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IanM





Joined: 28 Jan 2009
Posts: 254
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votes: 7
Location: The centre of the universe

PostPosted: Wed Oct 28, 2009 9:45 am    Post subject: Pension Reform. Reply with quote

It looks like the left is making a large issue of this again, so I am wondering what everyone thinks of pension reform in Canada?

I look at the best way of pension reform is well as follows.

1 - Increasing CPP Contribution limit from 46,000 to 60-100,000. Yes, its a tax, yes we don't like it, however. I also want to remove clawbacks on CPP, as well as not count other pension income in its payouts. So, if you make 100,000 on other retirement income, your CPP isn't affected.

2 - Double allowable RRSP Contributions. From 18% of gross salary, to 40% Double allowable contributions to 40% of income, remove over-subscription penalties, and remove the withholding tax for out of country withdrawals. Allow a base amount of 30,000 per citizen based upon date of birth or naturalization to allow parents to start contributing from day one. Allow this to go up by 5000 per year, adjusted for inflation This will allow more investment, and more stable retirement. Also, for determining RRSP contributions, allow any capital gains and pension income, or any income declared to added, not just regular income. Also, remove the upper limit on yearly contribution.

3 - A new tax free retirement account. Same conditions as the tax free savings account, however it would have to be registered, with a minimum term of one year for withdrawals to be tax free. I would recommend that this be allowed at birth, as well as backdated for all Canadian citizens with a yearly contribution of 10,000

4 - Make life insurance payments, medical insurance payments, critical illness insurance payments tax deductible. It saves everyone else money when people can cover their own expenses. Do not of course cash any sort of payments on it.

5 - Allow Tax free Savings accounts to be changed to be backdated to date of birth, so that each year you lived before they were implemented you can contribute the full five thousand dollars. So if you were 20 today, you would have 100,000 left in contribution room.

----------------------------

So, that takes care of things on personal income side, let us now go and look at how we can make it for businesses.


1 - De-link managements of pensions and companies. If your company wants a pension plan, then you go to another company who offers it. You make your agreed employee and employer payments, and that is that. It allows for businesses not to get around underfunding. Its simple, its effective. It allows for securities regulation and all that good stuff. It also reduces costs for companies. This should go for unions as well. Not to mention, it allow a pension plan to become a creditor in case of bankruptcy. This also goes for the government as well. No more of the taxpayer footing the bill for public service pensions.

2 - Allow Employer RRSP matching up to 20% of gross salary, not count employer contribution towards RRSP limits, and allow it to be tax deductible for the company. This will of course spur further investments into RRSP, as well as provide a relief to a company.

3 - Allow Companies to write off pension contributions to a company pension plan as tax deductible. It increases the bottom line of a company.

4 - Allow companies to contribute to the tax free retirement account at any rate up to the maximum amount per year, and not have it count towards the personal contribution, however it is only 1/3rd tax deductible for cash, 100% For stock in the company.

5 - As with personal insurance policies, allow employers to contribute to employee insurance and medical benefits and have it become tax deductible.

This should go a long way to helping plan for peoples retirement. A lot of the changes made are good, however I think its time that pensions become a valid third party in legal sense. Too many times hands have been caught in cookie jars. As well, with increased incentive to invest money, we can of course build out wealth up, and help stimulate the economy and the markets. Not to mention, it could cause significant tax savings to individuals and businesses. Coupled with my ideas on government spending and national debt, we could be in a good position next generation.
kwlafayette





Joined: 03 Sep 2006
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Location: Saskatoon Saskatchewan

PostPosted: Wed Oct 28, 2009 6:51 pm    Post subject: Reply with quote

Why should the government be in charge of pensions in any way shape or form? Pension reform I could get behind would be to simply abolish CPP, refund the premiums, and tell everyone it is time to be adults and plan their own retirement.
Northern Ontario Tory





Joined: 31 Jan 2008
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PostPosted: Wed Oct 28, 2009 7:32 pm    Post subject: Reply with quote

kwlafayette wrote:
Pension reform I could get behind would be to simply abolish CPP, refund the premiums, and tell everyone it is time to be adults and plan their own retirement.


Well, if they dramatically cut taxes that fund the massive nanny-state, that isn't necessarily a bad idea. Of course, it would probably take 2 or 3 generations to re-instill the virtue of personal responsibility (and the corresponding help-thy-neighbour mentality). One wonders how the pioneers of the various regions of the country ever managed to survive without massive taxation and government intervention! (.....that's sarcasm for those that may be severely humour impaired).
adinnhall





Joined: 20 Apr 2010
Posts: 3


PostPosted: Fri Apr 23, 2010 2:26 am    Post subject: HI Reply with quote

I assume you are talking of those pensions for workers who have retired because of their age. In Australia we have a whole raft of pensions for disabilities, for single mothers and this and that. I have never understood why any company was allowed to under-fund any pension. We all know how hard it is to pay an obligation once you get behind in payments.
kwlafayette





Joined: 03 Sep 2006
Posts: 6155
Reputation: 156.2Reputation: 156.2
votes: 28
Location: Saskatoon Saskatchewan

PostPosted: Fri Apr 23, 2010 9:58 am    Post subject: Reply with quote

Government pensions should kick in at 85 or 90. Most people should be dead before they have a chance to collect, otherwise it is just too expensive.
Cool Blue





Joined: 21 Sep 2006
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Location: Ontario

PostPosted: Fri Apr 23, 2010 6:50 pm    Post subject: Re: HI Reply with quote

adinnhall wrote:
I assume you are talking of those pensions for workers who have retired because of their age. In Australia we have a whole raft of pensions for disabilities, for single mothers and this and that. I have never understood why any company was allowed to under-fund any pension. We all know how hard it is to pay an obligation once you get behind in payments.


Generally in Canada the term "pension" refers to retirement income though people sometimes refer to "disability pension".
FF_Canuck





Joined: 02 Sep 2006
Posts: 3360
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Location: Southern Alberta

PostPosted: Sat Apr 24, 2010 12:39 am    Post subject: Reply with quote

kwlafayette wrote:
Government pensions should kick in at 85 or 90. Most people should be dead before they have a chance to collect, otherwise it is just too expensive.

This isn't an unreasonable idea - when the CPP was created in 1966, the average life expectancy of the Canadian worker was 71. It's projected to reach 86 by 2040.

85 might be on the high side right now, but just as the disbursements are indexed to the CPI, it would make sense to link the elibility age to life expectancy. The details of that age / formula should be would be a matter for actuaries, IMO.
Cool Blue





Joined: 21 Sep 2006
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Location: Ontario

PostPosted: Sat Apr 24, 2010 8:57 am    Post subject: Reply with quote

Increase penalties for withdrawing early and increase benefits of withdrawing late.
WestViking





Joined: 14 Oct 2007
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PostPosted: Sat Apr 24, 2010 10:11 am    Post subject: Reply with quote

Cool Blue wrote:
Increase penalties for withdrawing early and increase benefits of withdrawing late.
Why? Pension plans are not lotteries.

The pensioner is entitled to recover his contributions to the pension plan plus accumulated interest less administration costs. The penalties for early retirement must be actuarially sound and there can be no bonus for late retirement. If a pensioner dies before his pension is fully paid out his estate or heirs are entitled to any balance.
Cool Blue





Joined: 21 Sep 2006
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votes: 10
Location: Ontario

PostPosted: Sat Apr 24, 2010 9:08 pm    Post subject: Reply with quote

WestViking wrote:
Cool Blue wrote:
Increase penalties for withdrawing early and increase benefits of withdrawing late.
Why? Pension plans are not lotteries.

The pensioner is entitled to recover his contributions to the pension plan plus accumulated interest less administration costs. The penalties for early retirement must be actuarially sound and there can be no bonus for late retirement. If a pensioner dies before his pension is fully paid out his estate or heirs are entitled to any balance.


Sorry, I was referring to the CPP. Not a private pension.
IanM





Joined: 28 Jan 2009
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Location: The centre of the universe

PostPosted: Tue Jun 15, 2010 5:53 pm    Post subject: Reply with quote

Pension Reform.


Well, finally something has come out of it, and again, I need to blather about what we need to do to make Canada Great, and give a 'better' solution, at less cost to everyone involved. I'm not impressed with the outcome, and well thinking about it over time, I think we need to look at other solutions. Yes, I'm revisiting some prior points I did make, however I did expand on them a little bit more, trying to get a general theme. I've looked at recent news, as well as the posts here trying to figure it out, and am hoping to present a more detailed out plan for people to think of.

CPP Reform.

- Increase the CPP maximum to 250,000 from its current level. Keep benefits in line going up to the current cap.

- Increase employee / employer contribution to 5% vice the 4.95.

- Create a CPP II - Incorporating the Provincial Pension Plans, a national voluntary layer. Allow it to be done via salary sacrifice, with pretax dollars, so that it would be near automatic. I recommend that this plan of course invest slightly heavier in government bonds, say a regulatory
25%, with 25% more in provincial bonds. Especially if these are long term bonds, simply put I've been thinking about the differences with Japan and Greece, most of Japan's debt is held domestically, which does help. I've just been thinking, it may be a good idea to purchase government securities domestically, especially away from Nations Such as China, and in the middle east, encase of instability, or to allow for less issues with debt due to currency fluctuation. I would cap CPP II contributions to a max of 2500 a year, which should be viewed as a tax deduction, the same as RRSPs.

- Removal of claw backs from CPP. It should be viewed as an entitlement, and as such, other pension income should not come into play when determining CPP Rates. OAS should of course remain a needs based programme.

TFSA Reform.

- TFSA Reform needs to be looked at, as it can be, especially for the young, possibly a better and more flexible solution than RRSPs. That's why I think it does need to be expanded.

- First, double the base amount per year to 10,000 dollars, and apply this retroactively. This would mean that the minimum increase each year would be 5%.

- Allow TFSA's be started at birth vice the current age of 18. This would greatly help with educational savings.

- Allow for people over the age of 18 to be able to add in contribution room at the rate of 10,000 per year of age. (Minus any used room / already issued space). For example, if you were 30 and were opening a TFSA for the first time, you would have 300,000 of initial contribution room.

- TFSAs are to be exempt from any means based testing for all social programmes.

RRSP Reform.

- Allow a RRSP contribution limit increase of 25% of all income, with no maximum cap. Apply this limit retroactively.

- Allow for a minimum RRSP contribution limit, a floor so to speak of 5,000 a year, applied retroactively.

- Allow for RRSPs to be started at birth, with a 5000 dollar minimum contribution, and of course with the aforementioned floor of 5000 per year.

- No taxation on RRSP withdrawals after the age of 60.

- No taxation on RRSP withdrawals due to the death of the holder.

- Employer contributions should not add to the RRSP limit of the holder, they should be allowed to be generated in surplus, as well, they should of course be allowed to be a tax deduction for the business.

- Elimination of RRSP conversion into RRIFs.

- Exemption from Means based testing for all social programmes.

General Pension Reform.


- All pension income from employer pension to be tax exempt, regardless of age that the pension is paid out.
- Employer pension plans are to be regulated such that they are managed by a third party company, do have underwriting, and that all pension plans are maintained solvent. This will of course allow for the possibility of portable pensions, or possibly such that companies will sell these pension plans to the general public.

- All pension plan contributions from employees should be done with pretax dollars, vice post tax.

- Pensions should of course be exempt from means based testing for all social programmes.


Encouraging Canadians to Save and Invest.

- Sale of Canada Premium Bonds year round. This should be simple, and done of course with pretax dollars, with any income, capital gains, etc being exempt from taxation. Ideally a salary sacrifice scheme. All government securities should be the same, and provincial governments should be encouraged to sell bonds in the same way. If not a Salary Sacrifice scheme, then an idea such like Treasurydirect.gov where its only a few clicks.

- Allowing for share sales of crown corporations, both federal and provincial to Canadian citizens. Same idea as above, no taxes on capital gains, no taxes on dividends, no transfer taxes or brokerage fees. I recommend that it be done at market rates, again. These of course would have to be sold directly through a government agency, and I would recommend of course that these shares only be able to be traded through such agency, which would operate, unlike most 24x7 and allow for a psuedo market to be involved. I would of course tie the ownership to social insurance numbers, such that it could be purchased for children.

- I call this scheme, the Inter-Canadian Market. The way I look at it, is it has a lot of benefits to everyone. The first off, it is politically viable, such that it allows governments to partially privatize Crown corporations, yet maintaining a public good. It allows crown corporations to remain public, however, eventually be severed from the government teat. I would phase the sale of these corporations on the market in over time. Create an individual ownership cap of say .05% of the Corporation, and ensure that 51% of voting shares are owned by the government, and there should be no problems with the system.

- Changes to the RESP program. I would of course keep the contribution limits the same, however It would be changed so as to not impact means tested benefits such as student loans, or social assistance. Mind you, I would of course allow for a complete exemption from all taxes, should it be withdrawn to pay for any type of schooling, either private primary, private secondary, or any sort of post-secondary education.

- Removal of any sort of taxation for foreign holdings and income. It wasn't created in Canada, so the Canadian government shouldn't tax you for it. This also encourages people to purchase things on the world scale, hopefully building up our economic power.

The pros of this approach.

Its politically viable. It actually helps solve a lot of problems, it allows for Canadians to keep more of their dollar. It does give a bone to the left, which is a separate public pension option. It gives a bone to corporations by providing them incentives to invest in employee pensions. It allows us to hopefully avoid a pension crises such as Nortel, or Air Canada, by ensuring plans are paid by full by employers. It also allows for the sale of crown corporations without privatization.

We can accomplish the important national security requirement of ensuring our debt is held domestically, or changing the ratio to push it downwards from foreign held debt. This would be especially important as we could re-denominate a lot of existing debt to longer terms, hopefully pushing down debt service costs. I don't like our debt being held in International hands, yes, it is a part of international trade, however we allow ourselves to fall into Greece's position. I'd rather hold other people's debt. We could even look at block buying foreign debt and selling it domestically.

It encourages saving. A lot of people don't save that much, and a lot of people do not invest, and we need to change that.

It will of course allow for safer retirements, and thus longer and more consumption. People should be targeting to maintain 100% of their pre-retirement earnings, vice 70% as current. There hopefully would be a reduction in the need for OAS in this picture, and with that, I think OAS and other social programmes would be better used to debt service, which should be part of the package.

The cons of this approach.


Another few government programmes. Yes, I am for small government as much as anyone else. CPP II and the growth of the CPP plan means more take by the government, however I live in Canada, and I don't like the fact that Saskatchewan has a provincial pension plan, I really dislike that fact. I believe that is why we have equalization, and we all are to have access to the same services.

A small raise in the cost of doing business. .5 of a percentage point, yet it allows for simplification of calculation, it also gives a little bit of padding. I would not increase benefits to compensate for this increase, rather use it to build a reserve up over time. It hopefully will help make any increase in the future smaller.

Reduced government revenue. Yes, there's a lot more tax exemption, yes there is a lot of room for the rich to get richer, there's a lot more potential of parking assets within a RRSP, or a TFSA to prevent taxation. A lot of people would do it, however this can be alleviated by gradually phasing it in. For example, the TFSA additions, I would give the 10k of extra room (for the 2 years that the programme was run) immediately as well as the allowing from birth. Then start applying it retroactively over a period of say 20 years. I would of course link these with the natural increases.

Increased means tested benefits. I think this would not be a problem, I think in all actuality that there would be less need for means tested benefits applied for, as people would gather more assets.

A creation of idle rich. I also think that the numbers I am proposing will not make anyone super-rich. Most of the benefits will benefit the middle class.


So, someone shoot holes in my argument, or at least give me some feedback.
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Pension Reform.

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