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Grow the CPP - A better way to save

The best way to help today’s workers save enough money for tomorrow is by increasing what everybody gets from the Canada Pension Plan (CPP) as a share of their total retirement income. Which is why we’re proposing that over the next several years we lay the foundation to double CPP benefits for the future.

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These calculations:

  • assume you will not draw your CPP pension benefits before age 65.
  • assume that your employment earnings remain level throughout the whole CPP contributory period.
  • are not indexed to inflation and results are in 2010 constant dollars.
  • are based on the 2010 maximum pensionable earnings for which CPP contributions are paid and benefits are computed which is $47,200.
  • include the 2010 yearly basic exemption which is $3,500 and no CPP contributions are paid on the first $3,500 of income.

Offering every Canadian the chance to safely save enough money to provide for what they need in retirement is what’s behind Labour’s plan to change our country’s pension system. The current system is leaving too many people without the savings they need. There’s too much risk and not enough security.

Let’s face it: for more than a generation, wages have failed to keep pace with the cost of living and most Canadians haven’t saved what they need. Those who have are finding the RRSPs and investment funds they bought have come up short.

The best way to help today’s workers save enough money for tomorrow is by increasing what everybody gets from the Canada Pension Plan (CPP) as a share of their total retirement income. Which is why we’re proposing that over the next several years we lay the foundation to double CPP benefits for the future.

The CPP has been proven time and again to be a safe, secure and efficient retirement savings plan. Plus, the CPP is portable from job to job, across provinces, keeps up with inflation and is backed-up by the government.

Because the CPP operates independently from government, there is no cost to taxpayers – in fact there is the potential for governments to save over time.

Higher and secure pension savings mean seniors will be less likely to rely on income supports like the Guaranteed Income Supplement or provincial and local social supports for medicine, housing and food.

The cost to workers and employers is small. Over seven years, CPP premiums would slowly rise by 0.4% each year of pensionable earnings (which are capped at $47,200 today).

We all need to save more for retirement. And putting that little bit extra into the CPP makes more sense than investing it into risky RRSPs. It’s safer, easier (in fact, it’s effortless) and it earns more.

The table below shows how today’s workers would benefit from our plan to save more through the CPP.

While not everyone would see their overall CPP income double by the time they reach 65, the benefits are clear after only several years of extra contributions. That’s the simple, straightforward advantage of the Canada Pension Plan.

This is promising news for the 70% of Canadians without RRSPs. It’s even better news for the 33% of Canadians with no retirement savings at all (beyond what they contribute to the CPP).

What’s in it for me? Your CPP Benefits (with and without Labour’s plan)

If you are age... Your CPP pension for these years without labour’s plan...
 		 Your CPP pension for these years with labour’s plan...
 
28 (and made 37 years of contributions until age 65) $10,635.28 per year
$886.27 per month
 		 $21,270.65 per year
$1,772.54 per month
38 (and made 27 years of contributions until age 65) $7,760.88 per year
$646.74 per month		 $15, 521 per year $1,293.48 per month
48 (and made 17 years of contributions until age 65) $4,141.03 per year
$345.09 per month		 $8,282.05 per year
$690.17 per month
58 (and made 7 years of contributions until age 65) $2,012.08 per year
$175.17 per month		 $4,024.16 per year
$335.34 per month
 

This table assumes a worker will not draw their CPP pension before age 65 and will be making at least $43,000 per year to accumulate this level of CPP pension. Those earning less should consult our online pension calculator to estimate how labour’s plan will boost their CPP pension at age 65.

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