Canada Pension Plan

[Phil Longstaff]

I think treating the CPP as an asset is really the best you can do, because
it is not an asset you own. It is a government program you pay into, and
then when you retire, the government pays you based on your salary over
your working life. It's not your asset.

Phil

On Thu, Feb 19, 2015 at 8:48 PM, Edward Doolittle <
edward.doolittle at gmail.com> wrote:

> 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
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