Thursday, May 27, 2010

Pensions! Quebec will run dry soon, Canada will soon follow

Trust a retired school teacher to be interested in pensions, eh.

Even pensions in Quebec.

It’s because the Quebec Pension Plan is in trouble and Ontario will face the same dilemma, though at a later date. And it’s because there are hints in the story about the QPP that tell us we should perhaps be paying more taxes, which is what everybody wants to hear about during hot weather.

The QPP is at risk of running dry in 2037. Completely empty. Canada (CPP) 10 years later.

We knew this was coming, didn’t we? As I mentioned earlier, 92% of defined benefit pension plans in Canada have a shortfall; it’s gone from $160 billion in 2003 to $350 billion in 2008 and continues to grow.

“A rise in contributions is being suggested to balance the QPP’s reserves.” (full article, QMI Agency)

That’s been tried. Contribution rates have been rising since 1966 but not quickly enough to prevent big trouble. So, they’ll have to rise even more.


["Will one piggy bank be enough?"]

(Note to self: Is this a good time to mention Canada’s national debt is rising too, is a much bigger problem, and maybe contributions - i.e., taxes - should rise (not go down as in the recent past) until we have it under control? Nah. Skip it).

One observer said the QPP’s position results in intergenerational unfairness.

"Future generations will be obliged to contribute much more than their elders to enjoy comparable or even lesser benefits."

Prediction: We’ll pay more into pension plans, or receive less. Our lifestyles will change. Contributions to pensions will become a big issue within 10 years.

And if more people start worrying about the looming problems connected to the national debt, as they should, taxes will rise too.

Recommendation: Reduce spending, pay down debts, save money.

Buy the biggest piggy bank you can find.

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