Myths about the Canada Pension Plan (CPP)

The Canada Pension Plan has a website that debunks the myths many of us have about the plan. To read more go to the link and check the sources. Back in the late 1990s, there were serious concerns about how long the CPP would be able to continue paying benefits. Indeed, the Office of the Chief Actuary of Canada projects the CPP Fund is sustainable for the next 75 years.

Hard work was done to fix this, including the creation of the CPP Investment Board to invest contributions. 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 Investment Board’s public awareness effort, which includes this website as well as some digital and television advertising, 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 – Two decades ago, the CPP was unsustainable. But federal and provincial governments made changes, including creating CPP Investment Board, to fix that. Today, the CPP is sustainable and secure for future generations.

Myth – The government tells the CPP Investment Board how to invest.

Reality – In fact, CPP Investment Board operates independently of government on an arms-length basis. Our investment teams make decisions about what goes in our portfolio based on the CPP Investment Board’s statutory mandate, which requires us to invest 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 – Right now, CPP pays up to about one-quarter of an average worker’s salary – and 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, the CPP Investment Board 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 and Tax-Free Savings Accounts, as well as workplace pensions, are the other most common sources of retirement income.