April 22nd, 2018

Canada Pension Plan: Tax or benefit?

By Letter to the Editor on April 12, 2018.

So, you’ve contributed more than $130,000 to the Canada Pension Plan program since you were 18 years old and now you’re 64 years of age and about to apply to receive your benefits. Unfortunately, you pass away suddenly. Your family contacts CPP only to learn that since you were single at the time of your passing, the total death benefit to your family is a mere $2,500.

Between 2004 and 2014, the CPP has increased the amount of gross income subject to CPP contributions from $40,500 to $52,500. This is an increase of almost 30 per cent. If current increases continue, in just 10 more years the amount of your gross income subject to CPP contributions could be as much as $68,000, or $560/month off your paycheque.

Recently, the CPP program made a choice not to increase the death benefit. The death benefit of $2,500 in 2004 is the same today … no increase whatsoever. I’m fairly certain that a funeral today costs more than it did in 2004.

Mathematically speaking, if the worst-case scenario happens, the CPP will keep as much as 98 per cent of your contributions if you are single and pass away before the age of 65 years. Unfortunately, thousands of Canadians fall into this category every year. To say that this is wrong is the understatement of the century. If a private company offered a retirement package under these terms, not one single Canadian would buy it.

Had you invested your CPP contributions with your own financial advisor, over the course of the 46 years, your $130,000 would have grown to between $750,000 and $1 million, all of which would go to your family at the time of your passing. Instead, our government keeps almost all of it.

Changes to the CPP need to be made immediately. This system is broken and cannot continue the way it is. Call your MP today, or call CPP directly at 1-800-277-9914.

Randy Laughlin

Medicine Hat

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