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Expanded CPP of little use to younger Canadians

By Andrew Rickard | July 27 2016 01:33PM

The Fraser Institute argues that expanding the Canada Pension Plan (CPP) will do little to help younger Canadians.

According to an article posted to The Fraser Institute web site, the current CPP system offers Canadians born after 1971 a rate of return of 2.1%. After the recently announced changes to the CPP are implemented, The Fraser Institute says benefits for younger workers will still be minimal.

Rates of return

"The expanded CPP has resulted in modest increases in the expected rates of return for Canadian workers. For example, the rate of return for eligible workers born in 1971 to 1980 is 2.3%. Those born in 1993 or later can expect to receive a 2.5% rate of return (after inflation) from their CPP retirement benefits," conclude authors Charles Lammam and Hugh MacIntyre. "In other words, there is only a small increase in the long-term rate of return for individual Canadians under the expanded CPP — 2.5 % after expansion versus 2.1% before expansion."

The Fraser Institute is not the only body to have found that younger people are being short changed by the CPP. In its most recent tri-annual review in November 2013, the Office of the Chief Actuary (an independent division of the Office of the Superintendent of Financial Institutions) found that those born in 1950 were earning an internal real rate of return of 4.2% on their CPP contributions, while those born in 1970 were only receiving 2.4%.

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