chapter 8- finances and economics Flashcards
the debate in the 1980s over how to fund public pensions for older Canadians in the future.
Great pension debate
the idea that everyone in Canada has a right to a public pension regardless of his or her income
Universality
programs such as the Old Age Security and the Guaranteed Income Supplement that help people meet their basic needs in retirement.
Income security programs
programs such as the Canada and Quebec pension plans that help people maintain their preretirement income and lifestyle
Income maintenance programs
a required repayment of Old Age Security benefits from wealthier seniors to the government
Clawback
a payment plan to which each person contributes a percentage of his or her salary each month; in the case of the CPP/QPP, the payments are credited to individual workers; when they retire, their pension will depend on how much they paid into the plan
savings plan
money paid into the plan goes to pay the pensions of retired plan members today
Transfer plan (also called a pay-as-you-go plan)
today’s retirees receive their CPP pensions from workers’ contributions today; workers today will receive their CPP pensions from workers’ contributions in the future; this type of plan requires that each younger generation pay for the pensions of the older generation
Pay-as-you-go plan
a pension that moves with workers when they change jobs
Portable
workers with a fully vested pension have credit for their total pension contributions (their own and their employer’s contributions) even if they move from one employer to another
vesting
states how much an employee can expect to earn in retirement based on a formula that takes into account years of service and highest salary; the company guarantees the benefit based on this formula
Defined benefit pension plan
states how much a person will pay into their pension account (often matched to some degree by the company); this plan defines the contribution but does not guarantee the outcome; the outcome in retirement will depend on how well the employee’s investments do over time
Defined contribution pension plan
a government plan that allows people to save money for their future pension without paying income tax on the money protected within the ___; the savings are taxed when they are withdrawn in retirement; the taxes are deferred to a time when the person has a lower income and is in a lower tax rate.
Registered retirement savings plans (RRSPs)
a plan by which each spouse of a divorcing couple gets an equal share of pension credits accumulated during their time together
Credit splitting
a method of increasing pensions linked to increases in cost of living
Indexation