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Ben Felix - CPP is More Valuable than Most People Realize

Thumbnail of the video “Ben Felix - CPP is More Valuable than Most People Realize”
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Author: Ben Felix
Categories: Personal Finance
Tags: finance
Views: 2 · Last viewed: 2026-10-16 10:03 UTC

Short Summary

Main recommendation: Canadians should treat Canada Pension Plan (CPP) contributions as a valuable retirement asset rather than a poor deal, because CPP provides an inflation-indexed annuity that hedges risks individual investors cannot efficiently hedge alone. Ben Felix argues that CPP's expected return should be judged as a hedge, not against high-risk stocks, and that it allows retirees to take more risk elsewhere in their portfolios.

Key Points

  • CPP is an inflation-indexed annuity, which Ben Felix describes as the only truly risk-free asset for a long-term investor, and such annuities are not available for private sale in Canada.
  • CPP hedges longevity risk through mortality pooling: people who live longer than expected gain mortality credits from those who die earlier.
  • CPP hedges inflation risk by indexing benefits to the CPI all-items index, while bonds and cash often perform poorly under high inflation.
  • CPP reduces sequence of returns risk by providing a guaranteed income stream through all market conditions, and its investor has a very long time horizon and ongoing contributions.
  • Comparing CPP's return to stocks is misleading, since a hedge should not have a high expected return in normal conditions.

Details Worth Noting

  • Concrete instructions: The video gives no step-by-step instructions for managing CPP. It does say that planning to get the most out of CPP is valuable and will be covered in a future video, and .
  • Contribution levels: Combined employee and employer CPP contributions in 2025 are approximately $8,848, and the replacement rate rises to 33.33% up to an increased maximum, funded by contribution increases that began in 2019 and are fully implemented by 2025.
  • Return estimate: Using maximum 2025 contribution rates and a maximum benefit received in 2064, the real internal rate of return is a little more than 2%, roughly 5% nominal under the 2.5% inflation assumption.
  • Caveat: If a contributor pays in for their working life and dies after one benefit payment, private savings would have done better, but living to 100 greatly benefits the contributor.
  • Inflation measurement: The CPI may overstate actual cost-of-living increases by up to 0.6% per year due to substitution effects, and wages have historically outpaced inflation by about 1% per year.

Bottom Line

CPP is most useful as insurance against outliving savings, rising prices, and poor market timing, so its value should be judged by the protection it provides rather than by its raw return.