Pension Reform in Canada

[August1991]

Do you think a bureaucrat will choose better than an advisor of your choice?

Why would a qualified pension fund manager hired by the government be any different from one hired by the private sector?

The posing of such a simple question is terrifying. Do you really see no difference?

Would you entrust the sale of your house to a bureaucrat chosen for you, or to a real estate agent that you choose?

Neither - I would handle it myself but that is me.

Thankfully Riverwind, you do see the difference.

And no Riverwind, it's not you. It's almost everyone. And that's a good thing too. It is generally better to let millions of (even stupid) people make decisions for themselves rather than let one or two (even smart) people make decisions for millions.

BTW, anybody can buy or sell in financial markets. I do it regularly on my own behalf and if done right, it is not costly. Financial markets are now more open and free than at any time in history.

You'll have to show me a citation that private pensions cannot change the terms of the provisions of their pensions. It seems to me that they have. Companies declare bankruptcy as a strategy to dump their pensions.

I think you've stated it quite honestly. It is your opinion that Chretien Liberals made an issue of an underfunded CPP and were the driving force for change. In fact, the driving force came from outside government and eventually *all* of the House of Commons responded accordingly.

You keep mentioning the issue of baby boomers. This is why changes were made to CPP.

Clawbacks made by Mulroney are based on income.

You make several points here.

Of course, private pensions go bankrupt. Sometimes the savers are covered, sometimes not. But that's not what I mean. Your insurance company cannot arbitrarily increase your premiums. And it can't simply refuse to pay out a claim. If it did this, you could take it to court and sue.

Government pensions are different for the simple that government is different. A government has the power to raise taxes any time it wants.

Dobbin, if you want to believe the fiction that you pay into the the CPP and there's a giant sock in Ottawa, go ahead. You can even believe the greater fiction that the CPP "invests" your savings so that the sock will be large enough to pay out what you've contributed.

It's a fiction because CPP contributions and payouts are decided arbitrarily by politicians. They can change them at whim. Politicians can even change the tax regime and clawback (as Mulroney did) the pension you receive.

There is a big difference between OAS and CPP.

The government can change the value of your benefits even when they are privately held. They can tax them, change the interest rates, lower or increase the value of the dollar.

For a pensioner buying groceries or paying rent, there's no difference between a dollar of OAS and or a dollar of CPP.

Your second comment about how the government can change the value of private pensions shows me that you are starting to get my point. Our CPP contributions are just a tax. CPP and OAS are transfers. There may be a connection between the taxes you pay and the transfers you receive but it's a tenuous one.

When the Liberals raised CPP contributions, they were just raising taxes.

As far as your Globe article, are you complaining that the Quebec Pension Plan is well run? Yikes! Pension fund managers in Quebec and Canada are doing quite well and have been doing well for a very long time.

Your arguments over the CPP are yours and yours alone.

This point comes closer to my OP.

The Caisse underperformed Teacher's for most of the past 40 years. It's investments were politically motivated. Since Henri-Paul Rousseau took over, leveraged the Caisse's position and started to invest abroad, the Caisse has performed better. But then again, we have enjoyed a good bull market for the past seven years or so, and an overall bull market for the past 15 years or so. In such a market, it would be hard for any portfolio to perform badly.

The CPPIB and Teacher's have only recently gotten into the active portfolio management game. Maybe in the past 20 years or so. That's very short.

Despite some early successes, it took some 70 years before it became apparent that the managers at Gosplan in Moscow were not the best way to organize investment decisions.

Bureaucrats generally can't pick winners. Yet we Canadians have concentrated the power to pick winners in the hands of bureaucrats at three investment funds. And these bureaucrats have access to other people's money with little oversight.

Riverwind says that he would sell his house himself rather than trust a real estate agent. And he says that he doesn't trust financial planners because they act in their own self-interest. (My feeling too BTW.)

And yet Riverwind has entrusted his future and his children's future to faceless bureaucrats.

I think that we should each have control over our CPP savings. Individually, we should decide how to invest these savings. This would diversify decision making. Our CPP contributions would in effect become locked-in RRSPs. At any time after age 65, we could choose turn these RRSPs into annuities.

The disability aspect of the CPP should be turned into a State insurance scheme, or perhaps be privatized.

[jdobbin]

You make several points here.

Of course, private pensions go bankrupt. Sometimes the savers are covered, sometimes not. But that's not what I mean. Your insurance company cannot arbitrarily increase your premiums. And it can't simply refuse to pay out a claim. If it did this, you could take it to court and sue.

Government pensions are different for the simple that government is different. A government has the power to raise taxes any time it wants.

Dobbin, if you want to believe the fiction that you pay into the the CPP and there's a giant sock in Ottawa, go ahead. You can even believe the greater fiction that the CPP "invests" your savings so that the sock will be large enough to pay out what you've contributed.

It's a fiction because CPP contributions and payouts are decided arbitrarily by politicians. They can change them at whim. Politicians can even change the tax regime and clawback (as Mulroney did) the pension you receive.

For a pensioner buying groceries or paying rent, there's no difference between a dollar of OAS and or a dollar of CPP.

Your second comment about how the government can change the value of private pensions shows me that you are starting to get my point. Our CPP contributions are just a tax. CPP and OAS are transfers. There may be a connection between the taxes you pay and the transfers you receive but it's a tenuous one.

When the Liberals raised CPP contributions, they were just raising taxes.

This point comes closer to my OP.

The Caisse underperformed Teacher's for most of the past 40 years. It's investments were politically motivated. Since Henri-Paul Rousseau took over, leveraged the Caisse's position and started to invest abroad, the Caisse has performed better. But then again, we have enjoyed a good bull market for the past seven years or so, and an overall bull market for the past 15 years or so. In such a market, it would be hard for any portfolio to perform badly.

The CPPIB and Teacher's have only recently gotten into the active portfolio management game. Maybe in the past 20 years or so. That's very short.

Despite some early successes, it took some 70 years before it became apparent that the managers at Gosplan in Moscow were not the best way to organize investment decisions.

Bureaucrats generally can't pick winners. Yet we Canadians have concentrated the power to pick winners in the hands of bureaucrats at three investment funds. And these bureaucrats have access to other people's money with little oversight.

Riverwind says that he would sell his house himself rather than trust a real estate agent. And he says that he doesn't trust financial planners because they act in their own self-interest. (My feeling too BTW.)

And yet Riverwind has entrusted his future and his children's future to faceless bureaucrats.

I think that we should each have control over our CPP savings. Individually, we should decide how to invest these savings. This would diversify decision making. Our CPP contributions would in effect become locked-in RRSPs. At any time after age 65, we could choose turn these RRSPs into annuities.

The disability aspect of the CPP should be turned into a State insurance scheme, or perhaps be privatized.

August, if you want to insist that CPP is in bad shape or is not the best way to go, you're going have to offer more than your opinion. I'll need some citations, some arguments about why changing course is necessary.

Many private pensions are in very rough shape all over Canada. And this is even with a bull market, as you say.

Your Republican idea of privatizing CPP is just not on. And the reason it is not on is because CPP is well run and fulfilling its mandate.

[Riverwind]

And yet Riverwind has entrusted his future and his children's future to faceless bureaucrats.

This is not exactly true. I am happy with the CPP as it stands now because it forms only part of my entire retirement plan. I would not want to rely entirely on CPP and would not want to see CPP expanded to provide more benefits but demand higher premiums. As it stands right now CPP will pay between 700-800/month in today's dollars. Enough to cover the rent on an apartment. From my perspective CPP is like taking a portion of my savings an placing it in a tax sheltered GIC that is adjusted for inflation. I see it as a sensible part of a diversified portfolio.

[August1991]

I am happy with the CPP as it stands now because it forms only part of my entire retirement plan.

I dispute why decisions about such a large part of Canadians' savings should be determined this way.

For example, why are bureaucrats outside of our control making offers for such real estate?

WELLINGTON (Reuters) - Canada's state pension fund said on Wednesday it plans an all-cash offer for up to 40 percent of NZ's Auckland International Airport Ltd (AIA.NZ: Quote), valuing the airport at $3.5 billion and sending its shares surging.

But after two failed bids in recent months, including a rejected Canadian offer a week ago, analysts said the market was wary about the chances of the latest bid succeeding.

"The gap between the offer price and the market price is significant, and that reflects the fact that the stake they're seeking will be difficult to achieve," said James Lindsay, domestic equities manager at Tyndall Investment Manager.

The Canada Pension Plan Investment Board (CPPIB) said it would offer NZ$3.6555 a share, valuing the company at around NZ$4.5 billion ($3.5 billion).

Shares in Auckland Airport, 23 percent owned by two local authorities, leapt as much as 12 percent on the news, and last traded up 8.3 percent at NZ$3.15, still 14 percent below the offer price.

Reuters

August, if you want to insist that CPP is in bad shape or is not the best way to go, you're going have to offer more than your opinion. I'll need some citations, some arguments about why changing course is necessary.

Many private pensions are in very rough shape all over Canada. And this is even with a bull market, as you say.

Your Republican idea of privatizing CPP is just not on. And the reason it is not on is because CPP is well run and fulfilling its mandate.

Dobbin, I'm not against forcing people to save for their retirement. To be more precise, I think we should have a pay-as-you-go scheme that in effect creates an obligation of younger generations to provide pensions for older generations - with each new generation assuming its obligation.

I object precisely to the idea of a group of bureaucrats in Ottawa making decisions about a portfolio of hundreds of billions with little or no oversight. This is a new phenomenon. An activist CPPIB has only existed for several years. On past record, such bureaucracies do not perform well over the long run. Bureaucrats are not good at picking winners and concentrating power rarely leads to good. With the CPPIB, we have done both.

If you, as an individual, wish to direct your pension savings into New Zealand property, then you should be free to do so (although I believe that RRSPs must still respect Canadian content rules). But these decisions should be left in the hands of individual Canadians or fund managers chosen by individual Canadians. To whom do the people in the CPPIB answer?

We have created another federal bureaucracy and we are giving it the power to decide a large chunk of our future.

Edited November 7, 2007 by August1991

[jdobbin]

Dobbin, I'm not against forcing people to save for their retirement. To be more precise, I think we should have a pay-as-you-go scheme that in effect creates an obligation of younger generations to provide pensions for older generations - with each new generation assuming its obligation.

I object precisely to the idea of a group of bureaucrats in Ottawa making decisions about a portfolio of hundreds of billions with little or no oversight. This is a new phenomenon. An activist CPPIB has only existed for several years. On past record, such bureaucracies do not perform well over the long run. Bureaucrats are not good at picking winners and concentrating power rarely leads to good. With the CPPIB, we have done both.

If you, as an individual, wish to direct your pension savings into New Zealand property, then you should be free to do so (although I believe that RRSPs must still respect Canadian content rules). But these decisions should be left in the hands of individual Canadians or fund managers chosen by individual Canadians. To whom do the people in the CPPIB answer?

We have created another federal bureaucracy and we are giving it the power to decide a large chunk of our future.

I still see no evidence that the CPP is not being run well. Nor do I see a demand for the CPP to be privatized.

All I see now is an anti-government bias. By all means you are free to have that view but it doesn't mean that CPP isn't doing a good job.

Edited November 7, 2007 by jdobbin

[Riverwind]

For example, why are bureaucrats outside of our control making offers for such real estate?

Because it seems like a good investment.

But these decisions should be left in the hands of individual Canadians or fund managers chosen by individual Canadians. To whom do the people in the CPPIB answer?

The CPP is a defined benefit plan which means the CPPIB has to pay the benefits promised. If they screw up then the politicians who appointed them will be accountable. Mutual fund managers are not accountable at all. They always get their percentage no matter how badly the fund performs.

We have created another federal bureaucracy and we are giving it the power to decide a large chunk of our future.

Would you be satisfied if the CPP was spun off like Fannie Mae and Freddy Mac? It would still be a large pool of money managed by faceless bureaucrats. People would still have to make mandatory contributions but they would get a guaranteed benefit.

[M.Dancer]

In a race between investment professionals and amatuers, bet on the pros.....this is the advantage of mutual funds over taking stock picks from taxi drivers and burn outs....

[August1991]

In a race between investment professionals and amatuers, bet on the pros.....this is the advantage of mutual funds over taking stock picks from taxi drivers and burn outs....

Pros that are subject to oversight.

You pick your own dentist, your own doctor, your own lawyer, your own real estate agent, your own dry cleaner and your own car mechanic. Would you let a bureaucrat choose your financial planner? Would you let a bureaucrat assign you a real estate agent?

Worse, we are concentrating many of our investment decisions in the hands of a few unknown bureaucrats. In the past, the CPPIB bought federal government bonds. In the past 10 years or so, that has changed.

We'll see in 2030 what kind of track record they'll have. The evidence from the Quebec pension board has not been good and yet that is what the CPPIB is imitating.

[August1991]

The CPP is a defined benefit plan which means the CPPIB has to pay the benefits promised. If they screw up then the politicians who appointed them will be accountable. Mutual fund managers are not accountable at all. They always get their percentage no matter how badly the fund performs.

Politicians will be accountable? That reassures me.

If I don't like the performance of a mutual fund, I can sell and buy another mutual fund. If the mutual fund managers don't perform well, they'll be out of a job.

What happens if the bureaucrats at the CPPIB make mistakes? Who will even notice?

Would you be satisfied if the CPP was spun off like Fannie Mae and Freddy Mac? It would still be a large pool of money managed by faceless bureaucrats. People would still have to make mandatory contributions but they would get a guaranteed benefit.

Fannie Mae and Freddy Mac were set up originally to overcome problems in the housing market. But their problems are an indication of what will likely happen - far more seriously - with the recent direction of the CPP.

I still see no evidence that the CPP is not being run well. Nor do I see a demand for the CPP to be privatized.

All I see now is an anti-government bias. By all means you are free to have that view but it doesn't mean that CPP isn't doing a good job.

For all I know, when Mussolini first got into power, people thought he did well too.

The concentration of power is seductive. It seems good at first but it slowly becomes pernicious, depending on who has the power.

I am not suggesting that we "privatize" the CPP. I am merely suggesting that individual Canadians should have control over how their CPP pension portfolio is managed. This should be decentralized.

----

More generally however, I think that there is no need for a State savings fund. If we are to have a State pension scheme (defined benefit plan as Riverwind would say), the State should take from younger generations and give to older generations in a prescribed manner. The decision to save should be left for individuals to make on their own.

The State should be charged with ensuring that the public infrastructure of Canada is in good shape.

For example, while Quebec's roads and bridges are collapsing or need serious renovation, the Quebec pension fund (and now the CPPIB) are buying foreign airports. The State should not be doing such things. That is not why we elect governments.

Edited November 7, 2007 by August1991

[jdobbin]

For all I know, when Mussolini first got into power, people thought he did well too.

The concentration of power is seductive. It seems good at first but it slowly becomes pernicious, depending on who has the power.

I am not suggesting that we "privatize" the CPP. I am merely suggesting that individual Canadians should have control over how their CPP pension portfolio is managed. This should be decentralized.

----

More generally however, I think that there is no need for a State savings fund. If we are to have a State pension scheme (defined benefit plan as Riverwind would say), the State should take from younger generations and give to older generations in a prescribed manner. The decision to save should be left for individuals to make on their own.

The State should be charged with ensuring that the public infrastructure of Canada is in good shape.

For example, while Quebec's roads and bridges are collapsing or need serious renovation, the Quebec pension fund (and now the CPPIB) are buying foreign airports. The State should not be doing such things. That is not why we elect governments.

I think I prefer to stay with the CPP as is. You have not shown that it is poorly managed nor poorly performing. All you have shown is that you don't trust government and want it privatized. Your call for decentralization is a call for privatization.

As for your concerns over the Quebec pension plan, it is because politicians initially wanted it investing in Quebec Inc. even when that was not necessarily the best place to invest money.

[Riverwind]

More generally however, I think that there is no need for a State savings fund. If we are to have a State pension scheme (defined benefit plan as Riverwind would say)

Defined benefit pension plans have been part of the private sector for decades and they are generally a good thing for the people who are allowed to participate. The problem with defined benefit plans is you can't join one unless you belong to a group. A national pension plan with modest goals like the CPP is a worthwhile part of the retirement plan for all Canadians. You also must remember that the CPP is fully funded now and is not a social transfer as it was in the past or as the US Social Security is today.

[no queenslave]

Defined benefit pension plans have been part of the private sector for decades and they are generally a good thing for the people who are allowed to participate. The problem with defined benefit plans is you can't join one unless you belong to a group. A national pension plan with modest goals like the CPP is a worthwhile part of the retirement plan for all Canadians. You also must remember that the CPP is fully funded now and is not a social transfer as it was in the past or as the US Social Security is today.

With RRSP"s their is no need for the politicians to have a private pension plan funded by taxpayers;they created the CCP and that should be all they are entitled to. The same goes for all civil servants , and all politicians. If you are to dumb to manage your own RRSP then get a dumber person to manage it for you.

Federal personal income tax is a form of slavery-control, by corrupt governments..

[M.Dancer]

Pros that are subject to oversight.

You pick your own dentist, your own doctor, your own lawyer, your own real estate agent, your own dry cleaner and your own car mechanic. Would you let a bureaucrat choose your financial planner? Would you let a bureaucrat assign you a real estate agent?

Worse, we are concentrating many of our investment decisions in the hands of a few unknown bureaucrats. In the past, the CPPIB bought federal government bonds. In the past 10 years or so, that has changed.

We'll see in 2030 what kind of track record they'll have. The evidence from the Quebec pension board has not been good and yet that is what the CPPIB is imitating.

The bureaucrats aren't making the investment decisions.

[Topaz]

I'm sure most people wouldn't mind being an investor in the Ontario Teachers Pension Fund. I think the net assets are over 106BILLION! Who ever is taking care of that fund knows what they are doing. I heard that they are now a major shareholder in the oil sands as well as BCE. I wonder how other provinces teacher pension rate against the Ontario's?

[Fain]

I think I prefer to stay with the CPP as is. You have not shown that it is poorly managed nor poorly performing. All you have shown is that you don't trust government and want it privatized. Your call for decentralization is a call for privatization.

As for your concerns over the Quebec pension plan, it is because politicians initially wanted it investing in Quebec Inc. even when that was not necessarily the best place to invest money.

I disagree with the your bolded statement, Do a little independant research on your own you'll find the Canada Pension Plan underperforms the market in many many years. Statisitcs Canada can help you on that one.

You not only want your money to underperform but you want mine to as well?!!!!!!!!!!!!

That's just atrocious. Hands outta my pocket!

Privatize the thing and move society forward.

[jdobbin]

I disagree with the your bolded statement, Do a little independant research on your own you'll find the Canada Pension Plan underperforms the market in many many years. Statisitcs Canada can help you on that one.

You not only want your money to underperform but you want mine to as well?!!!!!!!!!!!!

That's just atrocious. Hands outta my pocket!

Privatize the thing and move society forward.

You'll have to show me that Canada Pension Plan underperforms.

http://www.cppib.ca/Results/Financial_High...ts/default.html

By all accounts, they are doing excellent.

[Fain]

You'll have to show me that Canada Pension Plan underperforms.

http://www.cppib.ca/Results/Financial_High...ts/default.html

By all accounts, they are doing excellent. WRONG

Date Net Asset Value (CAD) Investment Performance

Mar 2003 $55.6 Billion -1.1%

Mar 2004 $70.5 Billion +10.3%

Aug 2005 $87 Billion +3.6%

May 2006 $98 Billion +15.5%

Mar 2007 $116.6 Billion +12.9%

Sorry Jdobbin, but i can do better. Much better.

My money is my money and your money is yours.

Don't try to impose a shitty investment method on me because your just wasting my money and of alot of other Canadians.

Hands outta my wallet Jobbin and i'll keep mine outta yours

[M.Dancer]

Date Net Asset Value (CAD) Investment Performance

Mar 2003 $55.6 Billion -1.1%

Mar 2004 $70.5 Billion +10.3%

Aug 2005 $87 Billion +3.6%

May 2006 $98 Billion +15.5%

Mar 2007 $116.6 Billion +12.9%

Sorry Jdobbin, but i can do better. Much better.

My money is my money and your money is yours.

Don't try to impose a shitty investment method on me because your just wasting my money and of alot of other Canadians.

Hands outta my wallet Jobbin and i'll keep mine outta yours

Sure you can.....every canadian can produce a rolling avergae like that....which is why there are no mutual funds, index funds etc etc......not to mention that every canadian has the undivided attention of the sell side/buy side analysts, investor relations officers etc etc...and of course, every canadian has enough depth in their potfolio that they can absorb a sting of bears.....

[jdobbin]

Date Net Asset Value (CAD) Investment Performance

Mar 2003 $55.6 Billion -1.1%

Mar 2004 $70.5 Billion +10.3%

Aug 2005 $87 Billion +3.6%

May 2006 $98 Billion +15.5%

Mar 2007 $116.6 Billion +12.9%

Sorry Jdobbin, but i can do better. Much better.

My money is my money and your money is yours.

Don't try to impose a shitty investment method on me because your just wasting my money and of alot of other Canadians.

Hands outta my wallet Jobbin and i'll keep mine outta yours

What are you comparing that to? The return on average has been quite competitive at 12.2% over four years and I see no evidence that it is underperforming.

Edited November 8, 2007 by jdobbin

[August1991]

The bureaucrats aren't making the investment decisions.

If bureaucrats aren't making the investment decisions, who, please tell me, is?

I'll wager that you don't know. But I'll also wager that you know where your other savings are and who is managing them.

You'll have to show me that Canada Pension Plan underperforms.

The performance of the CPP Fund is not the whole question. (Indeed, given the market in recent years, it's hard not do well.)

The issue is concentrating power into the hands of a few people as opposed to diversifying the decisions. Ultimately, we are deciding the future direction of the Canadian economy because we are deciding which projects will receive financing.

It is generally not a good idea to concentrate these decisions in the hands of a few anonymous bureaucrats no matter how educated, specialized or skilled they may be. On paper, it looks good but in practice, it's not. That's the lesson of Gosplan and the Soviet Union.

Defined benefit pension plans have been part of the private sector for decades and they are generally a good thing for the people who are allowed to participate. The problem with defined benefit plans is you can't join one unless you belong to a group. A national pension plan with modest goals like the CPP is a worthwhile part of the retirement plan for all Canadians. You also must remember that the CPP is fully funded now and is not a social transfer as it was in the past or as the US Social Security is today.

Riverwind, I don't object to defined benefit plans and I agree that they generally must operate with groups. I object to the need for a "fully funded" plan. We don't need it.

A simple transfer scheme from younger to older Canadians would achieve the same objective and get the government out of the business of managing a fund and having government bureaucrats trying to pick winners and planning our economy.

Edited November 8, 2007 by August1991

[jdobbin]

If bureaucrats aren't making the investment decisions, who, please tell me, is?

I'll wager that you don't know. But I'll also wager that you know where your other savings are and who is managing them.

The performance of the CPP Fund is not the whole question. (Indeed, given the market in recent years, it's hard not do well.)

The issue is concentrating power into the hands of a few people as opposed to diversifying the decisions. Ultimately, we are deciding the future direction of the Canadian economy because we are deciding which projects will receive financing.

It is generally not a good idea to concentrate these decisions in the hands of a few anonymous bureaucrats no matter how educated, specialized or skilled they may be. On paper, it looks good but in practice, it's not. That's the lesson of Gosplan and the Soviet Union.

My understanding of the CPP Investment Board is that it is a professional board of directors independent of the government.

I don't know that your idealogical push to end the CPP when it working well is enough for me to support your desire for its end. What exactly do you have in mind to replace it?

[Riverwind]

Riverwind, I don't object to defined benefit plans and I agree that they generally must operate with groups. I object to the need for a "fully funded" plan. We don't need it.

The CPP accomplishes two worthy goals:

1) It gives Canadians a chance to participate in a defined benefit plan (something most would never be able to do).

2) It forces Canadians to save some money for retirement (something many would not do if CPP was optional).

2) is important because the political realities mean the government will have to spend money on a 'senior welfare program' to support people who fail to save on their own. A compulsory savings program like the CPP reduces the need for this 'senior welfare program'.

You don't trust bureaucrats managing large pools of capital. I don't trust large pools of capital in the hands of a relatively small number of super rich people. I don't see that as an argument for ending either of them.

[August1991]

My understanding of the CPP Investment Board is that it is a professional board of directors independent of the government.

I love expressions like that: "professional board of directors independent of the government". The mere use of the word "professional" makes me wonder. "This isn't just a watch. It's the professional model."

And if it's independent of government, who does it answer to?

I don't know that your idealogical push to end the CPP when it working well is enough for me to support your desire for its end. What exactly do you have in mind to replace it?

Lock the money into an account and let people choose the managers or portfolio of their choice. We do this now with RRSPs and other savings accounts. This isn't rocket science.

----

People over 65 receive three types of State funds: CPP, Old Age Security and Guaranteed Income Supplement (GAINS). The last two are purely transfers paid out of general revenue. We have no "OAS Fund" or "Gains Fund". Why not? In the same sense, why don't we have a Medical Insurance Fund? So, why do we have a CPPIB?

I am proposing that the CPP function like the OAS, GAINS or indeed our medical insurance financing - out of general revenues based on regular taxation. Moreover, CPP contributions amount to a regressive, payroll tax that lead to misallocation in the labour market.

Edited November 8, 2007 by August1991

[jdobbin]

I love expressions like that: "professional board of directors independent of the government". The mere use of the word "professional" makes me wonder. "This isn't just a watch. It's the professional model."

And if it's independent of government, who does it answer to?

Lock the money into an account and let people choose the managers or portfolio of their choice. We do this now with RRSPs and other savings accounts. This isn't rocket science.

----

People over 65 receive three types of State funds: CPP, Old Age Security and Guaranteed Income Supplement (GAINS). The last two are purely transfers paid out of general revenue. We have no "OAS Fund" or "Gains Fund". Why not? In the same sense, why don't we have a Medical Insurance Fund? So, why do we have a CPPIB?

I am proposing that the CPP function like the OAS, GAINS or indeed our medical insurance financing - out of general revenues based on regular taxation. Moreover, CPP contributions amount to a regressive, payroll tax that lead to misallocation in the labour market.

It answers to Parliament.

I don't see the difference between the managers you oppose with the CPP and those with RRSP funds except that the private people take a huge cut of my savings for doing the job.

I think what you are proposing for the CPP makes it unworkable. It is a fund that works now and does well.

[August1991]

1) It gives Canadians a chance to participate in a defined benefit plan (something most would never be able to do).

2) It forces Canadians to save some money for retirement (something many would not do if CPP was optional).

Both laudable goals can be accomplished without recourse to a hundred billion dollar savings fund.

We do it now with OAS, income supplements, health insurance and myriad other social welfare schemes. For each of these, the government does not collect large premiums and then fund predicted liabilities into the future. Yet, for some reason, everyone seems to think that we have to fund future CPP liabilities. Why? What's so special about CPP payments? Why don't we have a Canada Medical Insurance Fund Investment Board too?

You don't trust bureaucrats managing large pools of capital. I don't trust large pools of capital in the hands of a relatively small number of super rich people. I don't see that as an argument for ending either of them.

Each individual could designate the manager of their own CPP "funds" - assuming that such savings even existed. IMV, they shouldn't exist.)

----

Riverwind, please don't get on this "small cartel is controlling world capital markets" hobby horse again.

World capital markets are extremely competitive and it defies belief that any cartel could function for more than a few instants - even in the mind of the most conspiracy-suspicious person. Markets are designed for the little guy and that explains in part why the market system is so successful.

Worried? Just buy a general market index and you'll do as well as the big guys. Indeed, the big guys will be working for you. (BTW, that's what the CPPIB, Teacher's and the Caisse largely do and this explains most of their success. The problem is that these funds have recently started to become active traders and this will likely lead to them - as they say - "blowing up".)

Edited November 8, 2007 by August1991