How three powerful industries may have succeeded in this coverup
The C.D. Howe Institute, a think tank that refuses to reveal who funds them, is highly suspect in this cover-up for several reasons. Firstly, they recently published a misinformation paper on the CPP, packed with deceptive gibberish. It implies our CPP pensions may not be there when we retire. Secondly, C. D. Howe likely employed top Canadian actuary, Malcolm Hamilton. With 40 hours of debate, he tried to convince me that 2+2=5 regarding the CPP’s surplus.
Thirdly the C. D. Howe website boasts that meetings can be “off-the-record” and “no participant’s remarks may be quoted”. They have 90 such meetings every year.
This is an ideal venue for any industries that want to convene and engineer a clandestine cover-up, without any fear of eventual recrimination. Unfortunately, there is a large segment of Canadians who will engage in unethical, profitable behaviour when there is no trail that leads to criminal charges or disgrace.
The following is a hypothetical dialog that took place at a think tank like the C.D. Howe Institute. It is an off-the-record private meeting with a representative from the actuarial industry, the financial industry and the media industry attending.
Think tank representative:
Welcome to our think tank’s off-the-record, undocumented meeting place. This room is secure. We have removed all recording devices and phones, including yours. No one here is even allowed a pen and paper. We urge you to make all agreements informally. All agreements should result in a win/win/win for your three organizations so that you will all continue with this cover-up.
Remember that you face no future legal consequences because this meeting never took place and even your attendance here is confidential. If, by chance, you someday receive pressure from the millions of Canadians who you continue to abuse, you should tailor your agreements so that you can eventually say to the naïve public,
“Wow. Those CPP numbers make sense. We were never aware the situation was so dire.”
It helps immensely that one of you represents the entire Canadian media. It is good to know Canadians will never hear about the CPP’s “gigantic” $257 billion surplus. Using the traditional ten to one US/Canada ratio, this surplus would be $2.71 trillion in the US. The US media, with no formal topic-suppression agreement like the Canadian media has, would be writing numerous articles about how this surplus could help their sputtering economy and their citizens.
However, there is a new disturbing unpredictable entity that has emerged – social media. It is a powerful force and Macnaughton may be able to harness it to create a harmful uprising from concerned Canadians.
I will leave you three on your own now.
Actuarial representative:
CPP Investments is probably the best pension fund investor in the world. They have averaged an 11% return over the last 11 years when all that is needed to fund all CPP pensions for 75 years is a 6% return. This has resulted in an irrefutable $257 billion surplus.
And if CPP Investments keeps investing at 11%, a 25-year-old Canadian will have a $100,000 CPP pension, in 2021 dollars at age 65. If that news became known, why would individuals or businesses have any interest in any other pension funds? Thus, the job prospects for the 6,000 actuaries who I represent would decline considerably. This is because they are now employed by hundreds of Canadian pension funds. And they hope there will be an increase in pension funds, not a decrease. Therefore, we actuaries want to keep the news of the CPP’s surplus suppressed.
We will fight hard to avoid probable job losses. We have seen robots replace factory workers and ATM’s replace bank tellers. We will do everything possible to prevent such devastation to our industry.
All our members are now subtly downplaying any talk of the CPP’s surplus and investment success. Macnaughton has consulted ten top Canadian actuaries and they have all managed to evade his questions about the surplus with gibberish. Luckily, actuarial science is complex, and actuaries enjoy relative immunity from scrutiny. And our Chief Actuary does not have to answer to a CPP Board of Trustees. He only gets a peer review from cooperating colleagues who rubber stamp his reporting.
Finally, our Chief Actuary, in charge of monitoring the $550 billion CPP fund, is never audited by Canada’s Auditor General. He has 100% free rein on a complex topic. He told Macnaughton the biggest lie a public servant has ever uttered - “The CPP is not in surplus.”
The last thing we want is some auditor auditing the CPP like Ontario’s Auditor General, Bonnie Lysyk. She bravely accused Premier Ford of folding to “intense” lobbying from the financial industry, claiming lobbying by the financial industry is “a significant contributing factor” that has slowed investor protections in Ontario. If Canadians knew how the 1% sneakily use lobbying to influence politicians, they would likely pressure our governments to ban lobbying.
Keith Ambaschtsheer is Director Emeritus of the International Centre for Pension Management (ICPM). He devoted 82 pages to Pension Governance in his recently published book The Future of Pension Management. The 82 pages virtually demand a Board of Trustees for every pension fund, mainly comprised of contributors and pensioners.
The biggest pension fund in Canada, the CPP, has no such Board of Trustees. When Macnaughton asked Keith if he was interested in being a member of a CPP Board of Trustees, he refused, citing inadequate qualifications! What a team player!
If the CPP had a representative Board of Trustees, predominantly comprised of contributors and pensioners, they would have declared a large surplus distribution years ago. We are very lucky there is no CPP Board of Trustees. And we will do a great deal to keep it that way.
We sent Malcolm Hamilton to try to suppress Macnaughton. Unfortunately, he failed. And just after they met, Macnaughton quoted one top actuary, who requested anonymity:
“Our Chief Actuary has done what pension actuaries frequently do - invent measures that are easily manipulated so that actuaries can control the narrative and hide things at will.”
This quote is absolutely accurate, and it won’t take much for the public to see that it is true, especially after they check out Macnaughton’s website with what he calls, and he is right, irrefutable proof.
Our Chief Actuary has been highly cooperative, even though his reputation is at risk. Macnaughton accurately claims:
“No other government employee, ever, has been responsible for depriving so many deserving Canadians of so much money - $170 billion.”
What a legacy for our Chief Actuary! His children would be disgusted if they knew. To keep him on board, we may need to send him a secret donation. We already know his sense of ethics can be compromised.
But our Chief Actuary cannot hold this dam of deceit much longer. For the 12 months ending March 31, 2021, CPP Investments had a record $84 billion in net income when the Chief Actuary specified he only needed $20 billion to fund all CPP pensions for 100 years. That is a $64 billion addition to the surplus in those 12 months alone.
For years, reporters have been writing hundreds of scathing articles when our deficit is roughly $20 billion per year. How can the media keep ignoring an irrefutable, annual $64 billion surplus “elephant in the room”? We actuaries cannot keep this mushrooming surplus covered up much longer.
The current CPP surplus is $257 billion. The $550 billion will be 92% above the Dec. 31, 2021, target of $293 billion. And if we accurately forecast using a reasonable 10% CPP Investments return, the surplus mathematically becomes $464 billion and 464%. If the public ever hears this, they will be very angry with actuaries and demand concise information on other Canadian pension funds. Our industry does not need this increased scrutiny.
When a pension fund has a 25% surplus, a surplus distribution is considered. For example, the Ryerson University Pension Plan only had an 18% surplus and the CRA demanded its distribution. Retired and active professors received as much as $20,000 each. And the Healthcare of Ontario Pension Plan (HOOPP), increased pensions on January 1, 2018, by $4,900 per year, thanks to their investing prowess. People are starting to hear this and saying,
“Where is my deserved CPP surplus payment?”
Financial Industry representative:
I represent an industry that has very deep pockets. While members of my industry don’t want to know specifics, they have instructed me to keep our lucrative industry without competition. They are terrified that CPP Investments could become most investors’ choice.
We can’t compete. CPP Investments is probably the best pension fund investor in the world. They have so many investment advantages over the standard investments that we can offer our clients. Investors with CPP Investments would have much higher profits with simplicity, little risk, and no fraud.
There could be a stampede of millions of investors, wanting to invest the maximum. And the maximum contribution could spiral higher as Canadians ask “Why not?”
This agreement between the actuarial industry and the financial industry is a win/win. You want the news of the CPP’s surplus suppressed because it could lead to the demise of pension plans. We want it suppressed because it could lead to voluntary contributions to CPP Investments. We likely could not engineer this cover-up alone. However, together, with the media also complicit, we can keep the news of the CPP’s surplus suppressed.
We are lucky. My budget is many millions of dollars, and I can distribute it, without record-keeping, as I see fit.
From an investment viewpoint, long before Trudeau gained power in 2015, deceased Conservative Finance Minister Flaherty was a big proponent of voluntary contributions to the CPP. And that was when the CPP only had a surplus that is 4% of today’s surplus. Now, with CPP Investments achieving an 11% return for 11 years, the argument for voluntary contributions is very convincing. Because of my intense lobbying, no conservative has taken over Mr. Flaherty’s passion for voluntary contributions.
The numbers are astonishing. If a 25-year-old contributed just $1,000 per year, if CPP Investments achieved their return of the last ten years, 10.8% he would have $700,000 at age 65. And if CPP Investments’ return continues at 10.8%, he would have a $75,600 “pension”.
This is six times the CPP pension for 17% of the cost even after accounting for inflation. Income inequality could be solved for hundreds of thousands of Canadians.
There is a big injustice in Canada today. Those able to buy a home will likely become millionaires by age 65 while most renters will have nothing saved by age 65. Voluntary contributions could solve this injustice. For just $32,000, using an RRSP, a low-income young Canadian could retire in dignity and happiness, living comfortably above the poverty line.
Investing is complex and we help with advice as investors wade through a myriad of investment options. However, with CPP Investments there is no advice needed. Canadians could just contribute and watch their money grow. They could easily, for example, tell their payroll department to deduct a voluntary extra $83 per month, send it along to Ottawa with their mandatory CPP contributions and likely have $700,000 at age 65. And at tax time, they would get roughly a $200 refund every year, using an RRSP.
I know. Macnaughton is recommending a contribution limit of $1,000 per year per Canadian. This would not hurt our industry much. If, for example, one million Canadians invested, it would only be $1 billion invested in the $550 billion fund. But it could open the floodgates and eventually decimate our lucrative industries. We need to suppress any movement to voluntary contributions now.
You guys in the media industry should be concerned. We give you roughly 20% of your advertising revenue. We advertise profusely because, once we get a customer, he can pay us roughly 1% of his investments in fees every year and he usually stays with us for years. If CPP Investments became known as much more profitable than us, our industry would decrease our advertising with you considerably.
Media industry representative, we know you are not profitable. My industry is happy to secretly donate millions of dollars to the Canadian media industry to continue to keep the CPP’s surplus out of the mainstream media. We can talk later, with nothing written, about donation details.
Media Industry representative:
Chrystia Freeland, at one time a successful journalist, knows
“the super-rich have bankrolled mass media outlets to dominate the debate over economic policy”.
Unlike the U.S., where publishers like FOX and CNN would never agree to veto a story, the entire Canadian media industry has, under-the-radar, cooperated to veto discussing the CPP’s surplus and potential to solve income inequality. If Canadian media owners decide a topic should not reach the public, you will never see it discussed, regardless of what any journalist or citizen submits.
Other respected journalists like John Miller and Marc Edge are starting to come forward, complaining about a biased industry that strategically sacrifices true, ethical journalism for profit.
Our tentacles are powerful enough to even keep the CBC from publishing anything about the CPP’s surplus and potential. That is why you will never find anything on the CPP’s irrefutable “gigantic” surplus, ever, in the Canadian media. Macnaughton has submitted several comprehensive op-eds, but any stories on the CPP’s surplus will not be published, even though the CPP holds 10% of the lifetime earnings of most Canadians.
Unfortunately, while we have complete control of the Canadian media, we can’t control international publications. The Economist is a respected, credible international publication. Unlike us, they are dedicated to publishing any story that is newsworthy. In a January 2019 story entitled Canada’s vast pension fund is gaining even more financial clout, they wrote
“The fund’s portfolio size has more than tripled over the past decade and is going to become only more gigantic.”
And since those words were published, the fund has increased by another $192 billion and the surplus has increased by another $142 billion.
We see why the impact of the news of the CPP’s surplus would be detrimental to all three of our industries. And we don’t want to lose 20% of our advertising revenue. We are not profitable and that makes us desperate. For example, The Star lost $23.5 million in the first quarter or 2021. The Star has been forced to abandon their “help the little guy” Atkinson principles likely because the new selfish, entrepreneurial owners are much more interested in profits than principles.
What about the seniors’ advocacy groups? Can we silence them? Recall that Macnaughton and CARP convinced the finance minister to change his 2019 budget to give low-income seniors $440 million more per year in GIS payments. The Liberals could not have the news of a vicious 76% clawback (aka tax) rate reach the public, even though we refused to publish Macnaughton’s newsworthy submissions for publication.
Can we keep CARP and CANAGE complicit when their declared mandate is to advocate for the financial security of seniors?
Financial Industry representative:
CARP is the biggest senior’s advocacy group. It is disconcerting. Macnaughton has emailed all 27 CARP chapters saying CARP’s mandate of advocating for financial security is not being met. He has even offered to debate with any actuary online to CARP members about the CPP’s $257 billion surplus.
Of course, no actuary wants any part of arguing to deprive 17 million Canadians of a deserved $10,000 each and depriving our sputtering economy of a huge stimulus. And they all know a $170 billion surplus distribution now would bring no risk to future CPP pensions.
We have convinced CARP to sacrifice their alleged dedication to achieving pension justice for seniors. You don’t want to know details about what we did, but rest assured CARP is on board. Even though they joined forces with Macnaughton to bring $440 million more to low-income seniors per year, they now won’t even respond to his emails.
It looks bad. Their website has 100 pages that relate to their advocacy efforts regarding the CPP. However, all 100 pages are dated between 2010 and 2016.
There is no sign of any CARP advocacy regarding the CPP since 2016, even though the CPP owes CARP’s members $2.4 billion .
Unfortunately, Macnaughton’s website points this out.
CARP has further abused their members. They have lucratively endorsed an inferior investment fund called Longevity. Trusting CARP members and thousands of other trusting investors are encouraged to invest in an inferior investment vehicle with likely high overheads and low profits. By endorsing the fund, CARP is likely gaining substantial fees. Instead, they could be using their powerful advocacy voice to advocate for voluntary contributions to CPP Investments. We may be giving CARP’s executives secret donations to keep them on board. You don’t want to know the details.
It is amazing. For an estimated $1 million cost to us, we got CARP to abandon advocating for a deserved $44 billion for three million seniors. Just CARP’s 330,000 members alone deserve over $2.4 billion of the CPP’s “gigantic” surplus. CARP’s hypocrisy is unbelievable but, as we know, “money is the root of all evil”. CARP needs to be careful. It is illegal for a nonprofit organization to promise one thing on its website and not fulfill that promise. Macnaughton may be notifying the CRA, responsible for policing nonprofit organizations.
CANAGE is another seniors’ advocacy group. Their leader worked with Macnaughton to achieve the $440 million increase in GIS payments to low-income seniors. But she now has no conscience. We funded CANAGE with what is chump change to us but huge for them. In return, they have agreed to remain silent on the CPP’s surplus.
Media Industry executive:
What about politicians? Can we convince them to remain silent on the CPP’s surplus? Justifiably giving out $170 billion to 17 million deserving Canadians could gain any political party possibly one million more votes and change an election result.
Financial Industry representative:
Don’t worry. It costs us millions of dollars in secret campaign contributions, but we have every party on board. Even the left wing NDP, the self-proclaimed friend of the little guy, has chosen secret donations over, likely, a million more votes. That damn website democracywatch.ca alludes to “secret” donations but we know how to expertly cover our tracks. No one will know.
Recall that the pay-per-vote subsidy was eliminated in 2015. For ten years, the Conservative Party, Liberal Party and NDP Party respectively received $98 million, $75 million, and $55 million. That subsidy is gone. However, with inflation and frequent elections, the cost of running a political party have skyrocketed. There are 330 ridings to fund, hundreds of TV ads to pay for, travel expenses for many to travel across the country, political consultants to pay, polling companies to pay, nomination programs for many ridings to fund, etc.
Each party only gets about $12 million per year in formal, documented legal donations. That is not enough. That is where we enter the picture.
You don’t want to know how we accomplish this. Our methods are effective, expensive, morally vacant, and justifiable if we want to keep our own considerable profit flow. We might, as democracywatch.ca states, “secretly” donate, for example, $50 million per year to each of the three mainstream political parties so that our lucrative $100 billion industry remains intact. This is just 0.15% of our revenue, peanuts to us. Even though we don’t explain to our members how we do it, they don’t complain about their large dues paid to our association. The dues are prorated to revenue, meaning banks contribute the most. They know they should never ask any questions about our methods. Banks want no part of future bad publicity.
This secret donation is many times a party’s legal documented donations, which is roughly $12 million per year per party. For that reason, when Macnaughton or any other Canadian asks MPs about the CPP’s “gigantic” surplus and potential, the finance minister, and her counterparts in other parties, are trained to ignore the surplus.
This makes Chrystia Freeland, who wrote a book on how plutocrats are rigging the system, a hypocrite. She had to make choices. She knows politics is a dirty business that requires substantial funding to win an election.
In the meantime, to keep lower-level politicians mute on the CPP, we have our think tanks, including our host today, and lobbying groups. They are completely biased but enjoy incredible respect from politicians. Transparify gave the top ten think tanks in Canada an average rating of 1.5 out of 5 for transparency on revealing who funds them. But politicians likely don’t know this. After reading Transparify’s report, THINK TANK TRANSPARENCY IN CANADA: LAGGING BEHIND THE US AND UK, a Globe and Mail reporter wrote,
“Between 2000 and 2015, representatives from Canada's 10 leading think tanks appeared at least 216 times before parliamentary committees and were cited in the Canadian media almost 60,000 times. It gave them and their research priceless exposure and influence in shaping government policy. But at what price to Canadian democracy?”
And then there are our lobbying efforts. We have lobbyists visiting politicians constantly, fabricating reasons why there is no CPP surplus. Most politicians have no idea about how pension funds work. With the Chief Actuary and all other actuaries complicit, we convince lower-level politicians that the CPP is fine just the way it is. It helps that people like Macnaughton have almost no access to politicians. All he can do is talk to his MP who just sends his findings to the finance minister. Then she, thanks to our large secret donations, dismisses them.
Most poverty activists in Canada have an Arts background. The complexity of pension funds is beyond their scope. Moreover, they need to put food on the table and, while the financial industry spends many millions of dollars to further their interests, almost no one funds poverty activists. This means their lobbying efforts are impotent and infrequent.
What about our Chief Actuary? Will he continue to claim there is no CPP surplus? In 2010, when the fund was in perfect balance, he specified he needed a $293 billion fund value on Dec. 31, 2021, to fund all pensions for 100 years. The fund will likely be valued at $550 billion on Dec. 31, representing an irrefutable $257 billion, 92%, surplus.
Actuarial Industry representative:
Our Chief Actuary is a master at utilizing the complexity of actuarial science to muddy the waters and hide the surplus. For example, CPP investments has averaged an 11% return for 11 years and experts predict that will continue. Nevertheless, in 2019, he lowered his forecast of investment return for the next 75 years from 6.3% to 6.0%. This helped him bury today’s surplus.
We must strive to keep this news suppressed, even though thousands of low-income seniors are dying every year, never seeing their deserved $10,000 each, on average. And $10,000 to many of them, as they try to exist on $21,000 per year, could do a huge amount to improving their lifestyle and longevity. Conversely, when we wealthy guys reach retirement, $10,000 more will not impact us in the slightest, as we live off our multimillion-dollar portfolios and watch our houses periodically double in value to many millions of dollars. For example, if I receive $10,000 more thanks to this cover-up, my children will receive an inheritance of $4,010,000 instead of $4,000,000.
And luckily, CPP Investments is on board in the cover-up. It helps that most of their executives come from the financial industry, where their colleagues are still working. In their reporting, they have skillfully presented the data so that most Canadians conclude CPP Investments can give them their promised pension but nothing more. They are highly creative at hiding the CPP’s $257 billion surplus. Check out their website if you want to see a snow job – no lies but rampant deception. And Canadians don’t realize that CPP Investments’ executives are paid roughly ten times more than any other public servant. In 2020, their top five executives averaged $4.5 million in compensation each. For comparison, Mr. Trudeau will earn $347,000 in 2021.
I know we are off-the-record, but I need to emphasize this. You never heard it from me. A deserved $170 billion surplus of the distribution would likely decrease the deficit by $50 billion, create 200,000 jobs, double the GDP increase, and bring a needed boost to our COVID-ravaged country. And CPP Investments could help solve income inequality and reduce poverty. Are you guys feeling any guilt as we selfishly deprive millions of deserving Canadians of $170 billion and a solution to mounting income inequality?
Media industry representative:
Yes, personally I feel guilt. But I need to put food on my family’s table. My association pays me handsomely to get results. And if we can legally get away with this cover-up, with no fear of recrimination because we are “off-the-record”, I must try to not look in the mirror and forge on with our devious cover-up.