Recently the Member of Parliament from Charlottetown, Shawn Murphy, called for people to stop making potentially defamatory comments on media websites such as CBC and the Charlottetown newspaper. Both websites allow readers to post anonymous comments in response to news stories.
Mr. Murphy said, "I am actually shocked at some of the anonymous comments that are posted online. Some are hateful, many times untrue, and potentially defamatory."
This is most certainly true. The anonymity of the internet allows for all sorts of posturing, the bearing of grudges, general idiocy, agenda promotion, and crackpot conspiracy theories.
But you don't have to be reading anonymous comments to experience the worst that the Web has to offer.
I've got this Internet friend named Smelly. Now, Smelly isn't the bonehead in this story, although certainly some people out there would disagree. Smelly has no tolerance for fools, and he's not at all shy about letting the world know when his sensibilities are offended. But he's a stand-up guy, and I like him, even if he is a little shocking from time to time
So when Smelly posts "Help me Fight the Zombies" in an advisor forum that we both belong too, I knew I had to have a look.
There is an idea out there that is being promoted to double Canada Pension Plan benefits. That, in itself, is fine. The problem is, near as I can tell, that it's pure fantasy how this grand scheme is supposed to be financed.
Smelly's plea for aid reads, "It's the brain dead, double-the-CPP-benefits nutbar idea. Lots of real bone heads and whiners..... and me. My own (ex) nephew and an old friend are beating me up. I'm fighting alone brothers and sisters. I need you to jump in and join the fight for sanity. Help!"
So I go take a look at what he's referring to, and sure enough, this cockamamie scheme is garnering support. There are more than 3500 people that "like" the site.
Unfortunately, their scheme seems to rely on alchemy; creating gold from thin air. So while the idea sounds great, they might find a little problem with the execution.
It's a good sales pitch, though. No wonder people "like" it.
In part it reads, "a gradual doubling of future CPP benefits can be paid for by a modest increase in contributions, spread out over 7 years. This would mean increasing what everyone contributes to their CPP savings by about 0.43% of pensionable earnings each year for 7 years."
"For a worker earning $47,200 or more per year, the initial cost of gradually doubling future CPP benefits works out to about 9 cents an hour, or $3.57 a week. That's less than the cost of a newspaper subscription. For a worker earning $30,000 per year, the initial cost would be about 6 cents an hour, or $2.27 a week. That's less than the cost of a medium double-double with a donut at Tim Hortons."
"This is first-rate retirement savings at a low cost."
This is where I felt compelled to venture into the fray. You see, there has to be more to it. Simply has to. The bottom line is that putting an extra $3.57 per week into the Canada Pension Plan is a pittance; it's nowhere near what it would take to double your CPP benefits.
They had this little on-line calculator that allows a guy to see the alleged impact that the scheme would have on your own pension. It's pretty light on the details, and some of their assumptions are erroneous, but we'll give them a little leeway for discussion purposes.
So in this fairy tale I am apparently able to get more than $6,600 a year as an additional lifetime pension from my $3.57 a week. Well, let's run the numbers on that.
$3.57 per week is only $185.64 per year. I'm 42 now, so in the 23 years to age 65 I'd put in a total of $4,269.72.
Let me just say that one more time so you can fully appreciate how loopy this is. I put in $4,269 over 23 years, and in return I get $6,600 for the rest of my life. I've got all my money back and more in the first year! Of course people think this is a good deal. Little kids think Santa Clause is a good deal too. Big kids know better.
There is a decent chance that I'll have a 30 year retirement. $6,600 per year for 30 years in $198,000.
Folks, if you think that an extra $4,269 in CPP premiums has any chance at all of producing an extra $198,000 in retirement benefits, you are grossly mistaken.
So where is the rest of the money that will be needed to fund a doubling of CPP benefits supposed to come from? Additional employer contributions will be required, no doubt. But this is such a massive shortfall that employer contributions alone are not going to be sufficient.
So is the extra money coming from general tax revenue? If so, which programs are going to be cut? Education? Health care? The military? Or what additional taxes are to be imposed to pay for this pipe dream? Something's gotta give. But that information isn't provided. Just the comparison to a trip to Tim Horton's.
I asked these same questions to a vocal supporter of this idea. He was supposed to get me some numbers on how much the employer needs to put in, and where the rest of the money is supposed to come from. I'm still waiting.
If the miracle math that turns $4,269 into $198,000 wasn't kooky enough already, demographics makes the nutbar idea fail even faster. You see, when you pay your CPP premiums the money isn't actually set aside in a little account somewhere with your name on it. The bulk of the money is going towards paying the pensions of the people that are already retired.
Most readers of this column will be familiar with the 10 million baby boomers that are going to retire in the next 20 years. What this means is that fewer and fewer workers are going to be asked to shoulder the pensions of more and more retirees. We are looking at 25 percent of the Canadian population being over age 65 in the near future. Doubling the CPP will only exacerbate the situation. Near as I can see, the scheme is silent on how to handle demographics.
It's alarming that one the caretakers of the website promoting the idea is ignorant of how CPP is funded. He or she was insisting that any money that a person puts into the CPP is held for their eventual retirement. That's a mistake. It's not true. How can these guys come up with a scheme to double CPP pensions if they don't understand how the CPP is funded?
Yet their mistakes are being proclaimed as truths. And gullible people believe it.
At the end of the day there is no free lunch. You aren't going to double your CPP pension with a mere $4,269 in extra premiums.
Be careful of who you listen to on the Internet. Especially people making outlandish statements, anonymous or not.
The opinions expressed are those of Brad Brain, CFP, R.F.P. CLU, CH.F.C., FCSI. Brad Brain is a Certified Financial Planner with Manulife Securities Incorporated, Member CIPF and with Manulife Securities Insurance Agency in Fort St John, BC. Brad Brain can be reached at email@example.com www.bradbrainfinancial.com.