The TFSA, the CPP and the federal election

Given that the level of the CPP is such a significant issue across the country, it is constantly in the news, especially during the recent election campaign.

The Toronto Star recently published an article on the subject. It suggests that the TFSA has been hailed as the most important savings vehicle out of Ottawa since the RRSP.

Yet most Canadians still seem to want an increase in CPP benefits. The TFSA is a savings vehicle, so in a sense it’s “money going out.” Meanwhile, the CPP is immediate “money coming in” (to us).

That, to me, is the major difference between them.

There are now about 5 million Canadians collecting CPP benefits. A $200 increase in monthly benefits would cost the CPP about $1 billion per month at present (and it will rise). And remember that usually, when a Canadian starts collecting CPP benefits, they stop contributing to the plan.

So as the wave of Baby Boomers start to retire, fewer Canadians contribute to the CPP every month, while more collect from it.

The numbers are so high that, in my opinion, the government is very concerned about increasing contributions needed to fund any increase. The monthly contributions from contributing Canadians would have to increase by a lot.

Without being critical, I wonder whether these numbers have ever before been presented to us in this kind of way.

This ad originally appeared in the Richmond News on October 2, 2015.