# Enhanced CPP vs Personal Investing



## KJK (30 Mar 2011)

Quote from Redeye:

Again, that's not what I said, and not what I'd argue for.  Any such change would take time to implement.  Some good CPP reforms have already been made, but there's room for more.  I'd even be interested in the idea of it being a voluntary system where one could double their contributions in exchange for a higher annuity later, however, I don't know that that could be practically or cost-effectively managed.  A one-size-fits-all system seems better.  The idea, thus, is to increase the amount the CPP collects in contributions and increase the payment levels proportionately.  That is to say, whatever benefits accrued under the old system remain the same, if a change in implemented it's only reflected in those years where it's implemented.  I'm not suggesting anything resembling "bailouts" or "something for nothing".  Such a change will not fix the situation for those who didn't save effectively now, but it will going forward - and going so would probably keep more people from using GAINS (supplements which are effectively entitlement programs) to live off.  It's a pretty forward thinking idea, a long term one, and politicians tend to concern themselves with instant gratification.

If this comes to pass I would rather see an opt in or out option but I agree that it could be a nightmare to administer. The other problem is that currently half of an employee's CPP contribution come from the employer. On an opt in situation either the employer would be on the hook for a matching contribution of around $2200/employee which I can't see being very popular amongst the business community or the employee would have to contribute 3x his/her current contribution to double the benefits. A 3x contribution would equal 14.85% of income up to the current max of $4X,XXX. As Larry Strong stated, the average Canadian family can barely make ends meet as it is so I don't see this a very popular solution. Add in the fact that you pay income tax on your CPP contributions vs getting a tax refund for RRSP contributions and both are taxed in the end I know which one I personally would pick.

On an opt out situation you could have unethical employers putting pressure on on their employees to opt out to save the company money and these would most likely be the people who would need the pension the most.

Quote from Redeye:

The state's only role to should be to act where markets fail or cannot reasonably expected to produce a socially optimal outcome.  Given that private sector employers offer pensions less and less, I see a good argument for a decent public pension system.

I would agree with that statement right up to the socially optimal outcome point.

KJK 

Note: Mods, if you could bring the 'tangent posts' from the election thread over to this one that would be great.


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## KJK (30 Mar 2011)

Quote from Redeye:

I've only ever heard of a few Sprott funds charging that much.  Most come in below 2.5% - and even that in most cases is still far too high, but that's another matter all together.

I would agree although sadly every Investors Group fund I ever held was between 2.7X and 2.9X% plus sales commissions. I wonder why my ROI was very poor and nonexistent.

KJK


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## Redeye (30 Mar 2011)

KJK said:
			
		

> Quote from Redeye:
> 
> I've only ever heard of a few Sprott funds charging that much.  Most come in below 2.5% - and even that in most cases is still far too high, but that's another matter all together.
> 
> ...



Frankly, anyone who deals with IG is a fool being swindled.

(incidentally, it's not "plus sales commissions", unless of course you triggered the DSCs which likely were never explained to you in the first place)


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## KJK (30 Mar 2011)

Redeye said:
			
		

> Frankly, anyone who deals with IG is a fool being swindled.
> 
> (incidentally, it's not "plus sales commissions", unless of course you triggered the DSCs which likely were never explained to you in the first place)



All of the above is correct, what can I say? I was young and not investment astute. That said there are a lot of people getting fleeced by IG.

KJK

edited to remove 1 too many 'said's


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## Redeye (30 Mar 2011)

Dammit, I lost my original response by accidentally logging out, but I'll try to recreate it.



			
				KJK said:
			
		

> If this comes to pass I would rather see an opt in or out option but I agree that it could be a nightmare to administer. The other problem is that currently half of an employee's CPP contribution come from the employer. On an opt in situation either the employer would be on the hook for a matching contribution of around $2200/employee which I can't see being very popular amongst the business community or the employee would have to contribute 3x his/her current contribution to double the benefits. A 3x contribution would equal 14.85% of income up to the current max of $4X,XXX. As Larry Strong stated, the average Canadian family can barely make ends meet as it is so I don't see this a very popular solution. Add in the fact that you pay income tax on your CPP contributions vs getting a tax refund for RRSP contributions and both are taxed in the end I know which one I personally would pick.



That most families find it hard to save for retirement is exactly why it is a popular solution for many.  Unless you're making more than $41,970/year (I'm using 2010 numbers here) individually, the cost of those CPP contributions to you is $0, because the non-refundable tax credit you receive for them completely offsets the cost by reducing your income tax payable.  Even beyond that, the cost in federal taxes is a whopping 7% on the contributions on the remaining $8000 or so up to YMPE at which point you no longer contribute.  So, the difference between the YMPE ($47,200 for 2010) and the top of the 15% bracket is $6,230.  On that you're going to pay $308.39 into the CPP and you'll shell out the princely sum of $21.59 in federal tax.  ($6,230 x 4.95% = $308.39 CPP Contribution.  Net federal tax = 22% - 15% non-refundable tax credit = 7%.  7% of $308.39 is $21.59.)  Frankly it's still a pretty good deal in my opinion.



			
				KJK said:
			
		

> On an opt out situation you could have unethical employers putting pressure on on their employees to opt out to save the company money and these would most likely be the people who would need the pension the most.



Another reason on top of the adminstrative nightmare not to have an opt-out mechanism.

As for business concerns, not unreasonable to look at adjustments to payroll taxes accordingly.



			
				KJK said:
			
		

> Quote from Redeye:
> 
> The state's only role to should be to act where markets fail or cannot reasonably expected to produce a socially optimal outcome.  Given that private sector employers offer pensions less and less, I see a good argument for a decent public pension system.
> 
> I would agree with that statement right up to the socially optimal outcome point.



So, just for interest's sake, what "socially optimal outcomes" are you opposed to?  Forcing businesses to adhere to environmental standards to try to protect our air, water, and natural resources?  Having social safety nets to help those who fall on hard luck and enable them to get on their feet again?  Law enforcement?  Food safety regulations and enforcement? Public health standards?  Infrastructure to facilitate economic activity? Education that enables us to have productive, competitive workforce?  These are just a few examples of the market failures our societies formed governments to address to get socially optimal/desired outcomes.


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## Redeye (30 Mar 2011)

KJK said:
			
		

> All of the above is correct, what can I say? I was young and not investment astute. That said said there are a lot of people getting fleeced by IG.
> 
> KJK



Yeah, it's very sad.  I make my living try to get people out of that situation.  IG isn't the only culprit, but it's one of the worst I've seen in general.  They have some great, honest, decent people working for them and some that aren't.  I guess that happens everywhere, though.  To their credit, they have done a lot to get people to think about investing and planning for their future, they did kind of pave the way for that.  But when I show people what they're paying for their "service", the results are generally shock.


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## KJK (30 Mar 2011)

Redeye said:
			
		

> Dammit, I lost my original response by accidentally logging out, but I'll try to recreate it.
> 
> That sucks.
> 
> ...



I'll go with your numbers on the tax implications. My accountant deals with this and the example is quite different from my situation. I would point out that for any contribution above the CPP into an RRSP the person would get a refund however small.

As for the 'socially optimal outcome' part the problem I have with it is it soon becomes 'social engineering'. Example: our current EI system and it's inequities across our great country.

Case in point - For 15 years I ran a small business in Alberta. As most people know labour can be very hard to come by out here and equally expensive. The price of a booming economy I guess. I had 2 workers start with my company that were from the Maritimes. I spent close to $50,000 dollars to train these people to company safety standards which in this particular industry is not unusual. Unfortunately after the workers in question accumulated enough weeks of qualifying earnings they quit and returned to the east to sit on EI for many weeks. Were an Albertan to quit a job under most circumstances there is no EI at all and if they are laid off they get many fewer weeks of benefits for the same cost to the individual. Socially engineering and hardly socially optimal. You can argue that this shouldn't happen and it should be the same across the country but it never works that way at least in this country. I could also mention the EI fund being moved to General Revenue to balance the budget and then there is nothing there when we need it. Let hope that as the workforce in Canada 'greys' and tax revenues drop accordingly that the same doesn't happen to the CPP fund. I would also note that this job paid between $60,000 and $95,000, a decent income wouldn't say?

The other things you mention are IMHO the things government should be working on.

KJK


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## Redeye (30 Mar 2011)

KJK said:
			
		

> I'll go with your numbers on the tax implications. My accountant deals with this and the example is quite different from my situation. I would point out that for any contribution above the CPP into an RRSP the person would get a refund however small.



It's a misnomer to suggest that it gets you "a refund".  It does allow you to deduct that contribution from your income, which means you don't pay tax on it - and it comes "off the top", meaning it's a savings of tax at the highest marginal rate you'd pay.  And of course, anything beyond the CPP it makes sense in nearly all cases for.  I'm not suggesting that RRSPs would be irrevelant or that additional savings wouldn't be required - for most people, they would... but the amount coming from a pension source would be increased for all, which is a good outcome.




			
				KJK said:
			
		

> As for the 'socially optimal outcome' part the problem I have with it is it soon becomes 'social engineering'. Example: our current EI system and it's inequities across our great country.
> 
> Case in point - For 15 years I ran a small business in Alberta. As most people know labour can be very hard to come by out here and equally expensive. The price of a booming economy I guess. I had 2 workers start with my company that were from the Maritimes. I spent close to $50,000 dollars to train these people to company safety standards which in this particular industry is not unusual. Unfortunately after the workers in question accumulated enough weeks of qualifying earnings they quit and returned to the east to sit on EI for many weeks. Were an Albertan to quit a job under most circumstances there is no EI at all and if they are laid off they get many fewer weeks of benefits for the same cost to the individual. Socially engineering and hardly socially optimal. You can argue that this shouldn't happen and it should be the same across the country but it never works that way at least in this country. I could also mention the EI fund being moved to General Revenue to balance the budget and then there is nothing there when we need it. Let hope that as the workforce in Canada 'greys' and tax revenues drop accordingly that the same doesn't happen to the CPP fund. I would also note that this job paid between $60,000 and $95,000, a decent income wouldn't say?



Oh, don't even get me started on EI - you're preaching to the choir here, I find myself stunned living in the Maritimes how it works for seasonal workers.  That's a whole other kettle of fish that needs to be sorted.  Programs like EI and other "social safety net" type programs could do with substantial reform to make sure they are incentives to return to work quickly, or to get retraining, or otherwise get back to work.  Most people, I think, find earning a living doing whatever to be far more dignified than being on the dole... but some figure they may as well game the system as best they can.

As for CPP, I can't see the funds being appropriated like that due to the structure.  It's a solid, well funded system that is sustainable for the long haul, especially with the tweaks being made.  Eventually it'll be time to have a more serious national conversation about raising the retirement age, but in a lot of cases I see, people hitting 65 may be retiring from their "career" but are still doing lots to keep bringing in income...

Know why 65 was chosen as the standard age for retirement in most of the Western/industrialized world back at the beginning of the 20th Century?  Because life expectancy was between 58-63.  Most people never saw it.


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## KJK (30 Mar 2011)

Redeye said:
			
		

> Oh, don't even get me started on EI - you're preaching to the choir here, I find myself stunned living in the Maritimes how it works for seasonal workers.  That's a whole other kettle of fish that needs to be sorted.  Programs like EI and other "social safety net" type programs could do with substantial reform to make sure they are incentives to return to work quickly, or to get retraining, or otherwise get back to work.  Most people, I think, find earning a living doing whatever to be far more dignified than being on the dole... but some figure they may as well game the system as best they can.
> 
> As for CPP, I can't see the funds being appropriated like that due to the structure.  It's a solid, well funded system that is sustainable for the long haul, especially with the tweaks being made.  Eventually it'll be time to have a more serious national conversation about raising the retirement age, but in a lot of cases I see, people hitting 65 may be retiring from their "career" but are still doing lots to keep bringing in income...
> 
> Know why 65 was chosen as the standard age for retirement in most of the Western/industrialized world back at the beginning of the 20th Century?  Because life expectancy was between 58-63.  Most people never saw it.



Now I think we are getting somewhere. I don't wish to push my fellow man down and grind his face into the dirt because of bad luck or circumstance it is just that these programs snowball into something far different than was intended. Transfer payments are perfect example: Help out your fellow province in their time of need, OK fine. Now Quebec etc can spend far more per person on programs than can the provinces that are paying equalization.

Yeah, I know about the '65'. Unfortunately for the CPP, at least in my family, it was a very bad bet since most lived or are still living in their mid to late nineties. I'm afraid though that with the greying population it may be far too late to start trying to move the retirement age since seniors typically DO vote. 

Very true about retiring from a career but still working. The current project I am commissioning has 12 contract operators working on it and 4 of them are 'retired' and 2 over 70. I would also add that their daily rate is more than their monthly CPP cheque.  :nod:

KJK


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## a_majoor (31 Mar 2011)

The intersection between government and business. It is interesting to see how the rhetoric (and tax, regulatory and legislative actions that follow the rhetoric) are counterproductive in the real world:

http://paulsrants-paulsstuff.blogspot.com/2011/03/ignatieffs-election-platform-debunked.html



> *Ignatieff's Election Platform Debunked- Corporate Tax Cuts And CPP*
> 
> With Ignatieff releasing another plank in his platform today, changes to supposedly boost CPP, and with Ignatieff continuing to repeat how those bad banks don't deserve corporate tax breaks, it's time to put the two planks of the Liberal platform together, something it seems Ignatieff and the Liberal Party failed to do. The problem for Ignatieff is with today's platform release, it's like the Liberal leader is now going to try and strengthen CPP when in fact his platform to raise corporate taxes damages the strength of the CPP plan. Why? Well, you can start with this:
> 
> ...


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## a_majoor (22 May 2011)

The low ROI of CPP and how it affects taxpayers and pensions"

http://www.oxygentax.com/2011/05/why-cpp-is-not-good-investment-repost.html



> *Why CPP is not a good investment *Repost**
> *This is a repost from February 21st.  It's pretty long and information intensive, but at the end, it projects real world data on the CPP to show how badly it underperforms for you and me.  I hope you enjoy*
> 
> Every time I see a comment from Jack Layton about how we should increase the CPP contributions and double the maximum benefit. Every time I see an op-ed from a union boss saying the same thing. Every time I see these things, it doesn't sit right with me because I know it's the wrong thing to do. It doesn't sit right with me because it transfers more money to past generations at the expense of the current and future generations. It forces me to pay for the short-sightedness of my parent's generations (Dad was at the beginning of WWII, Mom was the first year of baby boomers).
> ...


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## Dennis Ruhl (22 May 2011)

Yes, CPP was nothing more than a Ponzi scheme.  I've been paying in since a few years after inception and almost all of that money went to overpay early claimants.  The premiums have gone through massive increases, but the deficit in the plan is still hundreds of millions.


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## observor 69 (22 May 2011)

These amendments to the CPP were designed to ensure its long-term sustainability and affordability. To achieve this, a careful balance had to be struck between making sure that the CPP Disability program serves severely disabled Canadian workers effectively and managing costs overall to keep the CPP sustainable. The 1998 amendments helped to ensure that the CPP is available not only for workers when they retire, but also for contributors and their families should they become disabled or die. As an additional measure to help secure the CPP for the long-term, the legislation now requires that any increase in benefits must be accompanied by a permanent increase in the contribution rate to cover incremental future costs. Ensuring the future sustainability of the Canada Pension Plan remains a key policy objective shared by the Government of Canada and the provinces.

Together, the 1998 changes have led to the growth of a large reserve fund for the CPP. Investment earnings from this fund will help pay for growing costs, primarily due to the retirement of the baby boom generation, keeping the CPP sustainable for future generations. A review of the CPP by federal and provincial ministers of finance in 2002 confirmed that the CPP is financially sound and on track to provide retirement pensions well into the future.

http://www.hrsdc.gc.ca/eng/oas-cpp/cpp_disability/future/5thpg3.shtml


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## a_majoor (23 May 2011)

While it is very comforting to know that CPP (Unlike Social Security and most US government employee pension plans) is operating on a sustainable basis, the point upthread is current CPP imposes a large opportunity cost to the claimant. If the person had invested the money him/her self and received an average 6% compounded return, the amount received after retirement would be considerably higher (how much higher depends on the number of years the money compounded before retiring and cashing out), providing a much higher standard of living. (Someone who received the long term 8% ROI would have a correspondingly larger retirement nest egg).

As well, monies held in the contributors own hand could be passed on to the surviving spouse, children or relatives or even gifted to a charity, options that are not at all possible with CPP.

Arguments about market variability, fees etc. are somewhat beside the point; investors are responsible for protecting their wealth and the "rules of thumb" for competent investing are simple enough to be taught to school children (adjusting the proportions of high to low risk assets based on your age or years to retirement, for example). More flexibility in RRSP rules, new investment vehicles like TFSA's and imposing draconian penlties for early withdrawal are alternative approaches to divesting citizens of their own monies and imposing low ROIs on the funds that are taken.


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## Brad Sallows (23 May 2011)

The problem is that not everyone has the will to manage their finances prudently, and a few haven't even the ability.  

I suggest reading Fred Reed's column on Socialized Medicine.  He poses the real question with which we must wrestle.


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## Dennis Ruhl (23 May 2011)

Dennis Ruhl said:
			
		

> Yes, CPP was nothing more than a Ponzi scheme.  I've been paying in since a few years after inception and almost all of that money went to overpay early claimants.  The premiums have gone through massive increases, but the deficit in the plan is still hundreds of millions.



Sorry - that's hundreds of billions - $ 619,985,000,000 to be exact.  That more than doubles our national deficit.  Since the plan is worth $ 620 billion less than has been paid in to date - the answer is to contribute more?  We are idiots, aren't we.  Feeding the National Madoff Fund.

Table 28 Balance Sheet as at 31 December 2006

($ billion)
Actuarial liability   733.5 10
Assets                (113.6 15)
                           -------------
Unfunded liability 619.9 85

http://www.osfi-bsif.gc.ca/app/DocRepository/1/eng/oca/reports/CPP/cpp23_e.pdf


First financial statement I've seen that hid the balance sheet in appendixes.


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## a_majoor (23 May 2011)

The idea most people can't manage their finances is true mostly because people have never been taught how to manage their money. I am teaching my own children because these concepts literally don't exist in school at all. My daughter in high school is in a "family studies" program which she describes as "extended therapy". This is what replaced "Home Ec", which at least taught people how to do things like sew and cook and some basic budgeting.

Most of the principles of money management are teachable to school children. The RRSP and TFSA programs need to be expanded to provide increased opportunities for the vast majority of Canadians to see better returns .


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## Redeye (23 May 2011)

Thucydides said:
			
		

> The idea most people can't manage their finances is true mostly because people have never been taught how to manage their money. I am teaching my own children because these concepts literally don't exist in school at all. My daughter in high school is in a "family studies" program which she describes as "extended therapy". This is what replaced "Home Ec", which at least taught people how to do things like sew and cook and some basic budgeting.
> 
> Most of the principles of money management are teachable to school children. The RRSP and TFSA programs need to be expanded to provide increased opportunities for the vast majority of Canadians to see better returns .



Expanded in what way?  Most Canadians don't take advantage of the programs as they exist to the full extent to begin with.

I'm think I'm going to call BS on your opportunity cost claims, too, but I'll wait until I have some tools I need to do the math.


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## a_majoor (24 May 2011)

Redeye said:
			
		

> I'll wait until I have some tools I need to do the math.



http://www.oup.com/us/pdf/eeconstuds/interestTables.pdf

http://www.fintrend.com/ftf/calculators/compound_interest_calculator.asp

Fixed that for you


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## Redeye (24 May 2011)

Thucydides said:
			
		

> http://www.oup.com/us/pdf/eeconstuds/interestTables.pdf
> 
> http://www.fintrend.com/ftf/calculators/compound_interest_calculator.asp
> 
> Fixed that for you



Actually, the calculator I wanted is one built into Naviplan, because a comparison involves a few moving parts.  First is to determine what a contribution equivalent to the CPP would earn if invested by an individual.  Then I'd have to consider how much they'd invest and from when until when.  So I started with a generous set of assumptions:

I assumed a contibution in today's dollars of $175/month (to approximate the max CPP contribution), starting at age 18 (unlikely) and running to age 65.  I assumed a 7% rate of return in an RRSP and into the RIF for until age 90, and assumed a tax rate of 30%.  That would generate an after-tax income of about $973/month in today's dollars.  Monthly CPP maximum right now is $980, applying the same tax rate yields about $686/month, so yes, there's some opportunity cost there, assuming of course one actually got those returns continuously. 

So then I tried a more accurate modeling of the CPP.  The way it works is that your benefit is calculated based on your contributions but only 85% of your years of contributions are included - that is to say, basically, that your seven worst years of contributions are excluded.  So I moved the start date up to age 25 with similar assumptions.  After tax income still was a little higher  - about $700/month.  So far, Thucydides, your math's actually working out, if we assume someone was willing to actually invest more aggressively than a pension fund would generally be expected to.  Drop the rate of return to 6%, and CPP's better for the individual.  To 5% and it's miles ahead.

There's a couple of variables I haven't factored - first, employer contributions - which make an impact for sure., and the second of course is portability, which is a key factor whenever anyone is making a pension vs private savings decision.  CPP pays a small death benefit but that's it, whereas money saved privately can be transferred to a spouse or become part of an estate, and often there's a lot of value to that.  The tradeoff is that it's also possible to outlive your money, which with a pension isn't a problem.  Also, I haven't worked out an easy way that won't take forever to use phasing to use different rates of return either.

The problem, however, comes back to a more philosophical one as I see it.  CPP forces people to save something, which is important because sadly without it there would be a lot of people retiring with absolutely nothing, because they don't save anywhere near enough on their own.  Of course, in the business I'm in I'd love it if people had to save more on their own but in the long run I'm not convinced it's the best overall strategy.

I will say that I agree that we definitely don't see people learning enough about finances in school, it falls to parents to do that, and while there's been efforts to add something to the curriculum I don't think it's anywhere near enough because the rate of financial illiteracy in this country is atrocious.


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## Infanteer (24 May 2011)

Redeye said:
			
		

> The problem, however, comes back to a more philosophical one as I see it.  CPP forces people to save something, which is important because sadly without it there would be a lot of people retiring with absolutely nothing, because they don't save anywhere near enough on their own.  Of course, in the business I'm in I'd love it if people had to save more on their own but in the long run I'm not convinced it's the best overall strategy.
> 
> I will say that I agree that we definitely don't see people learning enough about finances in school, it falls to parents to do that, and while there's been efforts to add something to the curriculum I don't think it's anywhere near enough because the rate of financial illiteracy in this country is atrocious.



I'll agree with both parts.  The libertarian in me says "people should save money for retirement", but that's a perfect world.  The state has to deal with the real world, where if we don't force people to pay into a pension plan, then we are paying their welfare because they're broke in retirement.

That being said, we need more education in schools into basic things like "bank accounts, savings, investments and mortgages".  I can recall that, throughout high school, there were no visits nor could I even find workshops on how to manage personal finances.  It has all been trial and error for me; including a bunk mortgage that I was able to get away from later on because I started doing a bit of research.


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## Redeye (24 May 2011)

Infanteer said:
			
		

> I'll agree with both parts.  The libertarian in me says "people should save money for retirement", but that's a perfect world.  The state has to deal with the real world, where if we don't force people to pay into a pension plan, then we are paying their welfare because they're broke in retirement.



Exactly.  All the rhetoric in the world about "personal responsibility" becomes essentially meaningless in consideration of the reality that we don't let people starve in the streets in this country, and those who fail to save enough wind up living off the state in some form anyhow.



			
				Infanteer said:
			
		

> That being said, we need more education in schools into basic things like "bank accounts, savings, investments and mortgages".  I can recall that, throughout high school, there were no visits nor could I even find workshops on how to manage personal finances.  It has all been trial and error for me; including a bunk mortgage that I was able to get away from later on because I started doing a bit of research.



I agree - there's efforts being made in this respect, by the banking industry, by the Financial PlannerStandards Council (the people who control the CFP designation), and so on, but it's not really well done, and there's a lot of information floating around that's no good.  When I was a mortgage lender it wasn't uncommon for people to come in with loads of questions obviously derived from reading about the process in the USA (which is quite different), and in many cases it's made worse by people _in the industry_ failing to explain things well.

Whenever anyone bitches at me about banks, I always ask them if they've actually gone in to ask questions about things like fees etc, because that's another "personal responsibility" issue - too many people pay too much because they simply can't be bothered to do their homework.


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## Brad Sallows (25 May 2011)

Yet when it comes to the vast body of legislated rules we have, which tends to grow rather than abate (some political ideologies going so far as to consider a legislative sitting "wasted" if several important pieces of new legislation are not passed), ignorance of the law is no excuse.  Why should people not be held entirely accountable in all things?


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## Redeye (25 May 2011)

Brad Sallows said:
			
		

> Yet when it comes to the vast body of legislated rules we have, which tends to grow rather than abate (some political ideologies going so far as to consider a legislative sitting "wasted" if several important pieces of new legislation are not passed), ignorance of the law is no excuse.  Why should people not be held entirely accountable in all things?



So, to restate what you've just said, we should let senior citizens who haven't saved adequately for retirement or enjoy longevity such that their savings haven't lasted be evicted from their homes and starve to death if they go broke and their families aren't able to support them?  That's "accountability", sure, but I don't think we live in a society where that would be tolerated - and I sure wouldn't want to.


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## a_majoor (25 May 2011)

I'd much rather live in a society where people are expected to pull their own weight and are given the tools to do so at an early age.

Looking at the opportunity cost question, I made a simple example so the principle is clear (without obscuring the answer in moving parts)

Citizen "x" is self employed and can contribute $100/month in an RRSP and must contribute $100/month to CPP.
The individual works for 20 years

CPP ROI is 3.5%
RRSP ROI is 6%
Market ROI is 8%

$100/month in CPP for 20 years yeilds $34686
$100/month in RRSP for 20 years yeilds $46,204
$100/month market for 20 years yeilds  $58,902

Current situation getting CPP and RRSP gives total yield of $80,890
"Enhanced" CPP doubling contribution (and thus crowding out RRSP contribution) = $69,372; opportunity cost to citizen "X" is $11,528
"Opt out" model allowing full contribution to go to RRSP (no CPP) gives total yeild of $92,408; opportunity cost to citizen "x" (who does not have this option) is $11,518

The difference between an "enhanced CPP" and an "op out" model is $23,046, using the conservative 6% compound interest rate. Data about the stock market dating back to the South Sea Bubble shows the long term ROI is actually @ 8%, but a 20 year period of investment might be made in one of the troughs, so 6% is a reasonable assumption.

I have no problem if people can choose to make their own decisions and opt out, someone with $10,000 to $20,000 more saved at the end of the day is more self sufficient and has more options (even if you keep throwing "what if scenarios"); including the option of charitable gifts to help people who are less fortunate.

As well, in the CPP + RRSP and "Opt out" scenarios, Citizen "x" has a considerable sum which can be passed on to other family members, providing them with a higher platform from which to start and giving them more options as well.


----------



## TangoTwoBravo (25 May 2011)

"Are there no prisons? And the Union workhouses, are they still in operation?"


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## Redeye (25 May 2011)

Thucydides said:
			
		

> I'd much rather live in a society where people are expected to pull their own weight and are given the tools to do so at an early age.



So would I, but I live in the real world where people don't.  Or think they have, but one of a myriad of unforeseen events changes things.



			
				Thucydides said:
			
		

> Looking at the opportunity cost question, I made a simple example so the principle is clear (without obscuring the answer in moving parts)



So simple as to be completely, utterly meaningless, since you haven't actually modelled what that money turns into.  The difference is that CPP pays an inflation-adjusted annuity for life.  An RRSP doesn't - it's a finite amount of money, unless of course someone takes it and buys an annuity with it, but it wouldn't likely have the indexing without substantial cost.



			
				Thucydides said:
			
		

> I have no problem if people can choose to make their own decisions and opt out, someone with $10,000 to $20,000 more saved at the end of the day is more self sufficient and has more options (even if you keep throwing "what if scenarios"); including the option of charitable gifts to help people who are less fortunate.



In theory I have no problem with the idea of someone opting out of the CPP - IF they are obliged to save in some vehicle that prevents them using the money for the intended purpose.  The problem with that is that there will be a transition period should people opt out of the CPP in droves (which, of course, I doubt would happen, but still must be considered) where money to pay pensioners would have to come from somewhere - ie the tax system.



			
				Thucydides said:
			
		

> As well, in the CPP + RRSP and "Opt out" scenarios, Citizen "x" has a considerable sum which can be passed on to other family members, providing them with a higher platform from which to start and giving them more options as well.



Citizen "x" may have a considerable sum, yes.  That's often the attraction of taking the commuted value of a private sector pension vice an annuity, particularly in cases where the annuity is of such size that it's more than is needed to meet lifestyle needs, or Citizen "x" has enough saved up in other vehicles to meet his needs and desires more control over the money.  That said, the decision often is made based on consideration of benefits (health, dental, etc) for pensioners, since when you "take the money and run" you generally lose any such benefits and the cost of them must be factored in to the decision.


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## a_majoor (26 May 2011)

Never the less, the principle still stands; people in control of their own resources get better outcomes and have more options than people who don't. (Regardless of the form, more is _always_ more, and greater quantities have a quality all of their own)

Most of the apocalyptic scenarios only apply to a small minority of the population (really, we have come a long way from William Blake's "Dark Satanic Mills"), and even there a richer society will have the charitable resources to assist. Much of the real damage of the Nanny state is the presumption that disconnected bureaucrats can usurp the roles of families, neighbours, communities and associations (the can't, and the Local Knowledge Problem demonstrates that no matter how much power and resources they hold, they never will), and the displacement of community by the State based on that presumption. 

The State can be swiftly and effectively replaced and communities rebuilt*, indeed it is a well known observation that people identifying with political conservative parties (Classical Liberals, to correctly identify them) donate more time and money to charity than self identified "progressives", and with more resources available they would certainly reach out more. There is also nothing at all to stop you, the reader, from volunteering to assist those in need to the limit of your ability and resources.








* As a footnote, when States fail, such as during natural disasters, community help almost always springs up by itself; Churches in New Orleans or today in the US Great Plains, "Life Hackers" creating local infrastructure in Japan after the earthquake, or more ominously, the Muslim Brotherhoods, Hezbollah and Hamas coming out to assist victims in Islamic countries. Loyalty can easily be transferred from the State to the new community partners should the State not pick up the game swiftly enough.


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## Redeye (26 May 2011)

Thucydides said:
			
		

> Never the less, the principle still stands; people in control of their own resources may get better outcomes and have more options than people who don't. (Regardless of the form, more is _always_ more, and greater quantities have a quality all of their own)



I fixed that for you.  Interestingly enough, when you compare, for example, the growth in value in stock markets with the return on investment received by the average investor, you often find a large disparity, because the ability to make choices is not necessarily the ability to make better choices.



			
				Thucydides said:
			
		

> Most of the apocalyptic scenarios only apply to a small minority of the population (really, we have come a long way from William Blake's "Dark Satanic Mills"), and even there a richer society will have the charitable resources to assist. Much of the real damage of the Nanny state is the presumption that disconnected bureaucrats can usurp the roles of families, neighbours, communities and associations (the can't, and the Local Knowledge Problem demonstrates that no matter how much power and resources they hold, they never will), and the displacement of community by the State based on that presumption.



Well, we've already seen that while community and charitable work can help, it simply isn't enough to deal with the problems we have currently, though one could argue quite effectively that you'll never totally eradicate poverty, homelessness, etc - but to suggest that "community will simply take care of the problem" isn't particularly correct based on what is currently observable.



			
				Thucydides said:
			
		

> The State can be swiftly and effectively replaced and communities rebuilt*, indeed it is a well known observation that people identifying with political conservative parties (Classical Liberals, to correctly identify them) donate more time and money to charity than self identified "progressives", and with more resources available they would certainly reach out more.



By "well known observation" you mean an assertion without merit or evidential support, right?  While this claim is oft-made, I've yet to see any sort of empirical evidence to support it whatsoever.  I'd also suspect that with the various dimensions involved in making such an assessment, and more importantly the efficacy of such  alleged philantrophy, no such research has ever been conducted in any sort of reliable manner.

Not to get too far into the weeds, but I often find it amusing that people who purport to support the ridiculous philosophy known as "objectivism" will then go out and cite things like the work of churches in responding to disasters, when Ayn Rand despised religion and as I recall referred to churches as "Kindergartens of socialism".  She also made a point of telling Playboy magazine that charity is not a moral duty  Then you have other morons like Glenn Beck spouting off about how "social justice" (the idea that churches should get actively involved in helping those in need) is some sort of evil.  Rand actually believed that total selfishness was some kind of virtual, after all.

It's also worth knowing that she died receiving social security and medicare benefits, and mostly alone having alienated virtually everyone in her life.







* As a footnote, when States fail, such as during natural disasters, community help almost always springs up by itself; Churches in New Orleans or today in the US Great Plains, "Life Hackers" creating local infrastructure in Japan after the earthquake, or more ominously, the Muslim Brotherhoods, Hezbollah and Hamas coming out to assist victims in Islamic countries. Loyalty can easily be transferred from the State to the new community partners should the State not pick up the game swiftly enough.
[/quote]


----------



## a_majoor (27 May 2011)

There is plenty of evidence on charitable giving, and it is easy for you to do the research and find it.

The scale of the problem is not anywhere near what the poverty industry makes it out to be, and if you consider that few poor people are suffering from starvation in Canada (obesity is the real problem), most people categorized as "poor" have such amenities as cars, televisions and personal computers and a serious policy discussion revolves around ensuring "poor" people have access to high speed Internet service, then it seems the definition of "poor" and "poverty" have been mangled beyond recognition. 

Perhaps a better way of looking at the scale and scope of the problem wold be to take the population of Vancouver's East End and divide that by the number of people who live in the Greater Vancouver area. Do similar comparisons in other cities and you will see that the number of truly sick and unfortunate people are indeed small enough to be effectively dealt with through charitable work, and I know enough volunteers and volunteer enough of my resources to realize that if *we* had more in our own pockets *we* would make a much bigger dent in the problem. As 41% of the average Canadian's income goes to taxes, our options are indeed restrained.

I have no idea where your off tangent attack on Objectivism fits in with this discussion, although true Objectivists would suggest that it is their choice to offer charity or not; not an imposed spiritual duty or a command by the State.


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## Redeye (27 May 2011)

Thucydides said:
			
		

> There is plenty of evidence on charitable giving, and it is easy for you to do the research and find it.



There's plenty of conjecture, not a lot of studies - and those I found actually don't support your theory, but the number of variables in play also makes a really good study difficult if not impossible.  I'll contentedly accept that there's no really strong correlation between vague political affiliations and charitable giving.  See, you'd need to go deeper into that and assess the nature of the charitable giving, what the money goes to etc, etc, and various other things.  I don't think anyone's done that.



			
				Thucydides said:
			
		

> I have no idea where your off tangent attack on Objectivism fits in with this discussion, although true Objectivists would suggest that it is their choice to offer charity or not; not an imposed spiritual duty or a command by the State.



I'll concede that the off tangent posts are generally your bailiwick rather than mine, but I included it because Objectivism is in my humble opinion the absolute stupidest "philosophy" ever created, and Ayn Rand is marvel of hypocrisy.  Suffice it to say, in the opinion to which I'm entitled, saying "I am an Objectivist" and "I am a moron" are synonymous, and I think more people are discovering that - at least, I'm hoping so.  The (mostly negative) publicity it's been getting since Paul Ryan wrote a contender for The Longest Suicide Note In History for the GOP Budget in the States is helping.  But you're right, it's not really relevant to to matter at hand.


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## KJK (14 Jun 2011)

I came across this in the Financial Post today. Shared with the usual disclaimer.

It is misleading to tell Canadians that the CPP is fully funded and could reliably deliver richer benefits on the same basis. The CPP is not fully funded in the sense most Canadians would understand the term, and its benefits are not guaranteed. The CPP is a gamble, not a guarantee. Doubling down means running the same risks on a larger scale.

http://opinion.financialpost.com/2011/06/10/cpp-is-a-gamble-not-a-guarantee/

He also states that in order to fully fund the current benefits CPP contributions would have to be raised to 11% from 9.9%

KJK


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## Redeye (14 Jun 2011)

KJK said:
			
		

> I came across this in the Financial Post today. Shared with the usual disclaimer.
> 
> It is misleading to tell Canadians that the CPP is fully funded and could reliably deliver richer benefits on the same basis. The CPP is not fully funded in the sense most Canadians would understand the term, and its benefits are not guaranteed. The CPP is a gamble, not a guarantee. Doubling down means running the same risks on a larger scale.
> 
> ...



What I see as a problem here is that the suggestion that using a 4% rate of return is somehow wrong.  The author correctly states that that is well above the yields currently
available on sovereign debt, long term that's a realistic number, and more importantly, that's not what the CPPIB invests in - they have a substantial, and reasonable well
performing equity portfolio which enhances their returns.


----------



## a_majoor (15 Jun 2011)

The argument is you are constrained to whatever ROI CPP chooses to disburse, wheras personal investing provides the opportunity of larger ROI based on long term historic market ROIs of 6-8%. The extra 2%-4% compounded is worth a considerable amount at the end of a working lifetime, and the flexibility to carry over that amount t o spouses or family is a tremendous benefit not available with CPP.


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## Redeye (15 Jun 2011)

Thucydides said:
			
		

> The argument is you are constrained to whatever ROI CPP chooses to disburse, wheras personal investing provides the opportunity of larger ROI based on long term historic market ROIs of 6-8%. The extra 2%-4% compounded is worth a considerable amount at the end of a working lifetime, and the flexibility to carry over that amount t o spouses or family is a tremendous benefit not available with CPP.



Did you even read the article?  No.  You clearly did not. Robson argues that to be considered "guaranteed" and fully funded that CPPIB should invest only in Federal government real return bonds from which he derives his model contribution amount.  That's not a model for full funding I've ever seen used to assess pensions, because all pensions invest in more diversified portfolios than that, the CPPIB especially does - its holdings are very broad and historically it has done very well.

In addition to that - the changes currently being implemented to the pension should enhance its position further.

I see you want to flog the "market return" dead horse some more - the key to that is while that's the market return it doesn't take into account transaction and carrying costs, and the fact that despite what the market returns, "average" investors don't tend to do as well, mainly because they make poor decisions, and because they have to pay costs.  That's why something like an expanded CPP could offer advantages - with its size and scope its transaction and management costs are miniscule, which might appeal to those who do not have the expertise to it themselves.


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## a_majoor (15 Jun 2011)

Compound rate of return is a dead horse? Many bankers, businessmen, politicians, investors and financial planners would beg to differ.

What it really amounts to is you would have people forced to pay into a system where they have no input into the investment decisions or outcomes, and are forced to take whatever is given to them upon retirement. Remember upthread the real compound ROI of CPP is actually under 3.5%, not the 4% assumed in the article. Perhaps there is a market for that kind of thing, but let that be an option, not a constraint. Literally forcing people to forego potentially large gains speaks of a world view of forced equalization, and lopping the heads off the tallest poppies in the field. 

Political solutions based on these world views are really forms of class warfare, and dragging people down to some arbitrary level isn't a workable model for societies (as history has repeatedly shown).


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## Brad Sallows (15 Jun 2011)

>So, to restate what you've just said, we should let senior citizens who haven't saved adequately for retirement or enjoy longevity such that their savings haven't lasted be evicted from their homes and starve to death if they go broke and their families aren't able to support them? 

Yes, let's go directly to the worst possible extreme without considering that they might have to give up their homes and live in modest state-sponsored pensiones.  It is a strange world progressives inhabit in which social benefits are either everything or nothing.

What I refer to is this contradiction: a person can be sued into penury simply because he is ignorant of his liability and despite manifest good intentions, but heaven forbid people be constrained to live modestly due to their own imprudence and lack of foresight.


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## brihard (15 Jun 2011)

Redeye said:
			
		

> Did you even read the article?  No.  You clearly did not. Robson argues that to be considered "guaranteed" and fully funded that CPPIB should invest only in Federal government real return bonds from which he derives his model contribution amount.  That's not a model for full funding I've ever seen used to assess pensions, because all pensions invest in more diversified portfolios than that, the CPPIB especially does - its holdings are very broad and historically it has done very well.
> 
> In addition to that - the changes currently being implemented to the pension should enhance its position further.
> 
> I see you want to flog the "market return" dead horse some more - the key to that is while that's the market return it doesn't take into account transaction and carrying costs, and the fact that despite what the market returns, "average" investors don't tend to do as well, mainly because they make poor decisions, and because they have to pay costs.  That's why something like an expanded CPP could offer advantages - with its size and scope its transaction and management costs are miniscule, which might appeal to those who do not have the expertise to it themselves.



Anyone in a position to invest privately has a bank account, likely with a major bank. Any one of those banks offers investment advisors at no cost- I used to use them myself.

Through the banks a variety of investment vehicles are available that offer many of the same advantages. A diversified portfolio of ETFs or mutual funds will generally offer the same advantages, and if the investment timeframe being looked at is to be measured in excess of a decade, with costs averaged by continually paying in, the risks of investing in such a manner would be largely mitigated, no?

Speaking for myself, I'll never bank on CPP or on any private or public sector pension fund- too many private funds have gone pear shaped, and I don't like the implicit assumptions inherent in relying ion a public sector pension. Given the option, I'll do my own investments as much as possible. Granted, currently I'm downright reckless with my stock selections- but at this stage in life I can afford to be, and more conservative approaches will follow before too long.

I will concede that the average person doesn't know enough about investing to be of much use. But the same expertise available to CPP is available to largely the same extent through the banks, and is offset in relation by the relatively low annualized ROI that CPP offers.


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## a_majoor (31 Jul 2011)

Why would the public service unions (with their gold plated pensions) want to step into the CPP debate you ask?

http://freedomnation.blogspot.com/2011/07/pensions-reality-and-fantasy.html



> *Pensions: reality and fantasy*
> 
> The Canadian Federation of Independent Businesses has come out strongly against increasing the size of the Canadian Pension Plan. They argue, correctly, that the increase will amount to a payroll tax and would hurt smaller businesses and discourage employers from hiring. Large corporations can generally swallow this sort of cost increase, but your local bakery or small law firm would be badly hurt.
> 
> ...


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## Neill McKay (31 Jul 2011)

Thucydides said:
			
		

> Why would the public service unions (with their gold plated pensions)



I swore I'd never use this, but  :.


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## mariomike (31 Jul 2011)

"The reason why the private sector doesn’t have public sector pensions is because the private sector can’t afford such high pension benefits. Hell, the public sector can’t really afford it either. It is time for the public sector to wake up to reality."

Reminds me of those "I pay your salary" citizens we used to run into.


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## Brad Sallows (1 Aug 2011)

Either everyone can enjoy public sector wages and benefits (ie. the economy can function that way), or not everyone can.  If not, and if there is significant inequality in terms and conditions, it means some people are overcompensated at the expense of others (ie. we pay more for some goods/services than what they are worth).

I assume that if it were possible to compensate everyone at public levels, we would already have done so.


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## mariomike (2 Aug 2011)

Brad Sallows said:
			
		

> Either everyone can enjoy public sector wages and benefits (ie. the economy can function that way), or not everyone can.  If not, and if there is significant inequality in terms and conditions, it means some people are overcompensated at the expense of others (ie. we pay more for some goods/services than what they are worth).
> 
> I assume that if it were possible to compensate everyone at public levels, we would already have done so.



Front-line workers deserve their wages and benefits. Especially now that the cities they serve and protect are the explicit targets of terrorists. 
I do not consider it a profit making business.

I support early retirement for front-line workers. Not only is it fair, it is also a public safety issue. An older worker should not be forced to run a code on a child at 0400 hours with the parents screaming at them. 
If that means paying a little more for an electric toothbrush or a haircut, I do not begrudge it.


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## a_majoor (2 Aug 2011)

The sad fact of the matter is public sector employees make an average of 13% more than their equivalent private sector counterparts, and the spread increases to 33% once wages and benefits are added in. Someone needs to pay for this, but the people paying earn less, only @20% have pensions from work and fewer still have defined benefit pensions.

The short answer is the people expected to pay for these generous benefits are fare worse off to begin with, and will be for the forseeable future. Now if public sector wages were in line with their private sector counterparts, there would be a $19 billion reduction in government spending, which shoudl give you a real idea of the magnitude of the problem (and the scale of resources that could be reinvigorating the economy if that money was in the private sector).


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## Old Sweat (2 Aug 2011)

Thucydides said:
			
		

> The sad fact of the matter is public sector employees make an average of 13% more than their equivalent private sector counterparts, and the spread increases to 33% once wages and benefits are added in. Someone needs to pay for this, but the people paying earn less, only @20% have pensions from work and fewer still have defined benefit pensions.
> 
> The short answer is the people expected to pay for these generous benefits are fare worse off to begin with, and will be for the forseeable future. Now if public sector wages were in line with their private sector counterparts, there would be a $19 billion reduction in government spending, which shoudl give you a real idea of the magnitude of the problem (and the scale of resources that could be reinvigorating the economy if that money was in the private sector).


It seems to me that back in the early seventies the government, check that, PM Trudeau justified big wage hikes to the Public Service (but not the CF) as an attempt to shame the private sector to paying their employees decent wages. Economics 101, anyone? (I was in CFHQ at the time and remember it. I also remember the press gushing over the golden age for the Public Service as there was so much money to be spent and so many careers to be built in the process.)


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## Edward Campbell (2 Aug 2011)

There was, until the late '60s, an explicit social contract: public servants were, relatively, poorly paid but they had a near "iron rice bowl," job security that no private sector employee could ever imagine. Then Trudeau upset the apple cart ~ the low wages were replaced with negotiated contracts and ever increasing wages which, eventually, covered the CF, too. But nothing was ever exchanged for the higher and higher wages; public sector employees (municipal, provincial and federal) still have "iron rice bowls," but they are, as other have pointed out, now paid far more than their private sector confreres.

What we have is a new "class" divide: well paid public sector workers with excellent job security and great pensions and relatively poorly paid private sector workers with no useful job security and lousy pensions. The latter pay for the former. I doubt it is sustainable.


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## Neill McKay (2 Aug 2011)

I'd like to meet one of these highly-paid public-sector workers.  In my profession (engineering) there's considerably more money to be made in the private sector.  (The gap between the two offers -- public and private -- from which I chose when I joined the civil service was about 14 per cent.)

But apart from wages, I accept that the benefits in the public sector tend to be better than those in many private-sector workplaces.  However, having worked in the private sector with no benefits of any kind -- not even sick days -- I think the solution is for private-sector employers to improve the lot of their workers, rather than for the public sector to join them in a race to the bottom.  By and large the civil service, in New Brunswick at least, is a reasonable and enlightened employer.  While acknowledging that there are exceptions, my experience has been that private sector employers tend to lag behind.


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## Bruce Monkhouse (3 Aug 2011)

Thucydides said:
			
		

> The sad fact of the matter is public sector employees make an average of 13% more than their equivalent private sector counterparts, and the spread increases to 33% once wages and benefits are added in. Someone needs to pay for this, but the people paying earn less, only @20% have pensions from work and fewer still have defined benefit pensions.



You have anything to back this claim up?


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## KJK (3 Aug 2011)

Bruce,

I just look to the recent Canada Post strike and their compensation package. No formal education  gets a starting wage of $27/hr moving up to $36-37 hr with seniority. I believe they also get 21 sick days/year and 6 personal days with a defined benefits pension if memory serves me correctly.

I work in the oilfield as many of you know. We have postions here that require 2 years of college to start at $25/ hr, 7 sick/personal days a year and a defined contribution pension plan. This on top of working under extremely adverse weather conditions far from home living in a camp. We consider ourselves lucky to be be working for one of the few private companies that still offer a pension at all. Yes our wages can go much higher than CP but not without a lot of education or a lot of hours worked. I might add that what we are doing is also considerably more dangerous than delivering mail.

I can't provide any stats to back this up right now but I have heard the numbers T is using before. I just can't remember where.  

My $.02

KJK


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## KJK (3 Aug 2011)

Here is a CBC article showing SK government liquor store cashiers making roughly twice what a private liquor store cashier would make + benefits + sick days + an indexed pension. It is from 2006 but I doubt things have gotten better for the taxpayer.

http://www.cbc.ca/news/canada/saskatchewan/story/2006/10/05/liquor-stores.html

KJK


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## Edward Campbell (3 Aug 2011)

Bruce Monkhouse said:
			
		

> You have anything to back this claim up?




There is all kinds of data out there: almost none of it authoritative. Much of the data compares apples and oranges ~ we do not, for example, have private sector law enforcement and many (most) jobs in the public sector are in large, unionized work-forces whereas many, many jobs in the private sector are in small, generally non-union work-forces.

But I can try to make some broad generalizations based on the data that I have seen:

1. The greater the education requirement the less likely there is to be a pay differential ~ most "journeyman" people with PhDs in chemical engineering make more in the private sector than they do in the public sector. In other words, the government sectors reward brawn and undervalue brains ~ physicians and pharmacists in the public service make too little, hospital food service workers make too much; university professors make too little, cleaners make too much, and so it goes; and

2. The pension schemes are growing towards being 180o out of phase ~ this is becoming a major bone of contention in the "class" divide.

The military has, for 30+ years, benefited from the public service wage _inflation_. I cannot remember exactly when it happened but, _circa_ 1970, our (military) pay scales were 'bench marked' against civil service equivalents (and we got a series of large pay raises to 'catch up') and their benefits packages were 'enhanced' to look more like ours (public service annual leave, for example, went from a minimum of two weeks to four weeks - a benefit which had been unique to the military and which was awarded, in part, to compensate for low wages and *unique* conditions of service).

But it is an important argument because if government employment is too attractive is will exacerbate our productivity problems. Government work - even the defence of the realm and the safety of the public - is, broadly, economically _unproductive_. We *must* have _some_ public services, and they must be provided in an efficient and effective manner (which, broadly, means good, adequately compensated people are required) but we must, also, have a strong private sector to pay the bills. The 'gap,' between the two should be biased towards the risk-taking private sector; currently it is not.


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## Fishbone Jones (3 Aug 2011)

Ken Lewenza, President of the CAW, stated last week that CAW workers average $55.00\ hr. Their pension is nothing to sneeze at either. 

There are lots of similar unionized private sector workers in the same boat. Want to talk about 'iron rice bowls' to use Edward's phrase, try fire a private sector, union employee.

Public sector employees don't have a lock on this.

This should properly be more a discussion about union and non-union employees. Not public\ private sector.


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## dapaterson (3 Aug 2011)

E.R. Campbell said:
			
		

> In other words, the government sectors reward brawn and undervalue brains ~ physicians and pharmacists in the public service make too little, hospital food service workers make too much; *university professors make too little*, cleaners make too much, and so it goes; and



[off topic]

I would challenge you to find a single Canadian university professor who is not a public employee.  Despite university's claims of independence, they are public institutions _de facto_, if not _de jure_, as without the generous governmental funding which flows unconstrained and uncontrolled they would not exist.

[/off topic]


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## Edward Campbell (3 Aug 2011)

recceguy said:
			
		

> Ken Lewenza, President of the CAW, stated last week that CAW workers average $55.00\ hr. Their pension is nothing to sneeze at either.
> 
> There are lots of similar unionized private sector workers in the same boat. Want to talk about 'iron rice bowls' to use Edward's phrase, try fire a private sector, union employee.
> 
> ...





That's why I mentioned the large (unionized) vs. small (non-union) work-force issue; you are correct, of course, large unions have the clout to protect their employees ~ but that may be changing.


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## Edward Campbell (3 Aug 2011)

dapaterson said:
			
		

> [off topic]
> 
> I would challenge you to find a single Canadian university professor who is not a public employee.  Despite university's claims of independence, they are public institutions _de facto_, if not _de jure_, as without the generous governmental funding which flows unconstrained and uncontrolled they would not exist.
> 
> [/off topic]




Certainly true, but it does not alter my perception that the public sector undervalues brains and overpays brawn.


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## Redeye (3 Aug 2011)

recceguy said:
			
		

> Ken Lewenza, President of the CAW, stated last week that CAW workers average $55.00\ hr. Their pension is nothing to sneeze at either.



The $55/hr rate (and various similar rates) generally factor in the value of benefits including pensions - it's not their hourly wage.  That would translate to $114,400/year.  Having worked as a financial planner in a GM town with lots of them as clients, even the white collars make nothing near that as salary.  A line worker at GM's Oshawa plants before the mess in a couple years ago would bring home a gross of around $50,000-$55,000/year, plus overtime perhaps.


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## mariomike (3 Aug 2011)

Regarding the "iron rice bowl". As ( then ) Mayor Lastman put it, "Jobs for life". “I knew it was time to stop that. We tried to take it away from them because they had us by the balls. We fought like hell but couldn’t get rid of it. You don’t know what we had to go through." “Try and fire them, you can’t.”
Star Feb 16 2011

For management, it was a different story. I remember when T-EMS fired 10 supervisors in a single day.


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## Fishbone Jones (3 Aug 2011)

Redeye said:
			
		

> The $55/hr rate (and various similar rates) generally factor in the value of benefits including pensions - it's not their hourly wage.  That would translate to $114,400/year.  Having worked as a financial planner in a GM town with lots of them as clients, even the white collars make nothing near that as salary.  A line worker at GM's Oshawa plants before the mess in a couple years ago would bring home a gross of around $50,000-$55,000/year, plus overtime perhaps.



CAW workers at the Big Three make approx $35\ hr before shift premium and overtime. That's $72,000.00\ year base.


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## Redeye (3 Aug 2011)

recceguy said:
			
		

> CAW workers at the Big Three make approx $35\ hr before shift premium and overtime. That's $72,000.00\ year base.



Unless they have gotten a lot of raises lately, I don't think I ever saw one that made that much.  However, it's not impossible.  $55/hr as a wage, however, is.


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## Fishbone Jones (3 Aug 2011)

Redeye said:
			
		

> Unless they have gotten a lot of raises lately, I don't think I ever saw one that made that much.  However, it's not impossible.  $55/hr as a wage, however, is.



I'm only restating what their own President said on the news last week. He mentioned no tie to benefits either. Take it up with him. The $35\ hr figure came from their own literature. Look it up.


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## Brad Sallows (3 Aug 2011)

>Front-line workers deserve their wages and benefits. Especially now that the cities they serve and protect are the explicit targets of terrorists.  I do not consider it a profit making business.

"Deserve".   Why?  Last time I checked, there are many Canadian occupations with higher fatality/injury rates than the "front-line workers", if by that you mean police and emergency services.


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## Teeps74 (3 Aug 2011)

Brad Sallows said:
			
		

> >Front-line workers deserve their wages and benefits. Especially now that the cities they serve and protect are the explicit targets of terrorists.  I do not consider it a profit making business.
> 
> "Deserve".   Why?  Last time I checked, there are many Canadian occupations with higher fatality/injury rates than the "front-line workers", if by that you mean police and emergency services.



Very few in this nation have people actually hunting them and wishing them harm on a daily basis. Police do deal with that. There are many criminal factions that would love to "cut their teeth" by injuring/murdering a cop. That hyper awareness is going to limit casualties by accident (note, accidents are always preventable... Being hunted, not always so.)

EDIT TO ADD: Paramedics deal with pain and suffering as a matter of course on a daily basis and firefighters are expected to rush into a burning building to rescue someone's cat because they smoked in bed... Some people are employed in fields where there is a very high degree of risk of personal harm.


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## mariomike (4 Aug 2011)

Teeps74 said:
			
		

> Very few in this nation have people actually hunting them and wishing them harm on a daily basis. Police do deal with that. There are many criminal factions that would love to "cut their teeth" by injuring/murdering a cop. That hyper awareness is going to limit casualties by accident (note, accidents are always preventable... Being hunted, not always so.)
> 
> EDIT TO ADD: Paramedics deal with pain and suffering as a matter of course on a daily basis and firefighters are expected to rush into a burning building to rescue someone's cat because they smoked in bed... Some people are employed in fields where there is a very high degree of risk of personal harm.



I think most citizens support their first responders for the reasons you said. They - and the military - are the only forces that protect us from losing everything we hold dear in an emergency.

The battle for supplemental pension benefits for police officers, firefighters and paramedics began at the federal level in 1999. It resulted in an increased pension accrual rate of 2.33 per cent, best-three years of contributory earnings, and an 80 Factor ( age + years of full-time credited service = 80 ).  
The Coverage Date cannot be earlier than July 1, 2008. That was too late to do me any good, but I support it for those now joining. The reason I support it is because the age of the average recruit in Toronto Fire Services has risen to 30.59  ( as of 2010 ). I am sure police and EMS are following a similar trend. That is a considerable increase in age from when I hired on ( 18-25 was typical ) and shows that early retirement improvements are necessary. Not only out of fairness to the worker, but also as a matter of public safety.

It is understood that jobs such as deep-sea fisherman, miner, forester etc. are also hazardous. However, they are not designated as Public Safety Occupations PSO's. Therefore, they are not eligible for a regulation to retire early, or a mechanism to make up for the resulting loss in retirement income under Canada’s Income Tax Act.


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## Brad Sallows (4 Aug 2011)

>Very few in this nation have people actually hunting them and wishing them harm on a daily basis.

So what?  Leave aside appeals to religion and immortal souls: what makes death or injury at the hands of a human worth more or less compensation than death or injury due to any other event in nature?  If risk is a compensating factor, should it not be the rationally and factually based risk (eg. rate per 100,000) which is the determination?

>Some people are employed in fields where there is a very high degree of risk of personal harm.

My point exactly.  But by what reasoning does the means by which the harm occurs matter?


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## a_majoor (4 Aug 2011)

People who choose to take up dangerous vocations can and do demand a risk premium; that is not at issue here. 

The National Post article which pointed out that making pubilc sector wages equivalent to the corresponding private sector wages specifically excluded Police, since there is no real equivalent, and I believe several other jobs with no direct private sector equivalents were also excluded from the study. Even with that segment removed from the study, there is still $19 billion to be saved by paying clerks and middle managers the same wages and benefits as they would get in the private sector. See here for details.


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## Neill McKay (5 Aug 2011)

Thucydides said:
			
		

> there is still $19 billion to be saved by paying clerks and middle managers the same wages and benefits as they would get in the private sector.



A race to the bottom isn't good for anyone.


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## mariomike (5 Aug 2011)

> "Deserve".   Why?  Last time I checked, there are many Canadian occupations with higher fatality/injury rates than 
>  the "front-line workers", if by that you mean police and emergency services. 

> If risk is a compensating factor, should it not be the rationally and factually based risk (eg. rate per 100,000) which is the determination?

Here is another list you can check for compensating factors.

Canada 2011:
"Top Jobs: The Professions We Trust Most: Emergency personnel like firefighters and paramedics topped this year's Most Trusted Jobs list":
1. Firefighters
2. Paramedics
3. Pharmacists
4. Nurses
5. Airline pilots
6. Doctors
7. Teachers
8. Armed Forces
9. Dentists
10. Veterinarians
11 . Police
12. Judges
13. Locksmiths
14. Accountants
15. Daycare workers
16. Public-transit drivers
17. Electricians
18. TV News Anchors
19. Psychologists/counsellors
20. Plumbers
http://www.readersdigest.ca/magazine/most-trusted-canadians-3rd-annual-trust-poll-results

Likewise in the U.S. and Australia.
"Which profession do you trust the most?":
http://www.dailymercury.com.au/story/2011/06/24/in-our-emergency-services-we-trust-jobs-profession/


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## a_majoor (5 Aug 2011)

WRT wages, the private sector bids for workers determined on how much the company can afford, and how much the worker is willing to accept. If there is a labour shortage, then wages can be bid up to unreasonable levels (such as in Alberta during boom periods; Tim Horton's workers were making wages many of us would envy), while if there is a labour surplus, wages get depressed as part of a natural cycle. Workers should be free to move from depressed markets to overheated ones, and the problem then corrects itself.

Paying the going market rate for government employees doing the same jobs as private sector employees is hardly a "race to the bottom" (unless all private sector workers are somehow currently living in poverty), and having $19 billion available in the economy would fund a tremendous amount of savings and investment across the entire breadth of the economy as @ 20 million people chose what to spend their share of the wealth on (rather than a handful of bureaucrats or a limited segment of the population). The $19 billion represents the resources to potentially create 380,000 full time private sector jobs as well.

This is the part of the argument which is willfully ignored. By removing large sums of money from the hands of the State, funds cannot be funneled into parts of the economy for whatever political purposes are deemed important by the political class (overpaying government workers to help ensure reelection is one classic distortion, as political ads paid for by Ontario's public sector unions are demonstrating in the runup to October's elections). This mitigates the appearance of bubbles, and moderates investment risk overall as money is not chasing perverse incentives created by politically motivated spending. Individual investors may choose unwisely, but this an individual issue, not a domino effect which can take out entire sectors of the economy.


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## Fishbone Jones (5 Aug 2011)

So, plain and simple, if Timmy's is paying $20.00\ hr in Edmonton and $9.00\ hr in London, where do you peg the Fed wage at in comparison?


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## Edward Campbell (5 Aug 2011)

recceguy said:
			
		

> So, plain and simple, if Timmy's is paying $20.00\ hr in Edmonton and $9.00\ hr in London, where do you peg the Fed wage at in comparison?




Why would the federal any government need anyone who serves coffee? There are probably dozens of job groups that fall into a similar category: support services that are, at least, highly desirable, maybe even necessary, but which need not and should not be provided by public servants. You want coffee? Phone the cafe; they'll bring it up. You want the office cleaned? Phone the contractor. You want the roads plowed? And so on ...


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## Fishbone Jones (5 Aug 2011)

E.R. Campbell said:
			
		

> Why would the federal any government need anyone who serves coffee? There are probably dozens of job groups that fall into a similar category: support services that are, at least, highly desirable, maybe even necessary, but which need not and should not be provided by public servants. You want coffee? Phone the cafe; they'll bring it up. You want the office cleaned? Phone the contractor. You want the roads plowed? And so on ...



Edward,

I'm simply going along with the examples. Let's not cloud the issue with semantics.

Try this.

A health care worker in Edmonton makes 50.00\ hr in Ontario $35. Where do the Feds peg the wage?

This is pretty simple. Either you let the market dictate, or we become socialist and everyone, but the politicians, lose their livelyhood.


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## a_majoor (5 Aug 2011)

The correct answer is the Feds do not peg the wage, as Edward says, these jobs should in no way be supplied by the State.

If there is no political will to divest jobs, then the ideal would simply base contracts on the prevailing market wage at the time the contract is negotiated. If there is an equivalent private sector job in Edmonton to the Health Care worker (a nebulous job category to begin with, who exactly are we talking about here? An X ray tech or a hospital cleaner?) then that is where the wage is set. The worker could choose to apply for a private sector job in the hope or expectation that the demand for the trade will rise and thus the wages if they are not satisfied with the public sector job offer.

Note that if after several years hordes of Ontario workers have migrated to Edmonton seeking $50/hr then the labour costs will come down when the new contract is to be negotiated. Of course the sky high rents and prices of Tim Horton's coffee will also have moderated, the market has a way of working these things out.


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## Fishbone Jones (5 Aug 2011)

So I guess we come back to square one. If my examples don't suit your mold, give me a concrete, real life example, of a private\ public job, and how you would tell which one how much they can be paid in comparison to the other.


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## a_majoor (6 Aug 2011)

If an X-ray tech in a private clinic can ask for and receive a wage of $50/hr in that location, then the public servant X-ray tech can be paid the same wage in the same location. If the going rate is only $35/hr in that location, then that is all the government wage will be as well.


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## Fishbone Jones (6 Aug 2011)

Thucydides said:
			
		

> If an X-ray tech in a private clinic can ask for and receive a wage of $50/hr in that location, then the public servant X-ray tech can be paid the same wage in the same location. If the going rate is only $35/hr in that location, then that is all the government wage will be as well.



And you negotiate this how?


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## Bruce Monkhouse (6 Aug 2011)

Thucydides said:
			
		

> If an X-ray tech in a private clinic can ask for and receive a wage of $50/hr in that location, then the public servant X-ray tech can be paid the same wage in the same location. If the going rate is only $35/hr in that location, then that is all the government wage will be as well.




I'm sure many senior civil servants would love the raise you would have just handed them.....................


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## Fishbone Jones (6 Aug 2011)

Like I said. How's it going to be negotiated?


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## Brad Sallows (6 Aug 2011)

>Like I said. How's it going to be negotiated?

1. You go to a compensation consultancy, and ask what is, say, the 60th or 70th or 80th (or whatever) percentile of market-based compensation across various points of years of experience (within categories for similar/identical occupations, obviously).  They tell you; you set your pay and benefits scales to those numbers.  Negotiation is: you may work here, or seek an employer who pays in a higher percentile.


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## Bruce Monkhouse (6 Aug 2011)

Sounds ridiculously expensive and labour intensive and, .....oh wait, now I understand, you must work in an HQ so of course you want MORE bureaucracy.


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## Brad Sallows (6 Aug 2011)

Compared to the expense and labour (time) lost in negotiation (and all its assorted practices), it is not.  How the engagement of outside consultants to provide a report every few years could help to expand a government bureaucratic fief, I can't see.


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## a_majoor (4 May 2012)

Interesting comparison between the Australian system and the US system. Some lessons learned here for those who wish to see them; and going towards the Australian model (or the similar Chilean model) would do a lot to mitigate the issue of unfunded liabilities in government pensions and the sustainability of OAS (which was recently an issue in the media):

http://finance.townhall.com/columnists/danieljmitchell/2012/05/03/australia_vs_the_united_states_two_charts_that_tell_you_everything_you_need_to_know_about_social_security_reform/page/full/



> *Australia vs. the United States: Two Charts that Tell You Everything You Need to Know about Social Security Reform*
> 
> Daniel J. Mitchell
> 
> ...


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## a_majoor (18 Dec 2012)

Proposals to expand the CPP are in the air again, and of course the proponents never state what the seen and unseen costs are going to be:

http://opinion.financialpost.com/2012/12/17/pension-shakeup-needed/



> *Pension shakeup needed*
> 
> Bill Tufts, Special to Financial Post | Dec 17, 2012 9:01 PM ET
> More from Special to Financial Post
> ...


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## observor 69 (18 Dec 2012)

About those “unfunded liabilities”

When it comes to the Canada Pension Plan, a major talking point from the right is that the CPP has “unfunded liabilities”, with the implication that is not affordable and financially unsustainable. This is nonsense, a scare tactic based on an accounting fiction that counts only future expenditures but does not count future revenues.

http://www.progressive-economics.ca/2011/08/09/about-those-unfunded-liabilities/


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## Brad Sallows (18 Dec 2012)

Neither the future revenues nor expenses are certain.  But the self-indulgent generation that benefited from being large, due to its parents' willingness to raise larger families, should not expect to tax at higher rates the smaller generation it produced.


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## a_majoor (18 Dec 2012)

Actually, unfunded liabilities is exactly correct: these are payments that are pledged to be honoured, but no funds exist to cover the pledge

You might tell me that you will give me $10,000 at a future date, and even sign a contract to do so, but until the money is in escrow in your bank account, you are actually skirting fraud at best. As the holder of a valid contract, I'm not likely to accept "sorry, I didn't make as much as I thought this year" as a valid excuse for not paying.

While I can take you to court and seize your chattles, the reality is much different for people expecting CPP. They will either not get it at all (with no opportunity for redress), receive a vastly reduced amount (ditto) or discover that through inflation and currency manipulation, the pension has much less actual value than they would have expected, once again with no possibility of redress.


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## a_majoor (24 Feb 2013)

The idea should be featured on the "Walking Dead", as reality does not seem to phase people who work to promote this idea:

http://opinion.financialpost.com/2013/02/20/terence-corcoran-the-new-national-savings-fantasy/



> *Terence Corcoran: The new national savings fantasy*
> 
> Terence Corcoran | Feb 20, 2013 9:24 PM ET | Last Updated: Feb 21, 2013 11:12 AM ET
> More from Terence Corcoran | @terencecorcoran
> ...


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