The Status of the CPP

The CPP is not trivial. You are likely being forced to contribute 5.70% of your income to the CPP. And your employer will be forced to match your contribution on your behalf. This will add as much as $7,000 to your personal CPP account in 2022 alone.

The maximum CPP pension in 2021 is $14,445 if you start receiving it age 65. The average is $7,371.

The CPP survived the subprime recession in 2009 admirably. Actuarial Study Number 10 states

“As at 31 December 2009, there is a slight asset shortfall of $7 billion.”

In 2010, our Chief Actuary stated

“If CPP Investments achieves a 6.0% return (where $100 becomes $106 after one year), todays’ pensioners, our children, and our grandchildren will all receive their promised CPP pension.”

The page below, from the 25th Actuarial Report as at December 31, 2009, shows how the fund should have progressed in order to fund all pensions for the next 75 years.

The red box shows how the fund value should have increased every year to a $293 billion value on December 31, 2021. The blue box shows an expected return on investment of 6%, on average. The green box shows the expected investment income in 2021 - $18 billion.

Using your money, CPP Investments, possibly the best pension fund investor in the world, did much better than required. The graph below shows how.

In his recent letter to Canadians, CPP Investments President John Graham stated the return for the ten years ending September 30, 2021 was 11.6%.

COVID-19 did not hamper reduce CPP Investments’ success. The opposite is true. For the 12 months from the start of COVID to March 31, 2021, CPP Investments achieved a whopping $84 billion, 20.4% return, $63 billion more than required. For perspective, economists have shown extreme alarm when our government’s annual deficit is more than $20 billion.

To summarize, on December 31, 2021, the fund had an irrefutable $257 billion surplus, 88% more than needed to fund all pensions for 75 years.

The surplus will continue to mushroom. “Our” Chief Actuary, presuming a fund value of $293 billion on Jan. 1, 2022, specified he needed an investment return of roughly $22 billion in 2022. Using the average return of the last 12 years, 11%, the graph below shows 2022 investments will likely produce a $61 billion return, resulting in a $39 billion surplus in 2022 alone.

We all have a personal CPP account. It is based on how much we contributed, with our employer matching on our behalf, to the CPP each year since our first job. Consider those one million older Canadians who had contributed roughly $100,000 into their personal CPP account ten years ago.

At the Chief Actuary’s specified 6% return, their $100,000 in their personal fund would have grown to $180,000 today. At CPP Investments’ outstanding 11.6% return, their $100,000 actually grew to $300,000 today, constituting a $120,000 surplus in their personal account alone.

Imagine the parallel situation in the private sector. Imagine you invested $100,000 with the investment industry ten years ago. Then it became $300,000 today, thanks to an 11.6% return. However, the investment industry told you

“We will only give you back $180,000, not $300,000, because we stated ten years ago that we are hoping for a 6% return.”

That would be an outright $120,000 robbery. Members of the investment firm would go to jail for theft. How is this CPP situation any different, except that 17 million Canadians are being robbed, not one? And we were all forced to contribute, by law.

(The CPP is a pay-as-you-go pension fund. That means some of your contributions were used to pay pensioners and the remainder was invested. This means the appropriate surplus distribution for these seniors is closer to $25,000, not $120,000.)

As you read further throughout this website, you will find strong evidence that the greedy investment industry is likely responsible for keeping your deserved surplus payment of many thousands of dollars from you.

While the fund today is 88% greater than our Chief Actuary specified for fund stability, the actual surplus percentage is likely much higher. Respected pension expert, Jim Keohane, has stated

“If you use any discount rate other than the best estimate of future returns on the portfolio you are going to overfund or underfund the obligation which brings up a whole series of intergenerational fairness issues”.

Because CPP Investments has averaged an 11.6% return for the ten years ending September 30, 2021, using a forecasted return (aka discount rate) of 11.6%, it can be determined that the fund only needs a value of $100 billion today to fund all pensions for the next 75 years.

This means the CPP now has a $464 billion, 464%, surplus.

You may suspect the CPP needs this surplus to fund our increased longevity and the high number of baby boomers now retiring. This is not the case. The Chief Actuary has known about these factors for years and has accurately accounted for them and all other fund stability factors in his last four forecasts, as shown below.

This graph takes into account every factor related to pension fund stability except return on investment. Our Chief Actuary has combined 75-year estimates for unemployment, immigration, fertility, mortality, inflation, and more to determine the net cash flow forecast shown. The graph shows the Chief Actuary has made four virtually identical forecasts since 2010. This makes the argument that we need the surplus for new costs illegitimate. It also makes the claim of a $257 billion surplus irrefutable.

The graph shows how trivial net cash flow is. For example, in 2021 it was +$752 million while the investment return was $74 billion, 100 times as much.

Looking ahead, the fund will mushroom for two reasons. Firstly, the amount invested is almost double what is needed. Secondly, the average return will likely be the historical 11.6%, not the required 6%.

To summarize, the surplus is between 88% and 464%. When a pension fund has a mere 25% surplus standard pension protocol demands a surplus distribution. However, such a distribution may help millions of Canadians but hinder the 1%, who greedily want to maintain their profits, even at the expense of 17 million Canadians.

You are being deprived of many thousands of dollars because three powerful industries are likely colluding to keep this wonderful news of the CPP’s gigantic $257 billion surplus suppressed.

If you view other pages on this website, you will find that the evidence is substantial that the wealthy have rigged the system to keep a deserved $170 billion out of Canadians’ pockets so that their personal, immense profit stream can continue to gush.

In 2019, the CPP added an Additional fund to the Base CPP. It only has a $5 billion value in 2021 and is not under scrutiny. Only the $550 billion base CPP fund is under scrutiny.