When a pension fund has a mere 25% surplus, standard pension protocol demands a surplus distribution. In 2000, my colleagues and I received as much as $20,000 each when the CRA forced the Ryerson University Pension Fund, with a mere 18% surplus, to declare a surplus distribution. Please compare Ryerson’s 18% surplus to the CPP’s 450% surplus.  

If we reasonably distributed $170 billion of the CPP's $257 billion surplus, 17 million Canadians would receive $10,000 each, on average, our GDP would increase by 5%, 200,000 jobs would be created, our deficit would decrease by $50 billion and almost all businesses would increase their profits by roughly 20%.

If the CPP invested every Canadian’s first $2,000 in CPP contributions directly with CPP Investments, almost all 25-year-olds would be $1.2 million wealthier by age 65. The number of seniors now living near the poverty line would eventually plummet from a distressing 33% now to a more reasonable 10%. And the anxiety that Canada’s young are experiencing because they cannot afford a home could be substantially erased.

No journalist, actuary, politician, or economist has provided any reason to NOT distribute the CPP’s surplus. Many have been consulted.

Three powerful, selfish industries are, under-the-radar, preventing these wonderful benefits from reaching Canadians and Canada.

1. The financial industry, which greedily corners 47.3% of all Canadian corporate business profits, has worked hard to suppress the news of the CPP’s surplus. They fear legislation allowing voluntary contributions to CPP Investments. If allowed, many thousands of investors and billions of investment dollars would flee Bay Street, seeking the high returns, low risk and low fees of CPP Investments. The financial industry would then lose billions of dollars in fees for investment advice.

2.  Actuaries know that, with a likely ongoing 11% return, the CPP could give a 25-year-old a $100,000 CPP pension, in 2022 dollars. The current maximum CPP pension is $15,000. That explains why ten top actuaries have denied this irrefutable surplus. Actuaries know that the news of the CPP’s huge surplus would make the demand for other pension funds, and hence actuaries, nosedive.

3. Mainstream media articles containing the above information would be read voraciously by most Canadians. However, the entire Canadian media has never published one word regarding the CPP's surplus. Canadian media experts agree that our media owners have abandoned truth in journalism to increase profit.

For example, a $100 million “donation” from the financial industry to the unprofitable media industry would only cost the financial industry 0.08% of their annual profits. Yet it might double the media industry’s profits.

Experts on Canadian democracy claim bribery is rampant in Canadian politics. For example, an illegal “donation” of $100 million by the financial industry to all three mainstream federal parties would be very persuasive at vetoing any discussion by politicians on the CPP’s surplus. Each party now only receives roughly $12 million per year in legal donations.

Any political party could have probably won the recent election by promising a $10,000 surplus payment to each of 17 million Canadians. None did, even though likely 99% of Canadians would vote to bring the above benefits to millions of Canadians and our sputtering Canadian economy.   

My website, www.fixthecpp.ca provides convincing evidence that confirms these disturbing claims.

Why each industry may want to reconsider their stance

The Financial Industry

Currently the financial industry enjoys a high degree of respect from Canadians. The industry is led by the big banks who oversee 70% of the $10 trillion (aka $10,000,000 million) in assets of the industry. This means that the big banks “drive the bus”. They are the “head of the snake”.

Even though it may not be true, because six big banks oversee more than two thirds of the assets of the financial industry, Canadians will logically conclude the following. If this cover-up continues, the big banks have decided to let it continue. If the cover-up ends, it is because the big banks decided to end it.

The financial industry has both the motivation and the resources to engineer this cover-up.

The Motivation

If politicians let Canadians voluntarily invest directly with CPP Investments, the average investor could likely earn 2 ½ times the profit over ten years by investing with CPP Investments. Billions of investment dollars would stampede from Bay Street to CPP Investments.

CPP Investments will likely continue to excel at investing because they have many advantages over the average investor. Recently one third of CPP Investments’ portfolio, private equity, achieved an unheard of 37.3% over one year. The fund owns, for example, half of 407-ETR, an Ontario toll road that is 2 ½ times as expensive as what Google identifies as the most expensive toll road in the world.

The financial industry’s concern is on record. The industry’s representative, Janet Ecker, stated that her industry is worried that the CPP could

“undermine a lot of successful, legitimate (retirement savings) products in the investment industry”.

Who should be undermined?

Should it be one million struggling businesses and millions of 17 million Canadians or the lucrative financial industry?
The Resources

With 47% of all corporate profits in Canada, the financial industry earned $125 billion in profit in 2020. For example, a mere 0.08% of their profits is $100 million, an amount that can be very persuasive, as will be shown below, in influencing any other industry or political party in Canada.  

Is Canada’s financial industry “rigged”?

What are Ms. Freeland, Mr. Carney, and Mr. Poilievre alluding to when they claim our capitalist system is rigged to favour the rich? No “rigging” seems to exist with the products and services Canadians purchase. When they shop at Walmart or Costco, for example, they appreciate capitalism. They can buy good products at a reasonable price. They sense that most retailers have taken a markup to cover expenses and then a reasonable, extra markup for profit. Most of us are satisfied that, in the non-financial industry, the prices we pay are reasonably monitored by the law of supply and demand.

However, the financial industry is suspicious. It earns 47% of all corporate profits in Canada but only contributes 7% to our GDP. For a level playing field, one would expect an industry that earns X% of the profit should contribute X% to our GDP. Why is there such a discrepancy in the financial industry?

Firstly, big banks oversee 70% of the assets of the financial industry. Many of their sources of profit are mysterious. Perhaps Canadians and the government need to scrutinize this giant profit stream with much more intensity, especially if the evidence is strong that big banks are the authors of a $170 billion CPP cover-up.

The banks’ massive profit arrives after colossal, mushrooming bonuses have been give to bank executives. The Globe and Mail wrote on November 24, 2022

“In total, Canada’s Big Six paid out more than $19-billion in variable compensation in 2021, representing growth of more than 22 per cent from the $15.6-billion they paid collectively in 2019.”

If, for example, 10,000 executives, 1700 per bank, were eligible for a bonus, each would receive $1.9 million. Thousands of wealthy bankers have a big incentive to maintain such high bank profits. Ethics can be more easily overlooked when cash is flowing freely and detection is unlikely.

Unlike non-financial industries, banks have a built-in profit stabilizer, related to mortgages. They take our money in deposits, bonds and GICs, give us a paltry return and then use that money to grant homebuyers mortgages, which gives them a much higher return. If profits are low, they simply raise the mortgage rate.

With mortgages, there is no risk for the banks. Firstly, a healthy minimum down payment is mandatory. Secondly, if a homeowner cannot meet his mortgage payment, the banks repossess his home. Then they sell it at a big profit, because real estate almost always increases in value.

Those businesses not in the financial industry are different. They have no such built-in profit stabilizer. Many thousands of businesses and their owners go bankrupt every year, after absorbing huge losses. Meanwhile, Canadian big banks have earned billions of dollars in profit every quarter for many years.

Is it time for a full-scale inquiry into how banks earn so much?

Consider the bread price-fixing cover-up in Canada. It is alleged that, over a 15-year period, a Canadian buying one loaf of bread a week paid $400 more for bread because of price-fixing. Wikipedia tells us

“The senior officers of Canada Bread and Weston Foods, colluded to boost bread prices, and later strong-armed retailers to increase their prices in tandem. The two named companies became aware of the investigation on 31 October 2017 and decided to cooperate with investigators in December in exchange for receiving immunity from prosecution…Penalties can range from $25 million to a prison term of 14 years.”

Compare the two cover-ups. The bread cover-up cost an average Canadian family $400. This CPP cover-up is costing an average family roughly $20,000, 50 times as much.

Perpetrators of this CPP cover-up should be concerned. Some desperate participants may see that the jig is up and, like those in the bread price-fixing scandal, “co-operate with investigators in exchange for receiving immunity from prosecution.” Meanwhile, those maintaining innocence to the end regarding the CPP may eventually face serious prosecution as scapegoats.

Detection of this cover-up may be simple. An inquiry could demand witnesses under oath, phone records, texts, and emails. Forensic accountants could uncover illegal cash payments and much more.

Alternatively, an enterprising lawyer may launch a class action lawsuit, on behalf of 20 million members of the CPP. It could help reveal both bribers and “bribees”.

Banks are open to investigation in another area. A perusal of today’s mortgage rates indicates the big banks have very similar, and like the bread industry, very profitable mortgage rates. The bread industry may have made a few million dollars in extra profits from their price-fixing. The big banks are making billions of dollars in profit from issuing mortgages that all have close to the same mortgage rate.

Is it time for Canada’s Competition Bureau to investigate the possibility of price-fixing in determining mortgage rates? Such an inquiry might be very revealing and force a considerable transfer of cash from the multibillion-dollar profits of the banking industry to those millions of Canadians who have purchased a mortgage in the last 25 years. 

Probably even deeper scrutiny will reveal much more complex sources of profit for banks that would make most Canadians appalled, as they struggle to earn a modest living for a great deal of hard work.

Our Canadian banking industry is an oligopoly that makes huge profits. Googling “How many commercial banks are there in the United States?”, shows 4,231 banks with US $22.2 trillion in assets. Canada only has six big banks with $7 trillion in assets, making cooperative, under-the-radar cover-up agreements much simpler.

Toronto Financial International, the financial industry’s voice, boasts of a “partnership” with all levels of government. Based on the above information, it is likely that “partnership” favours the banks’ interests much more than Canadian citizens’ interests.

It is not a level playing field. Individual Canadians have almost zero access to lobby influential politicians. And even if they achieved access, they would not be nearly as convincing as the financial industry, who according to experts on democracy, is likely bribing politicians with millions of dollars.  

Banks want no part of increased scrutiny on how they obtain their colossal profits. Continued existence of a CPP cover-up may soon incense Canadians and trigger a thorough investigation of all banking behaviour.

How bank presidents can avoid Canadians’ conclusion that they are guilty

Bank presidents may be innocent. However, only bank presidents have the power to eliminate this insidious cover-up. As leaders of the financial industry, they could tell the media that there will be no financial penalty if they write the truth about the CPP’s surplus. They could tell actuaries that the cover-up has become too unmanageable and dangerous. They could tell politicians to jointly agree to legislate appropriate CPP reform. They could tell their colleagues in the financial industry that CPP reform may not be as damaging as they once thought, as shown below.

Without such actions, Canadians may conclude bank presidents are extremely selfish as they lead a cover-up that is depriving 17 million Canadians of a deserved $10,000 each, as they each collect their roughly $15 million in annual income.

Will voluntary contributions be so devastating?

The big banks may be chumps. It appears they are trying to prevent billions of investment dollars from being transferred to CPP Investments. However, because there are many large investment firms on Bay Street, the banks likely only invest a small portion of Canadians’ money.

Moreover, profits from client fees in the investment industry have shrunk considerably. ETFs probably provide just enough commission to pay for overheads. Questrade, with a maximum fee of $10 per trade, is gaining huge ground with DIY investors. Banks have been forced to match these low fees. The huge profits available from mutual funds with, for example, a 2% MER are becoming extinct. Front load fees, trailer fees and huge commissions are now virtually non-existent.

Finally, if CPP Investments did allow voluntary contributions, there would probably be some maximum investment permitted, like $10,000 per year per Canadian. Those thousands of millionaires now investing on Bay Street would be forced to keep most of their investment dollars on Bay Street.   

Declaring a $170 billion CPP surplus distribution could bring banks a big profit

A $170 billion surplus distribution would yield huge profits for the big banks. Some of the $170 billion would be:

• invested, requiring investment advice,

• deposited in bank accounts, available for lucrative loans and mortgages,

• used to purchase a home, thereby increasing mortgage revenue,

• spent, thereby expanding our GDP by 5%, and increasing the need for many miscellaneous banking services.

Will banks’ share prices decline?

Consider ESG. Banks can have little impact on the Environment because they have no manufacturing or outdoor activities. And their Governance is probably excellent because they have thousands of active shareholders. However, with Social responsibility, the banks are failing miserably. Depriving 17 million Canadians of a deserved $10,000 each might be the biggest failure in Canadian Social responsibility, ever.

On social media, this message could soon be going to would-be investors in banks:

“If you are a Socially responsible investor, don’t invest in Canadian banks. The evidence is strong that they have engineered a cover-up that is depriving millions of Canadians, one million businesses and our Canadian economy of hundreds of billions of deserved dollars. And they hypocritically refuse to rectify it. Convincing evidence is at www.fixthecpp.ca.”

To further incense Canadians, bank presidents earn roughly $15 million per year. This is 300 times the earnings of a typical Canadian with a $50,000 income.

To summarize, it appears that six bank presidents earning $15 million each are jointly responsible for sneakily depriving 17 million Canadians, who earn 1/300th of their income, of $10,000 each.

This CPP cover-up could lead to serious damage to the banks’ unblemished image. Banks might net the same profit with no loss of image if they simply lobbied convincingly for a corporate tax rate reduction of, for example, 1%. If this tax rate reduction was somewhat hidden, thanks to a cooperative media, it would have little impact on individual Canadians and the economy.

Meanwhile, depriving 17 million Canadians of $10,000 and almost all businesses of a 20% profit increase could incense millions of Canadians and may result in a serious loss of a massive profit stream. Shareholders would likely agree, motivated by both selfishly seeking a share price increase and ethically investing in a Socially responsible company.

Optics are more important than truth

The optics do not look good for the big banks. They now give Canadians a convincing picture of a benevolent, compassionate, charitable, corporate citizen. We see ads that ooze respectability, evidence of considerable charitable efforts and the overall image of a caring big brother. A visitor to any bank is treated with professionalism and respect.

When Canadians demand answers on why the big banks are not endorsing CPP reform, and receive none, the banks’ image may plummet to a sleazy, bribing, self-interested bully that has probably, behind-the-scenes, deprived individual Canadians and Canada of huge, deserved benefits. When more and more Canadians find the evidence is overwhelming that the deep pockets of the financial industry, predominantly the big banks, are responsible for their $10,000 loss, they may soon be saying

“I want nothing to do with any organization that could engineer such a sneaky cover-up so that they could earn more money at the expense of millions of struggling Canadians, our sputtering Canadian economy and one million businesses. Those slimy swindlers in the financial industry already earn 47% of the corporate profits in Canada yet only contribute 7% to our GDP. I am switching to a credit union as soon as possible.”

Charity is losing many times what the banks are now so proudly contributing

To further witness the financial industry’s failure at “Social Responsibility”, consider the loss to charity. Because CPP payments are taxable, many wealthier Canadians may want to receive a tax credit and give their unexpected windfall gain of roughly $15,000 to charity. If just 1% of the $170 billion now owed to Canadians went to charity, charities would receive $1.7 billion, or approximately 17% more than received in a typical year. This means the big banks are likely responsible for depriving thousands of very needy, struggling Canadians of substantial help.

The hypocritical banks now trumpet their work for charity. The CIBC website, for example, under Corporate Responsibility boasts,

“$133 million in corporate and employee giving contributions to 4,000 community organizations.”

Meanwhile, because of this cover-up, it is likely that CIBC policy is helping deprive charities of many times that much. Their thousands of hard-working employees who helped raise the $133 million will not be amused when they learn their charitable efforts are being overshadowed by selfish bank head office policy that is also depriving them, personally, of a deserved $10,000 in CPP surplus payments.

How to both solve income inequality and appease the financial industry

There is a reasonable compromise solution that should interest the financial industry. The CPP could invest every Canadian’s first $2,000 in CPP contributions per year directly with CPP Investments. The contributions would enjoy a likely 11% return, not the 4.3% return that the CPP currently gives us. The graph below illustrates the result for every 25-year-old who earns $20,000 or more per year.

This strategy has many benefits for all parties involved:

• Not one investment dollar would be transferred from the financial industry to CPP Investments.

•  CPP Investments would not be burdened with finding profitable investments for billions of additional dollars in voluntary contributions, all expecting an 11% return.

•  Every 25-year-old Canadian earning $20,000 or more, for example, would be $1.2 million wealthier by age 65, without contributing a nickel more. He could likely enjoy a $75,000 CPP pension in 2022 dollars, instead of the current $5,000 pension that his first $2,000 in contributions now promise him. Also, almost every 45-year-old would be roughly $100,000 wealthier by age 65 with this policy.

•  Two million of six million seniors now live near the poverty line of roughly $21,000 per year. The above policy would probably eventually shrink that proportion from 33% to 10%. Millions more Canadians could retire with increased longevity, dignity, and joy, instead of barely existing. Income inequality could be markedly reduced. Finally, our skyrocketing GIS and OAS social assistance costs for seniors would plummet.

•  The tremendous anxiety that middle-aged Canadians are now experiencing because they cannot afford to buy a home, would be somewhat eliminated with the likelihood of a $75,000 CPP pension in today’s dollars, or a cash payment of $1.2 million at age 65.

• The big banks and the financial industry would not see their currently high image plummet to a bully because of this cover-up. Strategically, banks could act now and be perceived as heroes, making millions of young Canadians millionaires by age 65.

•  In 2016, the spokesperson for the financial industry, Janet Ecker, stated that the financial industry wanted a

‘“more targeted approach” to an expanded CPP, aimed at groups living below the poverty level, modest-income Canadians, and encouraging workplace retirement savings.’

The policy described above would give the financial industry a “more targeted approach”. Canadians will logically conclude that any attempt by the banks to discourage such a policy is hypocritical, self-serving, and disgusting.

The tentacles of the financial industry must be enormous. They have likely influenced with cash the actuarial industry, mainstream media, the CBC, CARP, CANAGE, CPP Investments, think tanks, and others to remain silent on the CPP’s surplus. All these organizations have been contacted and all have acted as if they have been paid to not discuss the CPP’s surplus. This risky, pervasive chain of denial is only as strong as its weakest link. Will someone ethical come forward and implicate the perpetrators. Bribing a politician probably involves jail time.

In conclusion, the financial industry can avoid a probable large decline in their massive profits and pristine image by sanctioning CPP reform now.

The actuarial industry

The letter to the banks next covered what is shown here.

The media industry

The letter to the banks next covered what is shown here.

Summary

The longer this cover-up continues, the more the colluding industries will be implicated and possibly suffer irreversible consequences.

Harry Markopolos is the whistleblower who warned the public of Bernie Madoff’s Ponzi scheme for almost ten years. The SEC suspiciously ignored his convincing evidence. Mr. Madoff was eventually sentenced to 150 years in jail. He and his two sons are tragically deceased. He predominantly defrauded millionaire investors who all probably still maintained a reasonable lifestyle following the fraud. And they were somewhat reimbursed for their losses.

This CPP fraud is worse. It is depriving 17 million “investors”, most of them needy, of a deserved $10,000 each, and much more. Like Mr. Markopolos, I will continue to expose this cover-up until changes occur. As a Canadian citizen who enjoys a substantial professor’s pension, half paid for by taxpayers, I feel an obligation to share this evidence with my fellow citizens and help bring CPP justice to the 99%, instead of the 1%.

Because of Covid, donations to charities fell 43% just when struggling Canadians needed the most help. A $170 billion surplus distribution might result in billions more dollars going to charities across Canada. An email explaining the above details to all prominent Canadian charities is next.

Many influential, caring, prominent Canadians who give substantially to charity may be disgusted and act punitively when they discover selfish bank policy has probably deprived deserving charities of a large increase in donations.

The response from 200 Chamber of Commerce chapters has been encouraging and web traffic at www.fixthecpp.ca has increased. In any David/Goliath conflict, David is given the benefit of the doubt and this David has overwhelming evidence to back up his claims. Exercising my right to freedom of speech (which our Canadian journalism industry obviously does not enjoy), I will be strategically initiating several more email campaigns to miscellaneous organizations that will soon be appalled.

It took three emails to the VPs of Advocacy at CARP before they took note and successfully lobbied for a reduction of the GIS clawback from 76%. Emailing the same people or organizations a second or third time will be fast because the email addresses are already collected.

My associates and I will not rest until CPP justice reaches all members of the CPP and the needy Canadian economy. Across Canada, all religions, Probus, The Rotary Club, the Lions Club, Seniors’ clubs, unions, local governments, charities, and more will soon be receiving these details, many times each.

Finally, the contents of this email will be at www.fixthecpp.ca with the menu title

“Why big banks are probably the head of the snake”

If you would like to defend yourselves, this is your opportunity.

Sincerely,

Ross Macnaughton

Professor emeritus

Ryerson University (aka TMU)