Fraser Institute Says CPP Expenses Higher Than They Appear

By Andrew Rickard | September 05 2014 01:05PM

The Fraser Institute claims that transaction fees and external management fees have more than tripled the cost of running the Canada Pension Plan (CPP).

In a study published on September 3, Accounting for the True Cost of the Canada Pension Plan, the Fraser Institute says that between the fiscal years 2006 to 2007 and 2012 to 2013, the total cost of running the CPP increased from $600 million to $2 billion.

The CPP Investment Board (CPPIB), however, says its operating expenses in 2012-13 were $490 million. The Fraser Institute attributes this discrepancy to the fact that the CPPIB excludes several important items from its operating budget: expenses such as the management fees it pays to external consultants, the transaction fees paid when assets are acquired, as well as the costs incurred by four federal government departments.

According to the Fraser Institute, in 2012 to 2013 the CPPIB spent $490 million on operations, $782 million on external management fees, and $177 million on transaction fees for a total of $1.4 billion. If the $586 million the government spends for the collection of contributions and the payment of benefits is included, the total cost of administering the CPP comes to more than $2 billion.

“Contrary to claims of proponents of an expanded CPP, or a provincial pension plan in Ontario, many of the costs of large, government-managed pension plans like CPP are hidden,” comments Philip Cross, a co-author of the study and former chief economic analyst at Statistics Canada. “A full examination of all costs shows that CPP is not as low-cost as they want you to believe.”