Canada Pension Plan

[Edward Doolittle]

Hello GnuCash users,

I have a question for which I can't seem to find a definitive answer
elsewhere. The context: one of the uses I have for GnuCash is retirement
planning. I can keep track of my defined contribution pension plan quite
easily. My pay advice slip contains information on my periodic contribution
and my employer's contribution; the contributions are dumped into a holding
account for a short period then forwarded to the pension plan, etc. Then I
can glance at an account in GnuCash and have some idea of the value of my
retirement fund, whether it is over or under target, etc.

On the other hand, every pay period for the first few months of the year I
have Canada Pension Plan deductions, but I don't know how to treat them in
GnuCash.

For those who don't know, CPP is somewhat like a defined benefit pension
plan. Benefits are calculated based on the number of full years of
contributions; maximum benefit is realized after 40 (or is it 39?) full
years of contributions up to a certain age. Fewer than 40 full years of
contributions results in pro-rating. The size of the maximum benefit
depends on legislation, which could conceivably also change the number 40
to something else or otherwise change the whole scheme (say, in response to
an aging population).

How should I treat the CPP contributions? The easiest thing to do would be
to treat them as an expense. But then I don't have any sense of the size of
the asset (if that's what it is) that is my CPP benefit.

So currently I'm just dumping the CPP contributions into an asset account,
which should represent some kind of lower bound on the size of the benefit
for which I should be eligible. Provided I live 12 to 20 years after
retirement, yada yada. It's not clear whether I should apply some kind of
investment growth to my CPP asset account, however.

Another problem with saving my contributions in an asset account is that I
don't know what to do about my CPP contributions from the time before I
started to use GnuCash.

I've thought of other schemes, like exchanging a full year of payroll
deductions for 1 year of CPP contribution as if it were an equity share,
which seems to mirror the way the government keeps track of it, or tracking
the growth fluctuations in the CPP as a whole and reflecting those in my
account, but nothing seems right.

Any suggestions?

E

-- 
Edward Doolittle
Associate Professor of Mathematics
First Nations University of Canada
1 First Nations Way, Regina SK S4S 7K2

« Toutes les fois que je donne une place vacante, je fais cent mécontents
et un ingrat. »
-- Louis XIV, dans Voltaire, Le Siècle de Louis XIV, Chap. XXVI