CLC presents straight talk on RRSP and mutual fund management fees.

Dateline: Tuesday, November 29, 2011

from the Canadian Labour Congress

Think you have a good deal with your RRSP? Think again. RRSPs and mutual funds have failed to deliver. Too many retirees are left with a goose egg instead of a nest egg.

Check out our handy, interactive fee calculator.

The financial services industry pays itself juicy fees to manage your money and that eats up a big part of your retirement savings. That is, if you have any retirement savings left when you are ready to retire, after the roller coaster dips and dives of the stock market.


The moral of the story? The CPP is by far the cheapest way for you to save for retirement.

Contrast that to the management expense of the Canada Pension Plan Investment Board (CPPIB) which is about 0.50 percent.

The moral of the story? The CPP is by far the cheapest way for you to save for retirement.

The CPP is a pension plan paid for by your contributions and your employer’s contributions. It moves with you no matter where you work or what job you have. What you receive in retirement is based on what you and your various employers paid in during the years you worked. You receive an indexed defined benefit, meaning you know exactly what you will get each month when you retire, and it takes unflation into account. No worries about what the stock market might have done to your retirement account. The CPP is a well-managed pension plan, with management expenses far lower than anything the banks, insurance companies, and mutual fund companies can sell you. The CPP is rock solid according to actuaries, for at least 75 years.

But — CPP benefits are too low. The most anyone can collect right now is about $11,000 a year and the average benefit paid out today is about $6,000 a year. We can double future pension payouts, to $22,000 a year, just by paying a little bit more now and putting it away for the future.

See how it will work for you!

You can get the same benefit that our plan will give future retirees — up to an additional $11,000 more in CPP — by saving on your own and buying an annuity. That’s what the banks and insurance companies want you to do — and they are willing to sell you an annuity — but it’s at a steep price. To receive an annuity of $10,000 a year, you would have to save at least $200,000 on your own, more if you are a woman because insurance companies base their calculations on how long you are expected to live.

Economists, academics, and 76 percent of all Canadians in a recent poll support expanding the CPP. So do at least seven of ten provinces. The only ones standing in our way are Alberta, Quebec and the federal government. They would rather create a different savings plan — one where you take on all the risk, where your employer doesn’t have to contribute a dime, and one that banks and insurance companies get to administer, for a fee.

Why give more of your hard earned savings to the banks and insurance companies, when expanding the CPP is a better deal for you, and a better deal for your children when they’re ready to retire?