Short Takes: Stock Splits, the New Tax-Free First Home Savings Account, and more

I’ve seen some complaining that government benefits (like CPP) aren’t keeping up with inflation the way they are supposed to.  Some people have substantive complaints about how the Consumer Price Index (CPI) is calculated, but others are simply unaware of how CPI changes get applied.

News reports generally just compare today’s CPI to what it was a year ago.  Lately, we’ve seen some big jumps in inflation.  People see that these inflation increases are larger than the CPI adjustments to their government benefits.  However, for government benefits and other CPI-indexed figures, the government averages CPI numbers from November of one year to the end of October of the following year.  

A CPI adjustment that takes place in January is based on CPI figures from 14 months earlier to 2 months earlier (and how much that average increased over the previous year’s average).  This creates about an 8-month delay in applying CPI increases.

So, assuming inflation moderates at some point, we’ll see the “pending” 8 months of higher inflation reflected in CPI-adjusted amounts the following year.

Here I discuss CPP timing in a conversation format:

A Conversation about CPP

Here are some short takes and some weekend reading:

Preet Banerjee explains the significance of stock splits.  They do make a difference in some small ways, but not in the ways many people think.

John Robertson has a different take on the new Tax-Free First Home Savings Account.

Andrew Hallam explains the danger of judging an investment strategy by just a few years of results.