Think tank says CPP costs have tripled since 2006

TORONTO – A new report says administrators are hiding the fact that the cost of running the Canada Pension Plan has more than tripled since 2006 because of transaction and external management fees.

The Fraser Institute report says proponents of an expanded CPP or a provincial pension plan in Ontario don’t talk about the hidden costs of large, government-managed plans.

Philip Cross, co-author of the study and a former chief economic analyst for Statistics Canada, says the total cost of running the CPP jumped to $2 billion in 2012-13, from $600 million in 2006-07.

The CPP Investment Board put the 2012 costs at $490 million, but Cross says that doesn’t include $1.4 billion in consultant and transaction fees and $586 million in government expenses to collect contributions and pay benefits.

He says the CPP board spends almost twice as much on management fees and transaction costs as it does on actual operations, and should not exclude those items from reported expenses.

Cross says the board does that to portray itself as low-cost and efficient, but the reality shows costs are four times more than its official operating budget.

A statement from Ontario Finance Minister Charles Sousa’s office ignores the cost concerns raised in the Fraser Institute report and says voters endorsed the idea of a provincial pension plan in the June election.

“We’ll continue to work with Ontario’s large and highly regarded pension funds,” said Sousa’s spokeswoman, Suzie Heath.

“It’s vital that we leverage the expertise of Ontario’s public sector pension plans with respect to their strong governance and proven investment track record.”

The Fraser Institute is an independent Canadian research organization that studies issues of economics and public policy from a fiscally conservative, libertarian perspective.