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Don’t Double Down on the CPP: Expansion Advocates Understate the Plan’s Risks

Author

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  • William B.P. Robson

    (C.D. Howe Institute)

Abstract

Advocates of an expanded Canada Pension Plan as a response to Canadian concerns about low incomes in retirement too often promote it as a plan with guaranteed benefits that are fully funded. The CPP looks like a defined-benefit plan, but it is not. Most of its benefits are targets contingent on its financial condition, and past and upcoming revisions – including lower pensions for those taking them up before age 65 in both the CPP and its sister Quebec Pension Plan – show that governments can change the targets. Adverse economics and demographics, combined with disappointing investment returns, are now forcing the Quebec Pension Plan to trim benefits and raise contributions. The same has happened to the CPP, and too few Canadians realize it is likely to happen again. The CPP is a gamble, not a guarantee: expanding the plan would raise the stakes on a bet most Canadians do not know they have made.

Suggested Citation

  • William B.P. Robson, 2011. "Don’t Double Down on the CPP: Expansion Advocates Understate the Plan’s Risks," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 137, June.
    • Handle: RePEc:cdh:backgr:137
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    File URL: https://www.cdhowe.org/don%E2%80%99t-double-down-cpp-expansion-advocates-understate-plan%E2%80%99s-risks/13661
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    References listed on IDEAS

    as
    1. Kevin D. Moore & William Robson & Alexandre Laurin, 2010. "Canada’s Looming Retirement Challenge: Will Future Retirees Be Able to Maintain Their Living Standards upon Retirement?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 317, December.
    2. Jonathan R. Kesselman, 2010. "Expanding Canada Pension Plan Retirement Benefits: Assessing Big CPP Proposals," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 3(6), October.
    3. Alexandre Laurin & William B.P. Robson, 2009. "Supersized Superannuation: The Startling Fair-Value Cost of Federal Government Pensions," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 122, December.
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    Cited by:

    1. Davies, James B. & Yu, Xiaoyu, 2013. "Impacts of Cyclical Downturns on the Third Pillar of the RIS and Policy Responses," CLSSRN working papers clsrn_admin-2013-20, Vancouver School of Economics, revised 29 Apr 2013.

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    More about this item

    Keywords

    Pension Papers; Canada Pension Plan (CPP); defined-benefit plan; Quebec Pension Plan;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

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