In 1889, Otto von Bismarck, the famous Iron Chancellor of the German Empire, introduced the first pension plan run by a government. Bismarck's revolutionary idea was a pension plan that was offered to everyone, no matter what trade you worked in or your walk of life. The idea of the government providing a pension to all workers hasn't changed much in the more than a century since, except for one thing: Bismarck's pension plan offered pension benefits when workers reached the age of 70 – at a time when the average German life expectancy was only 45.With advances in medical science and important lifestyle changes, we now live well into our seventies and eighties. More and more of us retire due to old age, use a pension plan, and see our retirement as a time to enjoy life, spend time with family, and live at a more relaxed pace – a late 20th-century luxury facilitated by pension plans. Did you know? Bismarck's pension laws also covered disability, and almost all of the first government pensions paid out were disability benefits in disguise!
In the United States, the trigger for a pension plan that would cover all citizens was the extreme poverty of the Great Depression, when a full half of senior citizens in the US lived below the poverty line. Inspired by the pension laws in Germany, the movement for a government pension plan came directly from the top: President Franklin D. Roosevelt and his Labour Secretary, Frances Perkins – two of the strongest forces behind America's New Deal.After a great deal of debate, both in the Senate and the public square, Roosevelt enacted the US Social Security program in 1935, covering citizens over 65 years of age – and creating the largest pension system in the world. Did you know? One prominent proposal during the American debates over pension plans – one with a good chance to win – would have required, among other things, pension plan recipients “to swear under oath to spend the entire monthly amount of their pension inside 30 days, and only within the confines of the United States!”
Canada passed our first piece of pension legislation in 1927. The Old Age Pensions Act covered both men and women over 70 years of age, so long as they were British subjects and had lived in the same province for five years – a smaller part of the elderly population. Its focus was on providing relief from poverty for senior citizens who had little or no income.After World War II, though, the face of Canada was changing: The group of people the Old Age Pensions Act covered was becoming smaller and smaller. As a response, the federal government replaced it with the Old Age Security Act in 1952, which provided a basic pension benefit to every Canadian resident – not citizen – aged 70 years and over. To supplement this minimum pension, the Canada Pension Plan (CPP) was introduced in 1966. To this day, benefits paid out by CPP and its twin plan in Quebec (QPP) are tied to our employment history. Did you know? Besides retirement benefits, today the CPP pays out a sizeable amount in survivor, disability, and one-time death benefits to Canadians and their families.
We all go through financial ups and downs over our lifetime: landing our first full-time job; helping our children through college or university; dealing with layoffs when our company downsizes; or simply just getting older.It's all too human to face financial uncertainties, and it's wise to prepare for them. But it's also human to focus on today and tomorrow, not ten or twenty years down the road. One reason governments step in is to make sure we have enough saved up for uncertainties that might arrive after we've retired, something we might not even be considering yet. This happens through the handy invention called a pension plan. Pension plans are older than we think: They've been around to recognize the hard work of our elders in ancient Greece, at the height of the Roman Empire, during medieval times and the Industrial Revolution, too. Sometimes drawing on a pension has meant receiving a share of stockpiled agricultural goods or a piece of land from your community. Pension plans have also been historically organized by trade guilds or fraternal organizations – the first version of today’s trade unions. But however pensions have been run or distributed, societies all over the world have faced the common problem of providing a stable income once we reach our senior years. But the roots of the modern social welfare scheme we know today begin in Germany, in 1889. Did you know? Your ancient Greek pension plan may have been delicious as well as good for the wallet: one of the items distributed to pensioners was olive oil!
With a maximum pension of abc per year (as of January 2014), the CPP can provide all Canadians a strong financial foundation for retirement. The Canada Pension Plan pays benefits to any Canadian resident who's made contributions to the plan at some time in their lives, whether as an employee with a CPP deduction on your pay cheque or as a self-employed individual paying directly into the plan yourself.Getting the most out of the Canada Pension Plan is simple: pension plan benefits are calculated based on the number of years you spent working and the amount you've contributed to CPP in that time. The "general drop-out provision" helps boost your benefits by automatically dropping your lowest-income years, so if you have to take time off to raise your children, go back to school, care for a sick loved one, or have just spent some time unemployed, those years might not count in calculating your Canada Pension Plan benefits. You can receive your CPP benefits at age 65, but there's also a way to receive them sooner – if you're willing to take reduced benefits by retiring earlier. On the whole, retiring after age 65 increases your pension benefits by more than 30%. However, later isn't always better. At age 70, there's no more waiting: you have to start collecting your Canada Pension Plan benefits. Did you know? The pension you receive is adjusted to increases in the price of daily living, so when the cost of bread, toilet paper, or light bulbs goes up, your pension goes up with it – a concept called indexation or CPI adjustments.