About the Author

Ross Macnaughton is a professor emeritus who taught Business Computing and The Mathematics of Finance at Ryerson University from 1976 to 2011. He also consulted for a Toronto firm that invested $3 billion for several pension funds. He also wrote and sold two software packages that were used by roughly 100,000 researchers and students.

Ross is deeply concerned. The Canadian media have not published one article on the CPP’s gigantic $224 surplus. He has been fed evasive responses by ten top Canadian actuaries denying the surplus. He has proof that our Chief Actuary, the watchdog of as much as 10% or most Canadians’ lifetime earnings, has “cooked the books” to bury the surplus. And it appears the deep pockets of the financial industry are selfishly rigging the system so that they can profit while many millions of Canadians lose. Ms. Freeland and Mr. Carney have written books that claim our capitalist system is rigged to favour the super-rich. Politicians, likely thanks to generous secret donations, are conveniently turning a blind eye to this CPP injustice.  

How can someone who is not actuary critique actuaries?

Since 2010, our Chief Actuary has admitted to errors totaling 500% regarding his financial predictions. The rest of his predictions have been reasonably accurate. As a professor who taught The Mathematics of Finance, Ross is only critiquing our Chief Actuary’s error-prone financial analysis of the CPP.

All pension experts insist on a Board of Governors, primarily comprised of contributors and pensioners. The CPP has none. And the CPP is not audited by our Auditor General. The CRA has no jurisdiction over the CPP. Someone needs to critique a Chief Actuary who has reported fiction to 20 million CPP members.

CPP Investments’ founder

Ross’s second cousin, John MacNaughton, was CEO of CPP Investments from 1999 to 2004. Up until 1999 the fund was comprised of mostly low risk bonds and guaranteed income certificates. John spearheaded a move to invest in slightly riskier investments, including stocks, private equity, real estate and much more, worldwide. This change in investment strategy generated large profits for the public at very little risk. John’s initial investment strategy has helped make CPP Investments likely the best pension fund investor in the world today.

Regrettably, John has passed on, before Ross started his CPP investigation. The two only met once, for ten minutes. John would have been a powerful ally in securing revised, appropriate CPP legislation.

The GIS story - proving politicians need monitoring

Because of his research on the CPP, Ross stumbled on an unjust situation related to low-income working seniors. Two million seniors now receive the Guaranteed Income Supplement (GIS), up to $11,000 per year for a single senior. They all live near the poverty line of roughly $21,000 in income per year for a single senior.

Before 2020, many of these seniors worked, unaware of a hidden GIS clawback rate as high as 76%. This means a 65-year-old woman (2/3 of low-income seniors are women) could be grossing, for example, $16 per hour but unknowingly netting less than $4 per hour. Her GIS payments were being reduced by more than $12 per hour for each hour she worked.

CARP, the Canadian Association of Retired People, has 330,000 members and is the most prominent seniors’ organization in Canada. After receiving repeated pleas from me in 2018, CARP’s two Vice-Presidents of Advocacy finally took notice. To illustrate the complexity of the GIS website, Vice-President Wanda Morris, a certified accountant, had to contact me to determine how I arrived at a 76% GIS clawback. (What chance does a low-income senior have in understanding how the GIS works if a certified accountant needs help determining the clawback rate?) I explained how the tables worked and she agreed.

As a result, CARP’s advocates for seniors, as shown in their FACES program, asked Finance Minister Morneau to substantially reduce this unjust GIS clawback rate.

Then the Liberal government, not wanting to see a newspaper article entitled

“Liberals gouge unknowing, low-income seniors’ with a 76% GIS clawback rate”

acted. The March 19, 2019 budget reduced the clawback rate substantially as this example from the Budget demonstrates.

“Eunice is 66 years old, has $5,000 of CPP income and lives in Toronto. She loves vintage clothes and is considering part-time work at a vintage clothing store, where she would earn minimum wage.

Currently, Eunice would only get to keep about $6,650 of her roughly $14,600 from the part-time job, or 45 cents of every dollar earned after the GIS benefit clawback, federal and provincial taxes, tax credits and other benefits are taken into account. 

With the proposed enhancement to the earnings exemption, Eunice's take-home pay would effectively increase to almost $9,600, leaving her with nearly $2,950 more of her earnings to spend on things like healthy foods, a new bicycle and gifts for her grandchildren…

It is estimated that improving the economic security of low-income seniors through the enhanced GIS earning exemption would cost approximately $1.76 billion over four years.”

Before the legislation, when a low-income senior grossed $5,000 through employment, she netted roughly $1,750. Now she nets the full $5,000.

There is ongoing injustice. This excessive clawback rate still applies to CPP pensions. For example, consider a low-income senior who has contributed enough to the CPP for a $10,000 annual pension. His total income would only increase by $3,500 because of the 65% GIS clawback. Conversely, middle-income seniors deserving the same $10,000 CPP would, now net roughly $8,000, after taxes. With the same CPP pension, a low-income senior will net a $3,500 payment while a middle-income senior will net an $8,000 payment. Injustice for low-income seniors persists.

If the CPP ever declares a deserved surplus distribution, hopefully this punishing clawback rate will not apply and low-income seniors will receive their full deserved surplus paymentunt.

There seems to be a conscious government effort to confuse seniors, thereby keeping the deficit lower. In 2020, I gave GIS staff basic advice on how to simplify their GIS website so that seniors could better understand. In 2023, the website remains complex and unchanged.

Moreover, www.fixthecpp.ca demonstrates how our government is concealing the news of a $224 billion CPP fund surplus for political reasons. CARP is suspiciously silent. There is convincing evidence that bribery is involved.

Seniors need a financial watchdog other than the Minister for Seniors, who has done nothing to improve the 2022 GIS situation or distribute the CPP’s surplus.

Professor Macnaughton welcomes your comments and suggestions that might help achieve CPP pension justice for all Canadians. He can be reached by emailing fixcpp@gmail.com.