Money & Career

Why you shouldn't rely on the Canada Pension Plan

A third of Canadians are depending on their CPP contributions to fund their retirement, but have they done the math on their so-called plan?
pink and gold piggy banks Photo, Getty Images.

What are you planning to live on when you retire? Well, if you’re like a lot of Canadians you might think you can fall back on the Canada Pension Plan. According to new research by Pollara nearly a third of Canadians are counting heavily on it to fund their retirement. But are they wrong? After all, they’ve paid into it their entire working life.

The thing about the Canada Pension Plan that a lot of people don’t know is that there is no way anyone can survive on it. The average monthly CPP payment is a measly $597 a month — and the absolute maximum amount you could get in 2013 was $1,012 a month. That’s barely enough to pay rent let alone eat and get anywhere that requires a bus token or gas.

The cold, hard truth is that a third of us have hitched our retirement wagon to this CPP star — that and lottery winnings (34 percent) or freeloading off family members (28 percent).

I think it’s entirely understandable that Canadians rely on the CPP — but the CPP isn’t a plan (even though it's called as such). And it definitely shouldn’t be the main pillar of your retirement income. Heck, even cat food would be too rich for a $597/month budget.

Sure, most people planning for retirement can count on CPP for a portion of what they need. But if you’re not planning beyond that, you’re going to be in big trouble when you hit retirement age. You need to plan beyond the Plan, which means counting on yourself, putting aside savings every month toward your own registered retirement savings plan (RRSP) or, even better, a tax-free savings account.

Don’t get me wrong: I wish Canadians could count on the Canada Pension Plan for more. It’s worth $193 billion and it invests all over the world. But without a plan that is an actual pension plan for Canadians, we need to get better at counting on ourselves (and don’t even get me started about lotteries and freeloading!).


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