Saving for your retirement with the CPP

Credit to Author: Staff Writer| Date: Tue, 08 Nov 2022 15:25:19 +0000

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When you look at your paycheque every month, you may notice a line item for the Canada Pension Plan (CPP) and wonder what that deduction is all about.

Both employees and employers pay into the CPP and the funds are used to provide a basis on which Canadians can build retirement security.

If you’re an average Canadian worker, you can expect to receive around $8,700 per year. Exactly how much you get depends on how long you’ve worked in Canada, because it’s based on how much you paid into CPP while you were working.

What’s more, CPP comes to you in addition to what you’ll get from Old Age Security and any personal savings or investments you’ve made to fund your retirement.

Years ago, CPP was set up as an in-and-out fund — with contributions from people working today paying retirement benefits to people who had already retired.

In the 1990s, studies of Canada’s population showed that at some point there would be too few workers to support the growing number of retirees. When that happened, it was feared there wouldn’t be enough money coming into CPP to pay benefits to those who had retired.

To fix this problem, Canada’s federal and provincial governments reformed CPP in 1997 and created an investment body (CPP Investments) to invest money not being used to pay benefits in an effort to help ensure the CPP would be able to pay out to future generations.

That solution is working. Reviews of the CPP by Canada’s Chief Actuary project that, at current rates of return, the CPP will be able to pay benefits to retirees for at least 75 years. CPP Investments earns those returns in a variety of ways; by investing in public markets (stocks and bonds) as well as private transactions that range from toll roads and student housing to clean energy providers and data centres worldwide.

But 20 years later, a majority of Canadians still believe the CPP Fund is running out of money and won’t be there for them. Public trust has stayed low and people’s perceptions remain 20 years behind the times.

That’s troubling and CPP Investments’ public awareness effort aims to help demystify some common misconceptions.

So, let’s look at a few of those more common myths:

Myth – CPP is bankrupt, or will be soon.

Reality – Over two decades ago, the CPP was unsustainable. But federal and provincial governments made changes, including creating CPP Investments, to fix that. Today, the CPP is sustainable and secure for future generations.

Myth – The government tells CPP Investments how to invest.

Reality – In fact, CPP Investments operates independently of government on an arm’s-length basis. Its investment teams make decisions about what goes into the portfolio based on CPP Investments’ statutory mandate, which requires investing in the best interest of CPP contributors and beneficiaries.

Myth – CPP contributions can be used by the government for purposes other than CPP.

Reality – The money you pay into CPP can only be used to fund the CPP and pay CPP benefits. It cannot be used for any other purpose, such as building roads or funding cultural programs.

Myth – CPP will pay for my whole retirement.

Reality – Depending on how much you contribute, CPP can pay up to about one-quarter of an average worker’s salary. In coming years, that will increase to one-third. In 2016, federal and provincial governments decided to enhance the CPP to create a stronger foundation for Canadians’ retirements. As the investment manager of the CPP Fund, CPP Investments is responsible for prudently investing the additional contribution amounts arising from the enhancement to the CPP. Other government pension sources include Old Age Security and Guaranteed Income Supplement. Personal savings, including Registered Retirement Savings Plans (RRSPs) and Tax Free Savings Accounts (TFSAs), as well as workplace pensions, are the other most common sources of retirement income.

CPP Investments’ role is to ensure the CPP will be there for you when you retire – and for your children, and their children.

Want to learn more about CPP Investments and your financial future as a new Canadian? Check back here for new content every month, or read more articles, access resources and watch videos at

This content is provided for information purposes only. CPP Investments is not a financial advisor, and the content on this site does not provide financial advice. Every person’s financial planning needs are different. For advice on how you should prepare financially for retirement, please consult a credentialed professional financial advisor.

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