Gay partners now have rights but what about other non-sexual partnersh

[August1991]

I guess it really depends on what you want to call a "tax". I agree that the CPP contributions are mandatory. If you define a tax as any payment to the government with is not voluntary, then I agree it is a tax. In my mind, a tax is a non-voluntary payment which is directed toward general revenues. But at this point we are simply disputing nomenclature.

It gets worse, or stranger. Your CPP "contributions" are used to buy federal government savings bonds and, in theory, this increases the federal debt. Does that make sense?

Recently, the CPP has started to buy shares on the stock market. IOW, the federal government is now a player in Canada's equity markets.

[quinton]

So I guess if the government is about to spend a few billion on a wind turbine farm, it would have prepared by using our CPP contributions to buy stock in a start-up wind mill company before hand.

Everything is related to everything else in one way or another.

[Renegade]

It gets worse, or stranger. Your CPP "contributions" are used to buy federal government savings bonds and, in theory, this increases the federal debt. Does that make sense?

It made sense for the government to do that as they basicly was able to borrow money from the CPP fund at low rates. I made no sense for the CPP-contributng population in general as all they got were inferior returns. A couple of years ago it came to a crisis as CPP was projected to run out of money if the demographic trends continued. The government took action to jack up contribution rates and also allow the fund to invest in many investment types other than loans to the government

Recently, the CPP has started to buy shares on the stock market. IOW, the federal government is now a player in Canada's equity markets.

Yes the CPP is now a stock market investor and has done pretty well. This is a good thing for us all because otherwise the fund would not have sufficient assets to pay out its obligations. The CPP investmetn board makes its investment decisions independant of government intervention.

Overall I would have been happier if the government stayed out of the pension game altogether. Of course the downside is there would be fools who if not forced, would not save for retirement, and then would come upon retirement with hands extended looking for a hand out.

** Edited to remove and inaccurate statement

[Renegade]

So I guess if the government is about to spend a few billion on a wind turbine farm, it would have prepared by using our CPP contributions to buy stock in a start-up wind mill company before hand.

Everything is related to everything else in one way or another.

The primary objective of the CPP investment board is to maximize returns. It would only invest in a wind turbine company if it felt it was a profitable investment, not because it wanted to promote a greener world.

[August1991]

The primary objective of the CPP investment board is to maximize returns. It would only invest in a wind turbine company if it felt it was a profitable investment, not because it wanted to promote a greener world.

That might make sense if government bureaucrats knew how to pick winners but on the balance of evidence, from the Soviet Union to the gun registry, they don't.

To describe the CPP as an "investment board" is misleading. To begin with, if the CPP is acting like a stock broker, it is in the enviable situation of receiving obligatory contributions. (Think where that might lead.)

Overall, you're better to ignore the "saving for retirement" analogy when thinking about the CPP. CPP contributions are simply a tax and pensions paid out are a form of welfare or transfer. Harper's recent proposal to transfer $1200 annually for each child is no different. People pay taxes and the government transfers the money to others. The CPP is the same.

Understanding this shows clearly the nature of government, and why it is an institution so different from corporations and markets.

BTW, I don't think government pensions are necessarily bad. As you point out:

Overall I would have been happier if the government stayed out of the pension game altogether. Of course the downside is there would be fools who if not forced, would not save for retirement, and then would come upon retirement with hands extended looking for a hand out.

We are going to have poor people at all ages and helping them is part of what governments do.

As to the CPP's particiaption in equity markets, this is best seen for what it is. Government subsidies to "preferred" firms.

As a last point, I'm not holding my breath for any serious reform of the CPP. No politician will go near the issue except to say "yes" to some group.

I believe there are court decisions pending about same sex common law survivors asking for benefits based on living arrangements going back to the 1980s.

Another group would be immigrants. To be entitled to Canada's various pensions, one has to have resided in Canada at least 10 years prior to application. I wonder whether this provision would survive a well-prepared Charter challenge.

[Renegade]

That might make sense if government bureaucrats knew how to pick winners but on the balance of evidence, from the Soviet Union to the gun registry, they don't.

To be honest I share your skeptiism, however the CPP investment board, is made up of investing professionals not government bureaucrats. So far their investment performance is meodicre.

1Q 2006 2.4%

2005 8.5%

2004 17.6%

CPPIB Results

To describe the CPP as an "investment board" is misleading. To begin with, if the CPP is acting like a stock broker, it is in the enviable situation of receiving obligatory contributions. (Think where that might lead.)

The board is similar in nature to pension boards such as the Ontario Teacher's Pension Plan and the Quebec Teachers Pension Plan. Both Pension plans have done pretty well over the years. It remains to be seen if the CPPIB does as well.

Overall, you're better to ignore the "saving for retirement" analogy when thinking about the CPP. CPP contributions are simply a tax and pensions paid out are a form of welfare or transfer. Harper's recent proposal to transfer $1200 annually for each child is no different. People pay taxes and the government transfers the money to others. The CPP is the same.

The forced nature of contributions is no different than a company pension plan which requires you to contribute. Would you consider that a tax as well? Personally I don't. I can get a yearly statement of my CPP contributions and my expected payout. In my mind that makes the analogy closest to a pension plan.

We are going to have poor people at all ages and helping them is part of what governments do.

There is already a system for poor people's handouts, its called welfare. Why create another for essentially the same purpose? I personally don't consider CPP to be analogous to welfare for a couple of reasons.

1. The payout depends upon contributions in.

2. The payout is independant of the payees wealth or income.

Another group would be immigrants. To be entitled to Canada's various pensions, one has to have resided in Canada at least 10 years prior to application. I wonder whether this provision would survive a well-prepared Charter challenge.

I can find no evidence that 10 years residency is a requirement for CPP. I know it is for OAS. OAS is basiclly welfare and doesn't require any contributions unlike CPP.

[August1991]

Quickly:

I was thinking about OAS and GAINS when I thought about the 10 years residency. You call them welfare, and I would include CPP in that too. It's a transfer. Once income taxes are taken into a ccount, there is a tenuous connection between contributions and what a person actually receives.

The CPP is is not like a private pension plan because you can quit your job (and choose a new plan) and the private pension plan (collectively) can hire new managers. Neither is possible with the CPP.

The better comparison is not the Ontario or Quebec Teachers funds but the RRQ (Quebec's own pension scheme). It is part of what is known as Quebec Inc, and recently went through serious scandals because of its investments, and the relationships between its managers and politicians.

----

Renegade, you still see the CPP as some kind of private sector investment fund. It can't be that.

There are two things going on with CPP. First, the government is taking from some people and giving to other people. These are simple transfers. Second, government bureaucrats are deciding which private firms should get capital for future development.

I don't disagree with the first aspect, although I think governments should aim to put money in the hands of the poorest people. As to the second aspect, it took about 70 years for Soviet bureaucrats to mismanage investment choices so badly that the economy fell apart. I give the CPPIB at least another 40 or 50 years before their bad decisions become absolutely apparent to everyone.

In simple terms, it is not a good idea to concentrate investment decisions in the hands of a few people, and even less so when those people do not directly face the discipline of the market.

[Renegade]

I was thinking about OAS and GAINS when I thought about the 10 years residency. You call them welfare, and I would include CPP in that too. It's a transfer. Once income taxes are taken into a ccount, there is a tenuous connection between contributions and what a person actually receives.

I would not characterize CPP as welfare for the reasons I stated. One other point, is that you can receive CPP benefits regardless of which country you are a resident. What welfare schemes are comparable? Yes CPP is a transfer, but so are private Defined-Benefit contribution plans. The link between contributions and benefits is no different than for a private pension plan. You get pension plan benefits, you are taxed on it.

The CPP is is not like a private pension plan because you can quit your job (and choose a new plan) and the private pension plan (collectively) can hire new managers. Neither is possible with the CPP.

I disagree. The analogy is the same with CPP. You point out that you can quit the plan because you can move out of the juristiction of the plan (ie the company). With CPP you quit the plan by leaving the juristiction (ie leave the country). With CPP you chose the managers indirectly in your choice of which party you elect. Same analogy as a private plan.

The better comparison is not the Ontario or Quebec Teachers funds but the RRQ (Quebec's own pension scheme). It is part of what is known as Quebec Inc, and recently went through serious scandals because of its investments, and the relationships between its managers and politicians.

Sure, but the whole Enron, Worldcom affair has proven that scandals and corruption are not the exclusive domain of public organizations.

There are two things going on with CPP. First, the government is taking from some people and giving to other people. These are simple transfers.

In a private DBPP (Defined Benefit Pension Plan), payments to retired workers are made through a combination of company contributions, worker contributions, and the plan's investmetn returns. That too is a transfer. So if you consider CPP basically a social benefit similar to welfare, you shoud consider the DBPP the same.

Second, government bureaucrats are deciding which private firms should get capital for future development.

We agree here. There is little choice on who makes the investment decisions and the decisions are vunerable to interference from the government.

I don't disagree with the first aspect, although I think governments should aim to put money in the hands of the poorest people.

So again, why have a second plan to do this when welfare already does this? BTW, CPP targets all who have worked and contributed regardless of their poverty status.

As to the second aspect, it took about 70 years for Soviet bureaucrats to mismanage investment choices so badly that the economy fell apart. I give the CPPIB at least another 40 or 50 years before their bad decisions become absolutely apparent to everyone.

In simple terms, it is not a good idea to concentrate investment decisions in the hands of a few people, and even less so when those people do not directly face the discipline of the market.

You may well be right. It remains to be seen, but I agree it is a risk, hence my position that the governmetn should stay out of running pension programs.

[August1991]

Sure, but the whole Enron, Worldcom affair has proven that scandals and corruption are not the exclusive domain of public organizations.

And that ultimately is the reason we should never put all our eggs in one basket.

But I'll repeat. The employees had a choice to leave the company. What choice do Canadians have? (As you said, we could leave the country.)

----

I am asking you to consider government (and the CPP) in a different light. For some reason, you insist on seeing CPP as if it were a private pension scheme.

What private pension scheme can arbitrarily set and change premiums at will? What private pension scheme forces all workers to contribute? What private pension scheme can claw back payments according to other income?

OAS, GAINS and the CPP amount to welfare - you may not like the word so let's call it a transfer. [i agree that any insurance scheme provides transfers, and if you think about it, you'll realize that welfare is a form of social insurance.]

All this is relevant because CPP contributions stop at about $40,000 annual income so this is a regressive, payroll tax. And now that the CPPIB is involved in equity markets, we are letting government bureaucrats choose "winners".

[Renegade]

I am asking you to consider government (and the CPP) in a different light. For some reason, you insist on seeing CPP as if it were a private pension scheme.

What private pension scheme can arbitrarily set and change premiums at will? What private pension scheme forces all workers to contribute? What private pension scheme can claw back payments according to other income?

You are correct private pension plans cannot arbitrarily change premiums. It is the particularily coercive nature of government that it can and does. And you are correct that no pension plan can clawback according to income, but that is also true of CPP. As I said there is NO clawback of CPP according to income. (You must be thinking of OAS and GAINS).

OAS, GAINS and the CPP amount to welfare - you may not like the word so let's call it a transfer. [i agree that any insurance scheme provides transfers, and if you think about it, you'll realize that welfare is a form of social insurance.]

I don't really have any problem calling OAS and GAINS welfare. In fact I have said so before. However I find CPP in its present form is more similar to a pension scheme than it is to welfare. Yes, the government can change the rules and it may become more welfare-like, but my comments are directed to what it is today.

I'm not really clear on what you mean by social insurance. Every insurance scheme is risk based, and every insurance I am aware of, participation is voluntary. So I don't seem much similarity with CPP.

All this is relevant because CPP contributions stop at about $40,000 annual income so this is a regressive, payroll tax. And now that the CPPIB is involved in equity markets, we are letting government bureaucrats choose "winners".

Except for your view that this is a tax, and my view that it is a pension scheme, do you then agree with me that the government should not be involved in CPP as it now stands?