If I could take all the CPP payments I’ve made and will make and instead invest them in my RRSP, the investment returns in the RRSP would make me far more money than I’ll ever get from CPP benefits.Assuming Andi is one of the few who has the discipline to stick with a reasonable portfolio through thick and thin, the conclusion that the RRSP approach would beat CPP is very likely true. The problem for government is that the majority of investors will make an anaemic return on their money due to paying huge fees on mutual funds, failed market timing attempts, and so on.
Even worse, many people would simply dip into their RRSPs either out of true need or simply a desire for more consumption. Eliminating CPP would leave governments with a big problem. We can’t have huge numbers of older citizens no longer able to work lying around in the streets starving. So, the government would not have any CPP income and would still have to bail out some fraction of retirees with some sort of minimal payments.
The next suggestion is to allow people to opt out of CPP. The problem here is that it won’t be just those who can manage their money well who will opt out; many of those who opt out will end up needing help in old age. The opt-out strategy wouldn’t solve the government’s problem at all.
Some commentators suggest that people should take personal responsibility and accept the consequences of their actions. This sounds good until you think of the reality of an explosion of elderly beggars clogging our streets.
It is doubtful that CPP will ever be scrapped or made optional unless it is replaced with some other similar mandatory scheme. If anything, CPP is likely to expand over time.