Posted on: 11-01-05 10:47:11
What is the difference between CPP and RRSP?
My company deducts huge amount of CPP every month - am I ever going to get any benefit out of this?
Is CPP optional? Can I tell them I don't want pension after retiring?
Also, if CPP is there, then why do people need RRSP?
Any experts enlighten me?
CPP is Canada Pension Plan. It adds to the govt. fund that will supposedly pay you a certain pension montly amount when you retire. This is a fixed amount that the govt. pays you.
RRSP is your OWN fund. This is a tax incentive way of urging people to save. You have an upper limit on how much you can invest every year based on your salary and whether you choose to invest is discretionary (unlike CPP). After investing in RRSP, you can then put your money in various funds and stuff.
Hope that clarifies. This is a basic explanation. I think some people including YoursTruly, Chandresh etc have put up a lot of detailed info. on RRSP if you want more detail. I'll post a link if I find it or you can search yourself.
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Are you there?
For RRSP the following link would answer most of the questions
http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/glossary-e.html
As Bluelobster has explained CPP is mendatory and RRSP is optional. Both are for your retirement.
For CPP follow this link:
http://www.sdc.gc.ca/en/isp/cpp/cpptoc.shtml
I hope this helps.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Thanks for the replies.
When the govt. imposes CPP on us, is there any benefit in doing an RRSP?
If the govt. is going to give someone regular pension after retirement, why do RRSP?
Also, is there a way to opt out of CPP if someone doesn't want to retire in Canada or doesn't want to stay here for a very long time?
CPP takes a huge chunk of my monthly salary away and I don't think I am going to retire in Canada and spend all my life here.
Any options?
Quote:
Orginally posted by OneIsACrowd
When the govt. imposes CPP on us, is there any benefit in doing an RRSP?
If the govt. is going to give someone regular pension after retirement, why do RRSP?
The pension that you would get out of CPP will not be sufficient to live properly. RRSP can therefore provides additional post retirement funds.
Quote:
Orginally posted by OneIsACrowd
Also, is there a way to opt out of CPP if someone doesn't want to retire in Canada or doesn't want to stay here for a very long time?
AFAIK CPP is not optional.
You do not have to be in Canada to avail the pension. It will be given to you no matter where you live in the world.
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Diogenes
====================
The Cynic
Quote:
Orginally posted by OneIsACrowd
Thanks for the replies.
When the govt. imposes CPP on us, is there any benefit in doing an RRSP?
If the govt. is going to give someone regular pension after retirement, why do RRSP?
Also, is there a way to opt out of CPP if someone doesn't want to retire in Canada or doesn't want to stay here for a very long time?
CPP takes a huge chunk of my monthly salary away and I don't think I am going to retire in Canada and spend all my life here.
Any options?
Hi OneIsACrowd,
As pointed out by the other posters, the CPP is compulsory. There is no escape.
If you are employed, you contribute 4.95% of your "contributory earnings" and your employer matches it. If you are self-employed you pay the whole 9.9%. If you were 65 and retired in 2004, the maximum pension from CPP would have been $814.17 pm. You can ask HRDC to send you a free annual CPP statement.
In addition to retirement pension, the CPP also provides disability, death and dependant benefits.
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