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Brainstorming Changes to the Canada Pension Plan

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Currently, employees have to pay roughly 5% of their income up to around $50,000 to the Canada Pension Plan. Their employers must match this amount. In simple terms, this is up to $2,500 per year, per employee, for both the employee and employer.

There are changes beginning in 2019 to gradually raise this amount to around 6% from around 5% while indexing the maximum pensionable amount. By 2024, the amount you pay CPP on is estimated to be over $66,000, and the rate around 6%. This is around $4,000 paid by the employee and around $4,000 paid by the employer.

There is then going to be an additional amount of another 4% for people earning more than this amount on the next $10,000 of earnings… ($400 per person)… but let’s just focus on the under $66,000 crowd for now.

The current system forces the employer and employee to contribute to a plan that they have no control over, and the government decides the rules, the investments, and the amount you get back when you can collect. If you die, your spouse may get a spousal benefit, but if you both pass away, there is nothing left behind to the next generation, siblings, charity, etc.

So let’s brainstorm.

What if, instead of a 5%… soon to be 6%… mandatory CPP contribution by employees and employers, we made it a mandatory 6% from both sides to an individual employee Locked-in Retirement Account or LIRA that the employee-owned (not the government nor the employer).

Now I’m not referring to the current technical definition of a LIRA necessarily, as I’m not an expert on retirement investment products. However, I am referring to the possibility of keeping your pension for your family, secured for later use, rather than letting the government dictate and take it from your family after death.

This “LIRA” could have the same characteristics of the CPP in that you can’t touch it until 60… and you must take it out or convert to a Registered Retirement Income Fund (RRIF) by 71. This will provide more control over the individual receiving the amount while locking it in for retirement.
It would also allow for the money to be transferred to a spouse, children, estate, or make a legacy donation upon death, rather than get eaten up by bureaucracy.

Many small business owners can’t afford to pay more benefits than what the government is already mandating, and that’s fine. I’m not saying increase or decrease the amount. I’m saying change the beneficiary.

As an employer myself, I want to provide for MY employees and their families. Why should their loved ones suffer financially because of a premature death of the parents? The money the parents paid into the CPP all their life is now being used to fund someone else’s retirement.

The CPP rewards longevity.

You would be better off to hook yourself up to a machine in perpetuity just to keep you alive and the cheques coming into your bank account for your descendants, than to die of natural causes.

However, families that need the money the most, need it usually because of a result of a premature death of the main income earner. If your children are adults and out of school, then there is nothing left behind other than a nominal maximum “death benefit” of up to $2,500 which we all know won’t even be enough to cover the funeral costs, probate fees, and legal costs.

With this idea, the cost is still the same for the employer and employee just like the CPP. The key difference is that in the event of death, the remaining amount can be transferred to whomever the employee designated as the beneficiary, rather than losing it all to the government. This plan would preserve the legacy of the individual that passed.

Do you like this idea? Or not?

So tell me what you think. Is it time we thought outside the pine box casket?

Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr is the President & Founder of CGL Strategic Business & Tax Advisors; you can find out more about Cory’s biography at http://www.CGLtax.ca/Litzenberger-Cory.html

CEO | Director, Canadian Tax Advisory CGL Strategic Business & Tax Advisors With the Income Tax Act always by his side on his smart-phone, Cory has taken tax-nerd to a whole other level. His background in strategic planning, tax-efficient corporate reorganizations, business management, and financial planning bring a well-rounded approach to assist private corporations and their owners increase their wealth through the strategies that work best for them. An entrepreneur himself, Cory started CGL with the idea that he wanted to help clients adapt to the ever-changing tax and economic environment and increase their wealth through optimizing the use of tax legislation coupled with strategic business planning and financial analysis. His relaxed blue-collar approach in a traditionally white-collar industry can raise a few eyebrows, but in his own words: “People don’t pay me for my looks. My modeling career ended at birth.” More info: https://www.CGLtax.ca/Litzenberger-Cory.html

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Business

Downtown Business Spotlight: Root 51 Salon and Spa

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This week’s Business Spotlight shines on Root 51 Salon & Spa! This unique establishment is located right on 4814 51 St and offers anywhere from haircare to spa treatments to relax and pamper. We spoke with the owner to learn more about this wonderful establishment!

What is your business?
Our business is a small locally owned salon & spa.

When did your business open?
We downsized & renovated this main floor in 2016 & changed our name to Root51 (previously Techniques Hair Therapy & Day Spa in the Millennium Center for 2 decades!)

What makes your business unique?
We have asked our valued guests this same question the responses we got: our education, our flexibility to accommodate, our selection & knowledge in our top-shelf natural products for both hair & skin, our prices are extremely reasonable for the level of experience (over 30 years) & education (over 100K worth of education!!!) (in a big city I would charge 35-40% more for the same treatments), and we work hard and are very proud of this next one…our Cleanliness – often they say your place is always spotless! (even before Covid!!)

What are some products/services that you offer?
Full-service Salon hair Care & Spa treatments that are non-invasive. Michele specializes in colours, balayage & ombre, colour corrections & blondes. Smoothing treatments are in high demand for silky soft straight looks and perms for waves or more body. With 30 years of cutting hair, some guests have said “that’s the best-shaped haircut I ever had.”
Spa treatments are effective and relaxing with visible results after one treatment ~ home care is a must because maintenance is easy than correction. Our skincare line is exclusive to us in RD and is composed of sea plants and seawater with many benefits to your facial skin as well as your body and well-being!

Why did you choose Downtown Red Deer as the location for your business?
In 2000, the Millennium Center was a brand new and very central location — when we changed the location to 2 block north on 51 st ~ we wanted to be able to still cater to our professional corporate downtown business people.

What do you think makes Downtown vibrant?
I believe it’s the local entrepreneurs big & small that make downtown a vibrant place.

Website: Root 51 Official Website
Facebook: Root 51 Facebook Page

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Alberta

Downtown Business Spotlight: Artisan Food Market on Ross

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This week’s Business Spotlight shines on Artisan Food Market on Ross! This unique restaurant is located right on Ross Street (106, 4916 Ross Street) and offers a large selection of locally made products. We spoke with the owner to learn more about this wonderful establishment!

What is your business?
Artisan Food Market on Ross is a specialty food store. We carry a large selection of local, national, and international foods and ingredients.

When did your business open?
We opened on April 1, 2020.

What makes your business unique?
We carry a large selection of local items and have a variety of frozen meals.

What are some products/services that you offer?
Customers can place orders for their favourite D Dutchmen Dairy or Black Forest German Bakery products and the requested items will get delivered to our store the following week. Additionally, customers can shop online and have their products delivered to their homes even during the times that we are closed. If a customer wishes to place an order they can simply visit us at www.ArtisanFoodMarket.ca.

Why did you choose Downtown Red Deer as the location for your business?
As a Red Deerian, I wanted to make a positive impact for our downtown by setting up a local market store right here.

What do you think makes Downtown vibrant?
I love the flower gardens at the city hall and the assortment of independent shops in our downtown core.

Finish this sentence: I love Downtown because…
It’s my home and it’s my place for adventure.

Website: Artisan Food Market on Ross Official Website
Facebook: Artisan Food Market on Ross Facebook Page
Instagram:
@artisanfoodmarket

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june, 2021

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