I just saw a posting which of course FB has now consumed and buried which basically stated - a person can't live on $14 an hour, how do we expect seniors on CPP to live on 1/3rd of that?
Well, in addition to the fact that many seniors don't have to deal with costs like vehicles, auto insurance, kids at home, mortgage payments, income taxes, full costs on services and utility costs that aren't subsidized, all of which we will discuss another time. We have to look at the bigger picture here regarding Canada Pension....
I don't agree with the amount we pay seniors in pension plan/old age, but you also need to take into account that we are paying at most CPP: $2,748.90 into the plan each year and seniors receive (from CPP alone) the maximum of $1,154.58.per month (not all seniors, the average is only $679.16).
The problem isn't that they are not being paid enough (make no mistake though it is certainly a problem in that you can't live on so little) but we have created a system that can no sustain itself.
Pay in $2,748 per year and employers kick in about 1.5X what the employee does so evening off it's still under $6,000 per year.
Pay out max $13,854 per year
My math isn't the most accurate but it's a pretty clear message. We have created a system that is not self-sustaining.
Add to that anyone over 45 coming into Canada will receive a pension when they retire even though they've contributed less than half what someone has starting at the age of 18.
The point of the meme states "why are seniors forced to live on 1/3 of minimum wage from CPP that they paid into". The answer - they are receiving about 500% return on what they paid into the system vs a minimum wage job that pays based on the revenues of the company.
In no way does this say seniors or minimum wage earners make enough to survive. But you have to look at the bigger picture here. A minimum wage earner does not make enough, especially when their employer (in some cases) takes in over $10 million per year. But a senior, who has at most, paid in ballpark $50,000, is expecting a return of, at least, $225,000 over the next 20 years.
It isn't right but we have to look at the bigger picture here, the pension system not only is not sustaining itself but it goes deeper into debt each year.
The solution, first off we need a system like the US based on "work credits". If you earn 40 work credits over your lifetime you receive a full pension at retirement 65, if you do not earn the 40 credits you get a partial pension. This prevents someone immigrating to the US at 60 and expecting to receive a full pension at 65. It's not hard to earn credits. I lived and worked there for 8.5 years and earned 32 credits - enough to receive a partial pension (which probably isn't much but it is what it is).
We have a similar system in place but leftist mentality will soon force the government to pay a full pension to everyone I suspect thus driving the system into bankruptcy before 2050.
A lot of people have said individuals should invest their own money into RSPs, etc and not pay into CPP. Clearly, no one seems to recall the great recession of 2008 when many near-retired workers lost thousands of their savings to the crash. This idea is risky and puts workers at the mercy of the banks vs the economic strength of a country (in countries that don't have fools in charge that is).
What would be wise is a hybrid savings system that incorporates and encourages both saving in RSP AND paying into CPP (by employers, employees and the government of the day) thus reducing overall risk.
There should be a special CPP RSP savings fund, where 2% of your pay goes into it and you can't take any out until age 60. It is far too easy to take regular RSP savings out during financial struggles or when investing in a home/education. This 2% would be constant and backed by the Government but in the individuals name.