CPP History:
CPP was created in 1966 as a pay as you go system i.e. the current working generation would pay for the pension benefits of the previous generation. It was a workable system in 1966 with retirement age of 70, a healthy economy and rising wages[1]. 30 years later in 1996 the plan received $11B in contributions and paid out approx. $17B in benefits with a deficit of $6B in that year. With contributor to beneficiary ratio expected to drop to 3:1 by 2030 major overhaul of the system was required to avoid a disastrous situation.
http://www.weblivepro.com/articles/cpp/cppinfo.aspx (pic)
D: That's right - it took 30 years for governments to turn the pension plan into a train wreck.
Why? Cuz Boomers did not want to pay taxes (or other payroll deducations) during their work years.
Did nobody NOTICE for 30 years the inevitable result of this laxness?
Wiki:
The CPP program mandates all employed Canadians who are 18 years of age and over to contribute a prescribed portion of their earnings income to a nationally administered pension plan
D: it is big government. It is coercive.
The CPP is funded on a "steady-state" basis, with its current contribution rate set so that it will remain constant for the next 75 years, by accumulating a reserve fund sufficient to stabilize the asset/expenditure and funding ratios over time. Such a system is a hybrid between a fully funded one and a "pay-as-you-go" plan. In other words, assets held in the CPP fund are by themselves insufficient to pay for all future benefits accrued to date but sufficient to prevent contributions from rising any further.
D: that's the technobabble.
History:
D: planned under the government of the Conservative Dief.
D: the first crisis:
At its inception, the prescribed CPP contribution rate was 1.8% of an employee's gross income up to an annual maximum. Over time, the contribution rate was increased slowly. However, by the 1990s, it was concluded that the "pay-as-you-go" structure would lead to excessively high contribution rates within 20 years or so, due to Canada's changing demographics, increased life expectancy of Canadians, a changing economy, benefit improvements and increased usage of disability benefits.
D: what was the problem? The key passage was "within 20 years or so" - the boomers might still be working!
THAT made it a 'crisis'. Delaying the crisis by 2-3 decades makes it sound Boomer planning...
http://www.hrsdc.gc.ca/eng/publications_resources/cpp/2007/annual_report/CPP_Eng_Report_FINAL.pdf
a faiR aPPRoaCh to funding
When it was introduced in 1966, the CPP
was designed as a pay-as-you-go plan, with a
small reserve. This meant that the benefits for
one generation would be paid largely from the
contributions of later generations. This approach
made sense under the economic, financial and
demographic circumstances of the time. The period
was characterized by a rapid growth in wages and
labour-force participation, and low rates of return
on investments.
D: and with a signature on the new bill, the Boomers were let off the hook to pay for their own retirement
D: let's tease these factors apart, and examine them one at a time.
1) changing demographics
2) increased life expectancy
3) changing economy
4) benefit improvements and increased usage of disability benefits.
D: Let's address them in order.
2) changing demographics.
(see pic 2)
D: seems to me, the whole wide world realized that life expectancy was increasing.
Well, maybe the RATE increased?
http://www.efmoody.com/estate/lifeexpectancy.html
Nope. The opposite. The increase in life expectancy actually slowed. So if anything, the plan should have shown a surplus.
1) changing demographics.
(pic).
Nope. Same thing. Bullshit. The immigration rate was HIGHER prior to the passing of the pension plan.
Once again, we'd expect the plan to overbudget for demographic shifts.
Once again, we get the opposite.
3) changing economy.
http://www.theoildrum.com/uploads/12/interest_rates.jpg
OK... got me there. That is some dismal real interest return rates.
4) if they expand benefits, who can act surprised?
So in summary, by and large, we get fed a line.
D: there is an old saying. Fool me once, shame on you. Fool me twice, shame on ME.
You're not fooling me twice.
D: the solution?
"Move towards a hybrid structure to take advantage of investment earnings on accumulated assets. Instead of a "pay-as-you-go" structure, the CPP is expected to be 20% funded by 2014."
D: leave post-Boomers with the bill?
----
Tomorrow we'll look at post-secondary education funding, and related student loans.
You will begin to see a pattern. I'll explicitly outline that pattern after entries cross-referencing income tax and pension pay in rates. One needs to look at the Boomer at every stage of voting life to understand just how pernicious the 'benign neglect generational model' can be, without any need to invoke conspiracy.
I'd note that a quasi-Marx-class-derived age-based analysis is entirely absent from both the public discourse and policy.
Like feminism, this model needs to create 'class awareness'. By that I not only mean for young people, but also for older people- Boomers really - so they realize where their policies lead. That leaves them with 2 options. They can acquiesce to these policies, knowing where they lead- and thereby become complicit- or join in becoming part of the solution.
For younger adults, awareness can replace apathy with anger. This anger can be used destructively or constructively.
Why rant about 'no future' when one can wrest from time the future one wants, bend fate to one's will?
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