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Test your Knowledge on CPP/QPP Expansion

It’s been around since the 1960s and it’s a fixture of Canada’s retirement safety net. On June 19, 2016, finance minister reached a backroom deal to increase premiums and expand the Canada Pension Plan/Quebec Pension Plan.

You may have seen some media stories, but how much do you really know about the CPP/QPP?

This quick quiz will help you brush up on your knowledge of Canada’s public pension system and what an expanded CPP/QPP could mean for you.

There are many myths and misconceptions surrounding public pension expansion, and some little-known, but important, facts.

Take the quiz. Test your knowledge.

1. What’s your age group?
2. If you already have a plan for your retirement and you’d prefer not to make any additional contributions to CPP or QPP, you can opt out of an increase.
ANSWER: FALSE

Regardless of your private investment decisions, additional CPP/QPP deductions will be mandatory for all working Canadians.

3. The current CPP/QPP takes a percentage of your earnings from your paycheque. How much comes off your paycheque if you make $35,000 a year?
ANSWER: Over $1,501

CPP currently deducts 4.95% of your income, matched equally by your employer. A worker making $35,000 a year pays $1,559.25 into the CPP.

QPP deducts 5.325% of your income, matched by the employer. A worker making $35,000 a year $1,677.38 into QPP.
4. A mandatory increase in CPP/QPP contributions is the most popular retirement savings option favoured by working Canadians.
ANSWER: FALSE

Public opinion polls show that if Canadians do have additional money to save for retirement, CPP/QPP is actually one of the least favoured savings options, behind RRSPs and TFSAs.

5. The reason why CPP expansion is needed is because most Canadians aren’t saving enough for retirement.
ANSWER: FALSE

Many Canadians do look after their own retirement needs using a combination of tools (RRSPs, TFSA, workplace pensions, CPP/QPP, and other assets). Today’s seniors have the lowest incidence of “low-income” of any age group. Increasing CPP premiums would likely be offset by lower savings in other retirement vehicles such as RRSPs, TFSAs or the planned PRPPs.

6. What percentage of the CPP/QPP premiums you currently pay will go towards your retirement?
ANSWER: 60%

60%. Due to past mistakes with CPP/QPP management, 40% of the premiums you are currently paying will never land in your pocket.

2. If you already have a plan for your retirement and you’d prefer not to make any additional contributions to CPP or QPP, you can opt out of an increase.
ANSWER: FALSE

Regardless of your private investment decisions, additional CPP/QPP deductions will be mandatory for all working Canadians.

3. A mandatory increase in CPP/QPP contributions is the most popular retirement savings option favoured by working Canadians.
ANSWER: FALSE

Public opinion polls show that if Canadians do have additional money to save for retirement, CPP/QPP is actually one of the least favoured savings options, behind RRSPs and TFSAs.

4. Increased CPP/QPP contributions mean your pension cheque is going to get much bigger.
ANSWER: FALSE

Current retirees would not see any change to their CPP or QPP benefit.  In fact, it would take 40 years of paying increased premiums in order for a worker to see the full impact of premium increases on their CPP/QPP benefits, so if you’re over 40, you will be paying the full premium increase but won’t likely benefit from the full benefit increase in your lifetime. CPP/QPP benefits are based on the premiums paid into the system over the course of a person’s employment.

5. Just like other retirement options, when I die, I can pass on my CPP/QPP benefits to whomever I choose.
ANSWER: FALSE

Only spouses and common-law partners are eligible for CPP/QPP Survivor benefits. These benefits are also limited to a percentage of the full benefit, based on the age of the surviving spouse/partner. Private savings vehicles like RRSPs and TFSAs are fully transferable.

The Canadian Federation of Independent Business represents 109,000 small- to medium-sized businesses across every economic sector in Canada. If you are a business owner, learn more about what CPP/QPP expansion will cost you.