No. of Recommendations: 28
Interesting on how countries differ.
The Canadian pension system was pay-as-you-go (current payments funded from current employment taxes) until the 1990s, when it became quite clear that that wasn't going to work out long term: it was going to be untenable unless something changed. Sound familiar?
I guess it had been clear for a while, but they did act. Contribution rates were 1.8% of payroll from inception of the system until 1986: 1.8% for the employee, plus 1.8% for the employer, total 3.6%. The rates rose slowly for a few years 1987-1996 at 2.8% each, then rose quickly 1997-2003 to 4.95% each. The extra contributions were enough to start building a pension fund. The contribution rate was steady at that level for 16 years, but was bumped up again 2019-2023 to 5.95% each where it is now holding steady. i.e., a "tax wedge" of about 12% for pensions alone.
The fund is now up to something like C$700bn, termed a "strong surplus" by the actuaries, so current forecasts are that it won't go broke...it's expected to be more that fully funded to at least the 2090s.
If there is a lesson, perhaps it's that sometimes you just gotta raise taxes. Just suck it up.
The US motto is "life, liberty and the pursuit of happiness". Canada's is a more boring "peace, order, and good government".
Jim
