Chapter 8 Textbook Terms Flashcards
Great Pension Debate
The debate in the 1980s over how to fund public pensions for older Canadians in the future
Universality
The idea that everyone in Canada has a right to a public pension, regardless of his or her income
Income security programs
The Old Age Security pension and the Guaranteed Income Supplement are income security programs that help people meet their basic needs in retirement
Income maintenance programs
The Canadian Pension Plan and the Quebec Pension Plan are income maintenance programs that help people maintain their pre-retirement income and lifestyle
Clawback
A required repayment of Old Age Security benefits by wealthier seniors to the government
Savings plan
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 and when they retire, their pension will depend on how much they paid into the plan
Transfer plan
(also called a pay-as-you-go plan) money paid into the plan goes to pay the pensions of retired plan members today; the CPP/QPP also works like a transfer plan
Pay-as-you-go plan
Today’s retirees recieve 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
Portable pension
A pension that moves with workers when they change jobs
Vesting
Workers with a fully vested pension have credit for their total pensions contributions (their own and their employer’s contributions) even if they move from one employer to another
Defined benefit (DB) pension plans
State how much a employee can expect to earn in retirement based on a formula that takes into account years of services and highest salary; the company guarantees the benefit based on this formula
Defined contribution (DC) pension plans
State how much a person will pay into his or her 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
Registered retirement savings plan (RRSP’s)
A government plan that allows people to save money for their future pension without paying income tax on the money protected within the RRSP; the savings are taxed when they are withdrawn in retirement; the taxes are deferred to a time when the person has a lower income and is in a lower tax bracket
Credit splitting
A plan by which each spouse of a divorcing couple gets an equal share of pension credits accumulated during their time together
Indexation
A method of increasing pensions linked to increases in the cost of living
