Comment by laurencerowe | Hacker News Reader

Comment by laurencerowe | Hacker News Reader

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> The reserve chute is the Canada Pension Plan. The CPP was originally intended to cover one-third of Canadians’ retirement income, but these days it’s more akin to what you might get from a part-time job: a sheet too small for most beds. The maximum CPP payout comes to about $18,000 per year; the average is just over $11,000.

Isn't the reserve chute the Old Age Security pension along with the Guaranteed Income Supplement?

Assuming a single person with no other income, they would add $11,378 to the maximum CPP payout of $18,092 for a total of $29,470 or $14,918 to the average CPP payout of $11,000 for at total of $25,918. (Unlike the CPP, OAS is clawed back if you have other income over a certain amount.)

Retiring at 70 would raise the maximum CPP to $25,690 and OAS to $12,272 for a total of $37,962.

https://www.canada.ca/en/services/benefits/publicpensions/ol...

Not a huge amount but substantially more. Renters also seem eligible for other help at these income levels which might amount to $5,000 per year in BC.

https://ageplacehub.ca/blog/affordable-senior-housing-canada...

(I am not Canadian but did try and look into pensions when I thought about moving there.)

> Isn't the reserve chute the Old Age Security pension along with the Guaranteed Income Supplement?

CPP benefits are proportional to how much you pay in over your life. OAS is proportional to how long you've lived in Canada and thus 'contributed to society at large'; once your income is CAD >95k/indiviudal OAS starts getting clawed back (IMHO it should be clawed back much sooner).

On top of CPP and OAS it is your responsibility to have personal savings: RRSP/pension, TFSA, etc.

GIS is the 'poverty prevention' program, for people making less than 20-30k:

* https://www.canada.ca/en/services/benefits/publicpensions/ol...

> once your income is CAD >95k/indiviudal OAS starts getting clawed back (IMHO it should be clawed back much sooner).

The downside of means testing pension payments is that it acts as a disincentive to discretionary pension saving.

The previous UK system (pre-2009) was an extreme example of this where those without additional pension savings got topped up with pension credit (GIS equivalent) that was clawed back at 100%. They ended up raising the state pension (OAS equivalent) to that level so those with a full contribution history are no longer eligible for pension credit (12,548 GBP = 23,416 CAD).

The OAS clawback rate is only 15% which seems more like a tax on pensioners - reasonable given they no longer make social security contributions though maybe the 50% GIS clawback would disincentivise workplace tax-deferred pension saving for those affected.

Someone making CA$ 90k will get the full OAS. If they have a spouse who makes $90k, they will also get the full amount. So a household with $180k income is getting a bunch of government money.

Why does a couple with $180k HHI need to get anything?

Broad based benefits tend to receive more public support. Just tax those with high incomes to get it back. Otherwise the bumpy effective marginal tax thresholds (which increase and the decrease again as income increases) end up incentivising gaming the system by shifting when income is realised.

Presumably the optimal strategy if you have retirement income within the range where you face a 15% clawback might be to withdraw extra income one year so that you can avoid the clawback the following year, since the higher marginal tax rate would be less than the clawback saved.

  > Just tax those with high incomes to get it back.

it also has the direct benefit of drastically reducing the bureaucracy since you don't need all those eligibility checks and associated paperworks (and associated costs)

> Just tax those with high incomes to get it back.

This appears to not raise as much money as many people think. Interesting conversation with UK tax lawyer Dan Neidle on the topic:

* https://www.youtube.com/watch?v=hgQONOM15HI

* https://en.wikipedia.org/wiki/Dan_Neidle

(Of course there could be reasons besides strictly revenue to do it, but folks should be realistic about the pros and cons.)

You absolutely need broadly based taxation for social democracy. But specifically for clawing back benefits from higher earners you can absolutely tax those same higher earners instead.

Dan has actually criticised a similar situation in the UK where child benefit is clawed back from higher earners.

> If I was a Tory Chancellor, I wouldn’t abolish inheritance tax. I’d fix the ridiculous marginal rates that mean there are hundreds of thousands of 30-somethings paying more than 70% tax on every additional £ they earn.

https://taxpolicy.org.uk/2023/09/24/70percent/

It’s reasonable to question the balance between how much taxation should be born by higher income pensioners (who likely own their home outright) vs working age people at the same level of income (who additionally pay social security tax). Maybe it would make more sense to roll social security into the tax system and raise pension payments so lower income pensioners don’t lose out.

Mostly to keep them from burning down the whole system.

It is the same with social security in the USA.

The higher earners are already heavily subsidizing the lower. Take away their returns and they will vote to dismantle the whole thing.

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