About the Canada Pension Plan

The Canada Pension Plan (CPP) is the only Defined-Benefit Plan available to all Canadians. As such, it is not comparable with and far superior to Defined-Contribution Pension Plans because, apart from being a plan for pension saving, it is a rather comprehensive insurance policy.
    A contributor to the CPP and his family are insured against loss of income due to maternity, unemployment or under-employment, the contributor's disability, disability or death of a parent, divorce from a contributing spouse, death of a contributing spouse; erosion of savings by inflation; and uncertainty about the length of the contributor's retirement period and the survivor's life. All these events are considered and the corresponding pension benefits are computed by the CPP Emulator.
    A General Drop-Out provision is the insurance for loss of income due to unemployment and even to spells of reduced income when under-employed. A Child-Rearing Drop-Out insures against loss of income during child-rearing periods. In case of disability of a contributor, there are pensions payable to the contributor and his under-age children. In case of death of the contributor, there are pensions payable to the surviving spouse and under-age children. Annual adjustment of benefits to the rise in the consumer price index insures against loss of pensioners' purchasing power due to price inflation. Finally, retirement pensions are annuities payable for life that may continue beyond the date when funds accumulated in an alternative defined contribution plan could have been exhausted.
    Because of these many forms of insurance built into the CPP, any computation of a rate of return to a contributor's pension saving is unwise and improper unless it is made after deduction from CPP contributions of insurance premiums charged for the insurance coverage mentioned above.