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Brexit, CPP Expansion and Free Credit Scores

Brexit, CPP Expansion and Free Credit ScoresBrexit, 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!).

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