Pensions - part 2

Some expansion of the CPP is mandatory, I agree.  But we also need to do something about the income security of the folks who have lost their current pensions, which is why I also favour a hike in the (income-tested) GIS.  We fund that out of a very targetted taxback of the bonuses paid to the thieves, er executives, at Nortel and other similar outfits.

I haven't been paying close attention to the details of the story, but what is that $1 billion insurance thingy that John Roth is seeking?  Is it civil liability insurance or something?  He, Frank Dunn and Zafirovski (sp?) are at the top of my list of evil greedy people who should be held accountable for destroying decades of hard work and thousands of lives.

Re CPP defined contribution.

I remember hearing back in the 1970s it was strictly a defined benefit.

Kesslemen's "people have to be protected from their own stupidity" argument will make this pretty easy for the insurance companies to blow this one out of the water:

"The "forced savings" aspect of a mandatory universal public pension scheme can address these gaps... By mandating universal coverage, a public scheme also protects the treasury and the taxpaying public against another kind of risk: people with the ability to save for their retirement who fail to do so and thus draw upon income-tested public benefits in old age."

Apply that argument to medicare.... yikes.

I think doubling the CPP is a good idea but it still won't provide an adequate retirement income - and this condescending language doesn't make the case very well.

Then if it's defined benefit why does the government make all this noise about how many years you've worked and how this affects how much money you get from the CPP?

Or is that just bafflegab that obscures the fact that everybody who's a Canadian citizen over a certain age collects the same base amount from the CPP?

In that case, ok, it's still defined benefit.

As for the pot of money or whatever, if we ignore whatever's in the stock market (and I am surprised that the fund managers seem to actually be exerting some effort... guess they feel guilty enough to do SOMEthing to show for the management expense ratio they clip the feds for) then I see no mystery. Present obligations not met by the pool of funds are met by present revenues going into the fund, essentially operating on the cash basis of accounting.

Therefore doubling payouts does, as a rough rule of thumb, mean doubling payroll taxes.

DrConway wrote:

Then if it's defined benefit why does the government make all this noise about how many years you've worked and how this affects how much money you get from the CPP?

From Wiki:

Quote:

a defined benefit pension plan is a type of pension plan in which an employer promises a specified monthly benefit on retirement that is predetermined by a formula based on the employee's earnings history, tenure of service and age, rather than depending on investment returns.

It does not mean that everyone receives the same amount, only that the amount is predetermined based on a formula.  A typical private pension plan would pay a fixed percentage of the employee's final salary (or the average of the last five years of salary or some such).  [FYI, if you're reading articles in the UK press this type of pension is typically called a final salary plan on that side of the pond.]

That differentiates it from a defined contribution plan (which are effectively tax advantaged savings plans some of which revert to an annuity upon retirement and some of which simply provide a lump sum at that point in time). There are other variants (for example cash balance plans fit somewhere in between).

Quote:

Present obligations not met by the pool of funds are met by present revenues going into the fund, essentially operating on the cash basis of accounting. Therefore doubling payouts does, as a rough rule of thumb, mean doubling payroll taxes.

Actually, no. The existing fund has been built up over a number of years - doubling payments would mean that when benefits start to be paid out of the fund it will be depleted much more rapidly than would otherwise have been the case - that's why I say that contributions would have to be more than doubled.

DrC - I suggest you learn something about pensions and accounting before you start accusing people of throwing out bafflegab.

Dr. C: "There is no such thing! All it means is that yearly revenues from the source (working people) will fall short of yearly revenues to the destination (senior citizens)."

And the future for "non'working" people is assured by.....?

Unionist wrote:

Before we worry about pensions for "non-working" people, how about unemployment insurance? How about wages, for that matter?

I'm underemployed (4.6 hours a day at $9 plus tip, average 2 to 4 shifts per week) and am dipping into the pension fund at the age of 43.  I get $805 a month.  As soon as I get back on my feet (hah!) I'll contribute more than I take away.  That's what everybody tries to do.

CPP has worked well, most people who are supposed to get CPP benefits get them,  while income exceeds outgo.  To double the benefits payable and expand coverage would need a substantial increase in premium .and a phased in approach.  First raise the premiums and then, when the cash is there and you know it is doable, raise the benefits. I think this is doable and should be done.  Jack, Wayne and the federal NDP team have done a great job on this issue.

.

Do we need to have CPP at all?  It's a bloated and inefficient bureaucracy.  I had one hell of a time convincing them that I was disabled.

Why not push for more RRSPs instead?  

oldgoat wrote:

CCP disability benifits, to which I assume you're referring are an admistrative nightmsre trying to co-ordinate benifits with their provencial counterparts which for all their own problems are a lot better.  In Ontario if you qualify for ODSP your really better off not getting CPP.

 

BTW, Hi!

All I know is that CPP gives me $805.  I am entitled to provincial benefits up to an amount ($95) which brings the total to $900. Everybody is entitled to $900.  The feds don't claw back until I earn $4,600 in a year (not going to make it this year!).  The province (BC) allows me to earn up to $500 per month without clawing back.  I only received 2 or 3 months worth of BC money before my work disqualified me.  The advantage to the provincial plan is that you get free basic dental care, free psychiatric medication, a gimp bus pass for $45 annually, so I'm still registered with them even though I don't get any money.  

Mine is a special case (aren't we all?) in that I have a job that does not threaten my mental health.  I work at a cubicle farm and people address each other by their employee numbers.  If I don't want to come in, I don't bother.  If #A353 is empty and my employer needs the work done, they have a call in list.  I also do not have to abide by a schedule.  I get there, I work 4 1/2 hours or so, I go home. Regular pay plus bonus works out to $14.08 per hour.  I'm old enough that that seems like a decent salary for a dumbo job.

I see I've strayed off topic so I'll end it here.

Merry Christmas, Oldgoat!  Thanks for your support.

Expanding CPP and deducting larger premiums for an involuntary retirement savings plan makes much sense. RRSPs are a vehicle for unscrupulous 'financial planners' to peddle mutual funds and other financial products that pay commissions and fees to said planner from the high MERs (management expense ratio) charged by Funds on an annual basis.

MERs of ~2% annually can be avoided by simply choosing one's own blue chip Canadian stocks, having the stock purchase registered in one's own name, rather than the broker and then joining the company's DRIP.

 A Dividend Reinvestment Plan allows the shareholder to have all dividends automatically invested in more shares, purchased from the corporation's treasury at up to a 5% discount, allows fractional shares, allows additional share purchases at a discount directly from treasury AND, charges NO fees or commissions.

Why pay some shyster 2% per annum to manage a mutual fund made up of the same stocks one can purchase themselves on the open market? DRIPS avoid brokerage fees, financial 'planner' commissions and all the other assorted impositions of the banksters.

Save YOUR Money - tell the 'planners' to take a hike.

For those individuals who won't take the time to inform themselves on personal financial planning and take responsibility for their own future, an expanded CPP or even open plans like municipal pension plans that individuals ( and their employer contributions) can join make sense.

G. Pie wrote:

Do we need to have CPP at all?  It's a bloated and inefficient bureaucracy.  

You can make that statement about a lot of programs - bureaucracies have a tendency to become self-sustaining and, unless checked, try to grow without limit.  The truly bad thing about that (other than the fact that they become nightmares to deal with) is the fact that they soak up a lot of money that could be used to fund the CPP itself or, failing that, other programs.

Quote:

Why not push for more RRSPs instead?  

CPP and RRSP's function quite differently.  Stripped to its bare essentials an RRSP is nothing but a tax advantaged savings plan - if you don't have surplus income to save you don't have an RRSP.  And even if you do have money to save the tax benefits are purely a function of your marginal tax rate.  If you're in a high tax bracket the benefits can be significant, but you have to have income in order to benefit.  Having said that, anything that would increase the level of personal savings is a good thing so expanding the limits on RRSP's isn't bad in itself.  It just doesn't help the same people that an increase in CPP benefits would.

I favour keeping things mostly as they are with some small changes around the edges, perhaps a law requiring companies to keep private plans fully funded as per their agreed apon responsibilities and perhaps the implimentation of a 401k type of system where the employer matchs the employee contribution up to a defined maximum. Also when a company goes bankrupt pension and severance should be first rather than last to be paid, and the owners shouldn't be able to hide behind a bunch of numbered companies, they have to take responsibility.

Quote "Really hard to get an answer to that one. Back in the early 80s folks would have been all over it, pointing to the absence of womens' rights in the current pensions dilemma.  That does not seem to stir interest any more, for some reason."

You got that right, as Canadians are carrying a torch across the country that says women just aren't good enough for the Olympics as hatred is now something to celebrate as women pick up the flame that discrimanates against them leaving us all in shame.

I believe I did above, when I talked about increasing the GIS.  Also, G. Pie confuses regular CPP with CPP Disability, which is notoriously bureaucratic.

With employers having much shorter lifespans and tighter margins, I respectfully disagree with Magog45's preference: I just don't think it's even realistic to try and rely on employers to organize proper pensions savings for their employees.

And while I might agree with canuquetoo's investment philosophy, the level of financial literacy it requires is let's be honest beyond much of the population who will most badly need income security in their retirement.

I agree that vehicles which promote personal savings are worth supporting, but the current RRSP regime is just so frikkin' rich at the top, and doesn't do much to help people who paid into company pension plans all their lives (thus losing the RRSP contribution room), and then lose those pensions.

So, again, I favour an enriched GIS (Guaranteed Income Supplement; the income-tested portion of Old Age Security), a move to double CPP insurable earnings, allowing companies to hand over their pension plans to the CPP, and cutting back on RRSP contribution limits at the top-end.  Also, we need to look at the tax treatment of various kinds of retirement income as a way of helping.

Moves like this will give the CPP Investment Board a lot more funds to invest.  They lost a bit during the downturn, and while it would be extremely dangerous to intervene too much in directing their investment mandates, we'll need to think carefully about who we hire to manage that money, how much we put under active management versus the safer traditional vehicles, what else we use it for if anything, and what incentives we're prepared to support for the money managers and which ones we aren't.

Last October, this thread started out under the heading  "Pensions - the Conservatives next wedge issue." 

Lo and behold, a front page story on the Globe front page  today says "Ottawa targets public service pension plan for cutbacks. Tories consider dropping warly retirement provisions as they review civil servants' plan in attempt to control ballooning deficit.

"The generous pension plan enjoyed by federal civil servants is being targeted for possible cuts, including an end to early-retirement provisions for new hires, federal documents and sources say. Newly released documents show that a group of deputy ministers has been taking a hard look at the federal pension plan, with concerns that fewer and fewer private-sector plans offer the same type of benefits...

"Any major change to the Public Service Superannuation Act, however, will be stiffly opposed by unions, which are trying to contain the growing criticism of their members' plans in an era of dwindling private-sector pensions."

And so it goes.

abnormal wrote:

 But of course, well before that mark, people would just move away.

Let's hope our Bay Street stooges in Ottawa and Queen's Parks lose lotsa voter support in future elections before the neoliberal baloney does finally collapse around their ears.

abnormal wrote:

Fidel, which baloney are you refering to? 

Well in the US recently, there is this: [url=http://www.dollarsandsense.org/blog/2009/12/krugman-vs-hudson-on-samuels... vs. Hudson on Samuelson[/url]

Hudson said recently that the people who were there in Bush I and Clinton administrations had a free hand in 1990's Russia. Those crooks are still there embedded in Obama's entourage and will do to America what they did to Russia with their Russian and European friends during the perestroika years, which is to pauperize the country. The current wealth and income gaps between rich and poor in America will become chasmic.

In Canada? Nothing. Whether we have Tories or Liberals or both at the helm as now, we get nothing worthwhile mentioning for the next ten years. Some are saying that over next ten years, there will be a revolution in economic theory. As it was in the 1930's, Asia bustles and surges ahead while the west is mired in economic stagnation. We already have a situation with liquid war in Central Asia and Middle East. The crooks and liars and crooked-liars may try to start a big war as a way out of  current economic crises of their own doing.

The Krugman bit is interesting, abnormal, because he tells us (in effect) how we got here...with our pensions and everything else:

'Actually, there was a time when many people thought that institutional economics, which was very much focused on historical context, the complexity of human behavior, and all that, would be the wave of the future. So why didn't that happen? Why did the model-builders, led by Samuelson, take over instead?

"The answer, in a word, was the Great Depression.

Faced with the Depression, institutional economics turned out to have very little to offer, except to say that it was a complex phenomenon with deep historical roots, and surely there was no easy answer. Meanwhile, model-oriented economists turned quickly to Keynes-who was very much a builder of little models. And what they said was, "This is a failure of effective demand. You can cure it by pushing this button." The fiscal expansion of World War II, although not intended as a Keynesian policy, proved them right."

So Samuelson-type economics didn't win because of its power to cloud men's minds. It won because in the greatest economic crisis in history, it had something useful to say."

In the decades that followed, economists themselves forgot this history; today's equation-mongers, for the most part, have no idea how much they owe to the Keynesian revolution. But in terms of shaping economics, it was the Depression that did it. "

Some "institutionalist" appeared again in the year Samuelson won his Nobel, to try to create economic models in which zero growth economies worked. Krugman does not explain this, and I cannot recall him explaining how his discipline proposes to end growth on a finite planet. Maybe, like Keynes, when asked "but what about in the long run", replied, "in the long run we are dead".

Fidel's right, we have to return to institutional thinking...but of course here the institution under consideration is pensions. I think it has to be melded with environmental considerations...just as some of us wanted in the 1970s.

abnormal wrote:

GV, I hear what you're saying but I don't think it addresses the issue.

I think what you're trying to say is, where will the money come from to properly fund public pensions? 

There was a time in the 1930's when Canadian seniors were living in poverty. The CCF demanded that Tory, then Liberal governments help out Canadian citizens whose working lives had come to an end, but were still citizens of this country nonetheless. I think it was Mackenzie King who told the CCF that there was no money, and asked CCF members if they thought money grew on trees? Meanwhile the CCF were prodding the Liberals to nationalise the Bank of Canada, and which unlike the US Federal Reserve of banks, is still nationalised today.

The second world war broke out, and CCFer MJ Coldwell later wrote about it that, suddenly, there was all kinds of money to fund Canada's war effort. The Liberals suddenly realized that money does grow on trees when they have the political will to make it happen. This was just one example of the history of feigned political impotence in Ottawa. The impotence is entirely self-imposed when it comes to Canada's two old line parties, Liberals and Tories alike.