≡ Menu

Brexit, CPP Expansion and Free Credit Scores

PC Financial World Elite MasterCard $50 Freebie

Recently, I wrote about how the PC Financial World Elite MasterCard is perhaps the best no annual fee grocery credit card out there.  It offers 3% cash back when shopping at Loblaws group of stores  (Loblaws, Dominion in NL, Real Canadian Super Store, No Frills, PC Mobile, and Shoppers Drug Mart).  You can redeem $20 at a time towards products in their group of stores.

For Loblaws shoppers out there, this card is a winner, especially since it doesn’t have an annual fee.  So what’s the freebie?  If you sign up for this card through their website, there is no mention of a bonus.  However, if you sign up through Rate Supermarket, they will give you a 50,000 PC points sign up bonus which is equivalent to $50 in free groceries.  More details here.

Recent Financial Headlines

BREXIT – What’s an investor to do?

The big financial news last week was that BREXIT actually happened.  I went to bed the night before the final tally almost certain that Britain was going to remain in the European union.  To my surprise (shock), the vote was close but clear in that the majority of voters want out of the union.

Following the “Leave” vote caused a lot of uncertainty in the market and uncertainty means volatility.  The British pound sold off to levels not seen since 1985, and perceived safety assets like USD and Gold gained accordingly. Thus far, the SP500 is down 3.59%, Dow Jones down 3.39%,  TSX down 1.66%.  The FTSE 100 index was surprisingly strong only correcting 3.15% (so far).

So what does this mean for investors?  For the buy and hold type (like me), it can be painful watching the portfolio drop a fairly substantial amount but the best thing you can do is to keep your eye on the horizon and hold on tight.  Over a longer time frame like 20-30 years, this will only be a blip on a long term chart.

In fact, I view these large financial events as opportunities to add to your long term positions. If you are an index investor, this may be a good opportunity to re-balance your international holdings as I suspect that the international index will fall greater than the US/Canada index.  If you are a dividend investor, use your watchlist to identify stocks that reach valuations (price range) that you are comfortable with.  If anything, the coming weeks/months (years?) will be the time to buy, not sell.

CPP Expansion

Other recent financial news is that CPP will be expanded starting 2019.  What does this mean to regular workers like you and me?  In 2019, our contribution will increase from 4.95% to 5.1% (employer will need to match); 2020 5.25%; 2021 5.45%; 2022 5.7%; and, 2023 5.95%.  Currently, the rates are paid on income between $3,500 and $54,900 but the expansion will see the upper income limit raise to $82,700 by 2025.

What about benefits?  Currently, CPP is meant to cover up to 25% of earnings up to the $54,900 ceiling.  The new plan is designed to cover up to about 1/3 of income up to the new expanded ceiling of $82,700.  Here is an example from The Toronto Star:

The maximum CPP pension in 2016 for someone retiring at age 65 is $13,110. That is based on maximum earnings for CPP purposes of $54,900.

The Department of Finance says that under the new scheme, at maturity, a Canadian earning slightly less — $50,000 in constant earnings throughout a working life — would receive a yearly pension of $16,000.

That compares with the current maximum of $12,000 at that income level.

Bear in mind that “at maturity” is a euphemism for about 40 years of work. And few people get the maximum. The average CPP pension is about 60 per cent of the maximum amount.

So basically higher forced savings during working years for higher income during retirement.  While not everyone will agree with the new system, future retirees will enjoy the extra income for relatively modest contribution.

Borrowell

Up until now, Canadians paid a fee to obtain their credit score.  We could always call equifax and get a free credit report, but not the score that lenders often judge us by during application.  Borrowell, a new Canadian FinTech company for personal loans, is disrupting the industry by giving free credit scores for whoever signs up for a free account. I signed up out of curiosity and I’m happy to see that my score remains strong.  This might come in handy to monitor your credit score if you tend to sign up for credit cards for the bonus (like the PC World Elite Deal above!).

If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).

FrugalTrader About the author: FrugalTrader is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 11 comments… add one }
  • Aram June 27, 2016, 1:32 pm

    What kind of information does Borrowell collect for credit score? I don’t know how securely they handle/store it, and how they control their employees dealing with client’s personal data, so I would like to see if they can retrieve the score with only minimal information about me…

    • FrugalTrader FrugalTrader June 27, 2016, 5:54 pm

      Aram, it is fairly minimal, no SIN – only full name, birthday, and address. They will then ask three questions based on your credit report that you need to answer correctly.

      • Aram June 27, 2016, 6:09 pm

        No SIN is good news, will subscribe for their service then.
        Thanks for details!

  • Spiro June 27, 2016, 4:35 pm

    Good Writeup.
    Brexit – Though annoying should trigger some good deals in the short term in North America. Id limit my Eurpo/International % mainly because i don’t see a recovery being as quick as it would be in CAN or US. Talking major indexes.
    my 2 cents …

  • Paul N June 27, 2016, 7:35 pm

    Re : CPP
    I fear that although you have explained it better than the many politicians have, most low to middle income people don’t realize they will get about $650.00 a month or less in CPP payments at 65…
    I think everyone just hears the $17,000.00 figure bounced around, and how the government is now “taking care of all Canadians”. People may now think even less of their own futures (and personal responsibility) and one day will have a big surprise awaiting them. Wasn’t the target of this campaign “to help those that need it the most”? I don’t see this being anything significant at all.

    I urge everyone to go the government website and check their current CPP “Statement of contributions report”. Get an idea of what you will get. It’s free.

    http://www.esdc.gc.ca/en/cpp/statement_contributions.page

    • FrugalTrader FrugalTrader June 27, 2016, 7:50 pm

      Great comment! I’m also an advocate of taking responsibility for your own future, but I can see benefit in this program for those who aren’t as prepared as they hope to be for retirement.

  • MrSLM June 29, 2016, 2:38 pm

    Totally agreed on Brexit, don’t see this being much of a big deal on larger timeframes. Short timeframes yeah, there’ll be some turmoil. Maybe even some possibilities to profit off of volatility (always look for that silver lining!).

  • Steve July 4, 2016, 9:38 am

    regarding Brexit, I wouldn’t call 51% a clear majority. With that thin a margin, if you held the referendum again, the vote could easily swing the other way.

    Major decisions like this should require 2/3rds majority, not simple majorities.

    There is also the idea that referendum’s for complex topics are not appropriate. Voters do not have the information and understanding of economics to vote intelligently. We have governments so that you can vote for who you’d like to be a leader, and expect them to get the all the right information and advisors and make an informed decision.

    • Paul N July 6, 2016, 5:58 pm

      I would ask “who is” appropriate then to make these decisions? I guess the standard answer is “intellectuals”? But which ones? I’ll give you a loose example. Paul Krugmann… A prize winning economist who’s economic ideology has completely flip flopped in an attempt to win favor and a future paid position with the democratic party in the US. He is ignoring facts (many of his own) and manufacturing distorted new narratives to try to support + elect a certain candidate in his NYT’s pieces.

      So for example in the EU, you get elected, you stack the deck with 10 Paul Krugmann types, or groups that share the same ideology (give them fancy names so they sound official) and you manufacture a movement and create confirmation bias to work towards an outcome. In the EU that’s globalism. I’m sure people that voted both ways are still confused at what’s right or wrong. People generally vote on who makes the best promises and gives the illusion of getting the most “free stuff”. They may elect a candidate in a landslide because of false promises. Then you feel your statement “expect them to get the all the right information and advisors and make an informed decision” is still correct? Ask the people of Greece, Venezuela, PR, etc if trusting those elected worked out for them?
      So I disagree, I think right or wrong the referendum is the right choice and majority rules. There will always be someone jaded by the outcome. At least you can only blame or congratulate yourself after. I believe Brexit is way overblown. EU is understandably afraid of contagion and further breakdown. Some countries should never have been invited to be part of EU. They did not know what they were getting into.

  • MARIA STARR July 25, 2016, 10:57 pm

    I went to Borrowell as recommended – in order to get my free credit score. It says I don’t qualify even though my credit score in July 2015 was 761, I own my home, employed full time – I thought I was credit worthy. It says to try again next month? What can be the issue here? I am financially responsible and very conscious of keeping a good credit score, paying bills on time, never missing a due date,
    and generally being frugal. Any thoughts?
    Thanks, Maria

    • Aram July 26, 2016, 12:18 pm

      My personal thought:
      – either something is broken at Borrowell’s side when they collect or evaluate the credit information;
      – or your credit score was damaged in last year (identity theft or the credit agency added someone else’s data to your file – this happens to people with same or similar names);
      – or Borrowell doesn’t want to deal with clients whos score is too good :) Try a line of credit with a bank, with your score may get a better rate :)

Leave a Comment