[Darren Dirt]

Hey, you know what I learned yesterday?  The federal government is enhancing the Canada Pension Plan.  It used to be set up so that we'll get roughly a quarter of our earnings when we retire.  It's being adjusted so that we'll get roughly a third of our earnings when we retire.

To accomplish this, CPP deductions from our cheques are going to go from 4.95% to 5.95%, although it's being phased in over several years.  2019's change is going from 4.95% to 5.1%, so 0.15% more of your paycheque is going into the CPP.  At the same time, EI deductions are dropping from 1.82% to 1.66%, so you won't notice a difference (for now).

https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-enhancement.html

Let's start over. Just the numbers. And for now ignoring the extra 4% applied to an amount beyond whatever.

Simplified, from the OP it seems that currently CPP will pay us 25% of our income based on a 5% deduction.

And the changes ("enhancements") mean that future CPP will pay us 33% of our income based on a 6% deduction.

Over time, of course, but just looking at the end result. Am I getting the "bottom line" right here?

Because as far as I can tell that is promising a gain of 33-25=8 out of 25 = +33% over the current payout.
From an increase of 6-5=1 out of 5 = +20%  over the current contribution.

That is what made me immediately skeptical. Presuming I didn't miss something here, how is that possible without also reducing the max/cap, or having additional funding (e.g. that extra 4% maybe?)

Otherwise, why not go to, say, a full doubling to 10% contribution, if the same math input:output is going to occur? If a 20% increase in contribution results in a 33% increase in payout, I can't imagine what a 100% increase in contribution would payout.