Another researcher getting into the muck and filth that is the Canadian Government and administration. Here is some of the work unearthed and exposed. Worth a good long read, for anyone who is truly concerned about the future of the nation. Here are just a few of the postings. Go check out more.
In this previous post, CdnSpotlight’s work from Gab is shared on this site. Here is continuation of that fine research.
6. Goldy Hyer
Canada’s Deep State Part 6 – Goldy Hyder
Another one of Dom’s buddies at Century Initiative is Goldy Hyder, currently Pres & CEO of the Business Council of Canada since 2018, previously:
Hill+Knowlton Strategies Canada (Ottawa) 2001-2018, working his way up to Pres & CEO in 2013
Hyder, a native Albertan, was PM Joe Clark’s chief of staff (when?) prior to joining Hill+Knowlton in 2001 but there’s no mention of dates exactly when that took place
Recently named Vice Chair of ABLAC 2020 (Asia Business Leaders Advisory Council), a high-level group of Asian and Canadian business leaders convened annually by the Asia Pacific Foundation of Canada (APFC) to identify and articulate opportunities for improved Canada-Asia business engagement.
And guess who some of the APFC members are from Canada – recognize some names from my previous posts?
Duffy adviser offered to share secrets with Nigel Wright, defence alleges in cross-examination.
Defence lawyer Donald Bayne suggested adviser Goldy Hyder was actually working closer with Wright and the PMO than he was with Duffy
In April 2013, Sen. Mike Duffy engaged longtime Conservative insider and communications expert Goldy Hyder to advise him on how to handle his ongoing discussions with the Prime Minister’s Office over his expense claims.
Hyder, a consultant, then contacted Nigel Wright, at the time the prime minister’s chief of staff, to say he had been engaged as a Duffy adviser. And, according to Duffy’s defence lawyer, Hyder offered to secretly share information with Wright.
“Sen. Duffy thinks that Goldy Hyder is working on his behalf,” defence lawyer Donald Bayne told Wright in court, “but really Mr. Hyder is working for you to get to where you want to go.”
“I never viewed it that way,” replied Wright. “He introduced himself as working for Sen. Duffy.”
Jaspal Atwal, Sikh Extremist Convicted In Assassination Attempt, Invited To Trudeau Receptions In India.
The news comes as Trudeau tries to reassure Indian leaders that his government doesn’t support Sikh extremism.
Goldy Hyder, President of Hill and Knowlton Strategies and a long-time Conservative insider who was in India for part of the Canadian trip, said the Atwal furor is taking away from the positives of the Trudeau tour.
“I do think it’s unfortunate because it’s taking away from some of the things that are happening on this that, as a Canadian of a different (political) stripe, quite frankly, I’m pleased to see.”
Hyder said he didn’t think the episode would harm Trudeau’s efforts to improve trade and cultural relations with India, largely because the mistake was fixed as soon as it was discovered.
7. Jim Leech, ON Teachers’ Pension, CIB
CANADA’S DEEP STATE Part 7 – Jim Leech – Ontario Teachers Pension Plan & Architect of the Canada Infrastructure Bank.
Currently the Chancellor of Queen’s University after retiring in 2014 as Pres/CEO of the Ontario Teachers’ Pension Plan (OTPP) 2001-2014, one of the world’s largest and most innovative pension funds. During his tenure as CEO, Teachers’ eliminated its funding deficit and was RANKED FIRST IN THE WORLD amongst peer plans for absolute returns and value-added returns over 5 & 10 years.
Feb.10, 2017 – he was named Special Advisor “to the Prime Minister of Canada” on the Canada Infrastructure Bank (CIB), working in collaboration with the Privy Council Office, the Minister of Infrastructure and Communities, and the Minister of Finance to expedite the swift and successful creation of the CIB
Mr. Leech is also a SENIOR ADVISOR to MCKINSEY & CO. (location & date unknown) & long-term acquaintance of Dominic Barton & Mark Wiseman.
Prior to his appointment as CEO, Mr. Leech headed Teachers’ Private Capital as Senior VP, the pension plan’s private investing arm where he oversaw the growth in private equity, venture capital, and infrastructure investments from $2B in 2001 to over $20B by 2007
–> This is when he and the fund gained world-wide attention
After retiring from OTPP in 2014, Mr. Leech was also appointed Special Advisor to the Ontario Minister of Finance to review the sustainability of the province’s electricity sector pension. His report was accepted by the government and is currently being implemented.
from a Globe & Mail interview Jan.2015:
Is there a particular metric you lean on?
“It’s funny, the whole time I was at Teachers, if you asked me on any given day what the stock market had done, I wouldn’t have been able to tell you. But in terms of meaty economic analysis, I put some weight in the World Economic Forum in Davos. That’s probably where I got the information.”
Also an Honorary Colonel in the Canadian Armed Forces
CANADA’S DEEP STATE Part 8 – Michael Sabia and the Caisse
While researching everything & everyone in this series, many questions arose while trying to understand how pension fund managers, global “investment/asset managers” and global “management consultants” became the Crime Minister’s gurus with so much power and say in this government – SO MUCH that an infrastructure bank Crown Corporation was created AND FAST.
How did the core mandate of public pensions morph into that?
Why does there seem to be an ulterior motive?
How does this fit in with China, the other key players like Barton & Wiseman, Pension Plans, immigration, the “middle class” & retiring boomers? Future posts to come.
These all came together with the deep digs on Michael Sabia and Quebec’s public pension the Caisse.
Michael Sabia is Pres & CEO of Quebec’s Pension Plan : Caisse de Depot et Placement du Quebec (CDPQ or The Caisse) since 2009. The first anglophone to head the Caisse which ruffled a lot of feathers in Quebec
1976 BA political economy, University of Toronto
– met his wife, Hilary Pearson in 1st year, granddaughter of former PM Lester B.Pearson
1977-83 MA, MPhil, political economy, Yale University
1986-90 Canadian department of finance, tax policy
1990-93 PRIVY COUNCIL OFFICE deputy secretary to the cabinet
—–> Why do I get bad vibes every time with the PCO or Clerk of the Privy Council?
1993-95 Canadian National Railway (CN), VP Corp Development
1995-99 CN CFO
1999-00 Bell Canada International, chief executive
2000-02 Bell Canada Enterprise (BCE), Exec.VP & COO
2002-08 BCE CEO & Pres
2009-present Caisse de Dépôt et Placement du Québec, CEO & Pres
Sabia held a number of senior positions in Canada’s federal public service incl. Deputy Secretary to the Cabinet of the Privy Council Office1986-93. As a federal govt bureaucrat, he worked on the tax overhaul that would lead to the creation of GST.
Sabia’s supervisor, Clerk of the Privy Council Paul Tellier, left the public service in 1992 to become Pres. of CN Rail, a Crown corp., Sabia followed him in 1993 to help in privatizing the company. Sabia held a number of executive positions at Canadian National Railway including the position of chief financial officer.
Tellier remained CEO at CN until Jan.2003 when he left “unexpectedly” to become Bombardier Corp’s CEO.
CANADIAN NATIONAL RAILWAY COMPANY LIMITED
On November 17, 1995, after 78 years as a Crown corporation, CN was part of the largest privatization in Canadian history through an initial public offering (IPO) that raised CAD 2.26 billion for the Canadian government.
This was led by a new management team of ex-federal government bureaucrats, including Paul Tellier and Michael Sabia who began preparing CN for privatization by improving productivity and enhancing profitability.
These objectives were achieved by massive cuts to the company’s management structure, massive layoffs (CN went from 32,000 employees to about 23,000) and the sale of its branch lines. In Tellier’s final year as CEO, the publicly traded company earned $800 million.
9. Quebec’s pension – The Caisse (CPDQ)
CANADA’S DEEP STATE Part 9 – Quebec’s pension – The Caisse (CPDQ)
Quebec has its own public pension plan and they do not contribute to CPP. It is the 2nd largest pension fund in Canada, after the Canada Pension Plan (CPP)
As at December 31, 2018, CDPQ managed assets of $309.5B invested in Canada and internationally
Established in 1965, the Caisse de Dépôt et Placement du Québec (CDPQ) initially focused on bonds before entering the Canadian stock market in 1967. Caisse manages the funds of other public pension and insurance plans, government and public employee pensions, employees of the QUEBEC CONSTRUCTION INDUSTRY and more.
— Remember the Charbonneau Commission?
It created its private equity portfolio investing in Québec companies then adopted new investment guidelines, placing greater emphasis on equity and entering the real estate market in the 80’s. In 1996, the Caisse’s Real Estate group was the leading real estate owner in Québec and the second largest in Canada.
As of 2017, CDPQ has 41 depositors, active on Canadian and international markets, holds a diversified portfolio including fixed-income securities, publicly listed shares, real estate investments, and private equity. A shareholder in more than 4,000 companies in Québec, elsewhere in Canada, and around the world, the Caisse is internationally recognized as a leading institutional investor
Based on Caisse’s success, the Ontario Teachers Pension Plan lobbied the federal gov’t in the 90’s, and won, to allow the same diversification as Caisse.
Caisse has 3 subsidiaries: Ivanhoe Cambridge, Otera Capital, & CDPQ Infra
Ivanhoé Cambridge is the real estate subsidiary of the Caisse investing in real estate assets ranging from office space & shopping centers to multi-residential buildings. In 2011 all of CDPQ’s real estate subsidiaries were merged into Ivanhoe Cambridge.
Otera Capital is a balance sheet lender in commercial real estate debt in Canada. Unknown if acquired or created by CDPQ in the 80’s
CDPQ Infra is the first Infrastructure Bank in Canada created June 2015 for its first & biggest project – the Réseau express métropolitain (REM) in the Montreal area
From 2010, this brilliant analysis foretells Caisse’s infrastructure bank – the MODEL for the new Canada Infrastructure Bank
Why does Quebec claim so many of the nation’s political scandals?
“…the frankly disastrous state of Charest’s government. In the past two years, the government has lurched from one scandal to the next, from political financing to favouritism in the provincial daycare system to the matter of Charest’s own (long undisclosed) $75,000 stipend, paid to him by his own party, to corruption in the construction industry. Charest has stymied repeated opposition calls for an investigation into the latter, prompting many to wonder whether the Liberals, who have long-standing ties to Quebec’s construction companies, have something to hide. (Regardless, this much is true: it costs Quebec taxpayers roughly 30 per cent more to build a stretch of road than anywhere else in the country,
(much more on that topic…..)
10. Rise Of The Pensions
CANADA’S DEEP STATE – The Rise of the Pensions
Canada’s economy is, at best, stagnant
With no economic growth, there’s no new jobs, no additional income or disposable income to spend or INVEST
Canadians have also reached the limits of being taxed – trapping many in the “middle class” as the working poor near the poverty line
But the middle class drives the tax revenues of the entire country as well as the contributions to pension plans (CPP)
So when the middle class declines, when income declines, so do tax revenues, pension plan contributions, disposable income and investment/savings $
That’s why the Crime Minister & Liberals keep referring to the middle class:
Announced in the Fall Economic Statement, the Canada Infrastructure Bank – a key component of the government’s Investing in Canada plan – will provide innovative financing for infrastructure projects, and help more projects get built in Canada. It will lead to better projects that create the GOOD, WELL-PAYING JOBS NEEDED to GROW THE MIDDLE CLASS now, and strengthen Canada’s economy over the long term.
***Source: Prime Minister announces Special Advisor on the Canada Infrastructure Bank Feb.10, 2017
All of this is really about lower incomes = lower income tax revenue
from Jim Leech’s book The Third Rail: Confronting Our Pension Failures:
“Over the next 20 years (as of 2013) more than 7 million Canadian workers will retire. Baby boomers, the 45- to 65-year-olds who account for 42% of the country’s workforce, will join the largest job exodus in Canadian history, moving to the promised land of retirement.”
*** Since millennials now outnumber boomers, the “exodus” can be easily replaced, so what’s the big deal?
“UNLESS OUR CRUMBLING PENSION SYSTEM IS REFORMED, many of these retirees will find this dreamland a bewildering and disappointing mirage.”
*** Reforming the pension “system” is really what’s going on
“In the early 1980s, consumers were setting aside 20% of their DISPLOSABLE incomes to their retirement plans;
TODAY (2013) THE SAVINGS RATE IS A THREADBARE 2.5%
“Retirement savings plans meant to build Canadians’ personal war chests for their final years have failed to live up to their cheery promises of early retirement “freedom” – MARKET RETURNS ARE LOW, and FINANCIAL FEES ARE CLIMBING.
Moreover, retirement plans are now being compromised by high pension obligations and a shrinking workforce.”
*** No shrinking workforce with millennials replacing these workers, but their lower entry-level salaries don’t match the higher boomer salaries because of their decades of work experience
When public pensions got the green light from gov’ts to invest in real estate & riskier investments, those plans exploded in wealth:
CPP from $44.5 B in 2000 to $409.5 B in 2019 – an increase of $365 B in 20 yr
CDPQ from $50 B in 1994 to $325 B in 2019 – staggering – Quebec only!
OTPP from $69 B in 2001 to $191 B in 2018
There’s also OMERS, HOOPP, etc
However, CPP became concerned with decreasing contributions as the workforce declined or retired. CPP had projected a deficiency in contributions vs. pensions being paid in 2021. That means the investment portion of the CPP portfolio has to be used to top up this deficiency.
But isn’t that what it’s for? See this report.
Source: Office of the Superintendent of Financial Institutions Canada
11. Follow The Money….
CANADA’S DEEP STATE Part 11 – Follow the Money
How governments & capitalists are STEALING Public Pension Funds
Previous posts in this series showed that middle class Canadians and all levels of government are broke, with governments heavily in debt with no real means to create additional tax revenues
But there’s TRILLIONS of $ in Canada’s Public Pension Plans
And TRILLIONS of $ of infrastructure needed WORLDWIDE
Since legislation forbids government access to these funds, this Liberal gov’t has changed the GAME by creating the Canada Infrastructure Bank
Now that gov’t has created the CIB, gov’t will now work at arm’s length, meaning no formal direct bidding process with the gov’t
That means SNC-Lavalin gets their “get out of jail free” card – they can bid on anything
And will likely get them all
In Dec.2017, Minister of Infrastructure Amarjeet Sohi (and Morneau) wrote the true mandate of the CIB in their Statement of Priorities and Accountabilities – Canada Infrastructure Bank (CIB)
“The Bank will be an innovative financing tool designed to work collaboratively with public and private sector partners to transform the way infrastructure is planned, funded and delivered in Canada”
Public & private sector partners – otherwise known as PPPs or the 3Ps or P3 – see next post in this thread
Public sector partners include Institutional Investors – otherwise known as pensions, insurance, etc
“As other countries face the same challenges of closing the infrastructure gap with private and INSTITUTIONAL CAPITAL and finding new ways to fund infrastructure, our GLOBAL PARTNERS (WHO THE HELL ARE THEY?!?) WILL BE WATCHING AND LEARNING FROM THE BANK”
Looks like Canada is the guinea pig for the “Global Partners” – see next post in this thread
(This is the Paris Accord, and “Conservative” Garnett Genuis’ dishonest spin in supporting it in Parliament.)
(Shiva Ayyadurai, Republican and former Senate Candidate explains how the Carbon tax really works.)
(UN supports global tax to raise $400B)
(Details of proposed global tax scheme)
(Pensions are also being eyed as a funding source)
(UN Environment Programme)
(Green finance for developing countries)
(International Chamber of Commerce)
(Addis Ababa Action Agenda)
(Global tax avoidance measures)
(Why stop at just billions?)
These are not the only examples, but should serve as an illustration for the “taxation” efforts the UN is undertaking in order to finance its various agendas. Of course its ultimate goal is world domination.
1. Important Links
CLICK HERE, for New Development Financing: Carbon Tax $250B/year CLICK HERE, for UN “Int’l Tax” To Raise $400B. CLICK HERE, for Paris Accord “Financial Flows”. CLICK HERE, for Addis Ababa, Financing Devel’t. CLICK HERE, for Int’l Chamber of Commerce, Tax, SDA Goals. CLICK HERE, for ICC Position on Tax, SDA Goals. CLICK HERE, for Green Financing, Sustainable Development. CLICK HERE, for Development Financing, “Cooperation” To Combat Tax Avoidance. CLICK HERE, for Leveraging African Pension Plans. CLICK HERE, for Finance 2030 SDG, $5-7T Needed. CLICK HERE, for UN Tax Treaties Changes. CLICK HERE, for: From Billions To Trillions CLICK HERE, for Sustainable Financing Report. CLICK HERE, for UN Enviro Program, Finance Initiative. CLICK HERE, for Capital Development Finance. CLICK HERE, for UN Join Staff Pension Fund. CLICK HERE, for the UN Credit Union
CLICK HERE, for earlier review of Paris Accord. CLICK HERE, for previous article debunking Paris Accord CLICK HERE, for review New Development Financing. CLICK HERE, for New Development Financing, the bait-and-switch.
CLICK HERE, for a recent article by Uppity Peasants on the UN Environment Programme. Also, go check out the site. CLICK HERE, for a guest post by: BOLD Like a Leopard. This covered the “Green New Deal”, the US proposal.
2. Paris Accord Is All About Taxation
This is not an exaggeration, or hyperbole. The entire point of the agreement is to generate an enormous slush fund. The UN IPCC and select partners can then put that money into the commodities market and make trillions from it.
If you have any doubts about that, read Article 9 from the Paris Agreement. It spells out the “financial flow” in no uncertain terms.
1. Developed country Parties shall provide financial resources to assist developing country Parties with respect to both mitigation and adaptation in continuation of their existing obligations under the Convention.
2. Other Parties are encouraged to provide or continue to provide such support voluntarily.
3. As part of a global effort, developed country Parties should continue to take the lead in mobilizing climate finance from a wide variety of sources, instruments and channels, noting the significant role of public funds, through a variety of actions, including supporting country-driven strategies, and taking into account the needs and priorities of developing country Parties. Such mobilization of climate finance should represent a progression beyond previous efforts.
4. The provision of scaled-up financial resources should aim to achieve a balance between adaptation and mitigation, taking into account country-driven strategies, and the priorities and needs of developing country Parties, especially those that are particularly vulnerable to the adverse effects of climate change and have significant capacity constraints, such as the least developed countries and small island developing States, considering the need for public and grant-based resources for adaptation.
5. Developed country Parties shall biennially communicate indicative quantitative and qualitative information related to paragraphs 1 and 3 of this Article, as applicable, including, as available, projected levels of public financial resources to be provided to developing country Parties. Other Parties providing resources are encouraged to communicate biennially such information on a voluntary basis.
6. The global stock take referred to in Article 14 shall take into account the relevant information provided by developed country Parties and/or Agreement bodies on efforts related to climate finance.
7. Developed country Parties shall provide transparent and consistent information on support for developing country Parties provided and mobilized through public interventions biennially in accordance with the modalities, procedures and guidelines to be adopted by the Conference of the Parties serving as the meeting of the Parties to this Agreement, at its first session, as stipulated in Article 13, paragraph 13. Other Parties are encouraged to do so.
8. The Financial Mechanism of the Convention, including its operating entities, shall serve as the financial mechanism of this Agreement.
9. The institutions serving this Agreement, including the operating entities of the Financial Mechanism of the Convention, shall aim to ensure efficient access to financial resources through simplified approval procedures and enhanced readiness support for developing country Parties, in particular for the least developed countries and small island developing States, in the context of their national climate strategies and plans.
These are quotes directly from the Paris Accord. In particular, Article 9 makes it abundantly clear that this is all about “financial flow” and a transfer of wealth from the developed world to the developing world.
Actual environmental changes seem almost to be an afterthought. This is a giant wealth transfer scheme.
3. New Development Finance, Bait-and-Switch
Okay, what are these “revenue sources”?
SDR (or special drawing rights), from IMF $150B-$270B
Carbon taxes, $240B
Leveraging SDR, $90B
Financial transaction tax, $10B-70B
Billionaire tax, $90B
Currency trading tax, $30B
EU emissions trading scheme, $5B
Air passenger levy, $10B
Certified emission reduction tax, $2B
Current ODA Flow, $120B
If these numbers are accurate, then the US is viewed as a cash cow somewhere to the tune of $627 billion to $807 billion. Yes, this only refers to revenue potential from the United States. I believe this is annually.
What does the report say about SDAs?
These include taxes on financial and currency transactions and on greenhouse gas emissions, as well as the creation of new international liquidity through issuance of special drawing rights (SDRs) by the International Monetary Fund IMF), to be allocated with a bias favouring developing countries or leveraged as development financing. Though their potential may be high, these proposals are subject to political controversy. For instance, many countries are not willing to support international forms of taxation, as these are said to undermine national sovereignty.
No kidding. There is a lot of political opposition to taxes which are deemed to undermine national sovereignty. Could that be because these taxes AREN’T being used to support the well being of the citizenry? Instead the money is being funnelled out of the country in the name of some global good project.
This is how bait-and-switch works:
(1) Raise money using cause A.
(2) Actually spend the money on cause B.
An array of other options with large fundraising potential have been proposed (see figure O.1 and table O.1), but have not been agreed upon internationally thus far. These include taxes on financial and currency transactions and on greenhouse gas emissions, as well as the creation of new international liquidity through issuance of special drawing rights (SDRs) by the International Monetary Fund IMF), to be allocated with a bias favouring developing countries or leveraged as development financing. Though their potential may be high, these proposals are subject to political controversy. For instance, many countries are not willing to support international forms of taxation, as these are said to undermine national sovereignty.
(Page 86) Debt-conversion mechanisms Debt conversion entails the cancellation by one or more creditors of part of a country’s debt in order to enable the release of funds which would otherwise have been used for debt-servicing, for use instead in social or environmental projects. Where debt is converted at a discount with respect to its face value, only part of the proceeds fund the projects, the remainder reducing the external debt burden, typically as part of a broader debt restructuring.
Debt to developing nations can be “forgiven”, at least partly, if certain conditions are met. However, the obvious question must be asked:
Can nations be loaned money they could never realistically pay back, in order to ensure their compliance in UN or other global agenda, by agreeing to “forgive” part of it?
(Page 86) Debt conversion first emerged, in the guise of debt-for-nature swaps, during the 1980s debt crisis, following an opinion article by Thomas Lovejoy, then Executive Vice-President of the World Wildlife Fund (WWF), in the New York Times in 1984. Lovejoy argued that a developing country’s external debt could be reduced (also providing tax relief to participating creditor banks) in exchange for the country’s taking measures to address environmental challenges. Estimates based on Sheikh (2010) and Buckley, ed. (2011) suggest that between $1.1 billion and $1.5 billion of debt has been exchanged through debt-for-nature swaps since the mid–1980s, although it is not possible to assess how much of this constitutes IDF, for the reasons discussed in box III.1.
If debt can be forgiven in return for environmental measures, then why not simply fund these environmental measures from the beginning? Is it to pressure or coerce otherwise unwilling nations into agreeing with such measures?
There have been two basic forms of debt-for-nature exchanges (Buckley and Freeland, 2011). In the first, part of a country’s external debt is purchased by an environmental non-governmental organization and offered to the debtor for cancellation in exchange for a commitment to protect a particular area of land. Such transactions occurred mainly in the late 1980s and 1990s and were generally relatively small-scale. An early example was a 1987 deal under which Conservation International, a Washington, D.C.-based environmental non-governmental organization, bought $650,000 of the commercial bank debt of Bolivia (now Plurinational State of Bolivia) in the secondary market for $100,000, and exchanged this for shares in a company established to preserve 3.7 million acres of forest and grassland surrounding the Beni Biosphere Reserve in the north-east part of the country. In the second form, debt is exchanged for local currency (often at a discount), which is then used by local conservation groups or government agencies to fund projects in the debtor country. Swaps of this kind are generally much larger, and have predominated since the 1990s. The largest such swap came in 1991, when a group of bilateral creditors agreed to channel principal and interest payments of $473 million (in local currency) into Poland’s Ecofund set up to finance projects designed to counter environmental deterioration. The EcoFund financed 1,500 programmes between 1992 and 2007, providing grants for conservation projects relating to cross-border air pollution, climate change, biological diversity and the clean-up of the Baltic Sea (Buckley and Freeland, 2011).
We will “forgive” your debt if:
(1) A portion of your land is off limits; or
(2) Debt converted to currency to fund “projects”
The entire document is 178 pages. While a tedious read, it’s worthwhile.
4. UN Wants $400B In Global Taxation
New York, 5 July 2012 –The United Nations is proposing an international tax, combined with other innovative financing mechanisms, to raise more than $400 billion annually for development and global challenges such as fighting climate change. In its annual report on global development, World Economic and Social Survey 2012: In Search of New Development Finance, (WESS 2012) launched today, the UN says, in the midst of difficult financial times, many donor countries have cut back on development assistance. In 2011, for the first time in many years, aid flows declined in real terms
The survey finds that the financial needs of developing countries have long outstripped the willingness and ability of donors to provide aid. And finding the necessary resources to achieve the Millennium Development Goals and meet other global challenges, such as addressing climate change, will be tough, especially for least developed countries.
The need for additional and more predictable financing has led to a search for new sources not as a substitute for aid, but as a complement to it. A number of innovative initiatives have been launched during the past decade, mainly to fund global health programmes aimed at providing immunizations, AIDS and tuberculosis treatments to millions of people in the developing world. The UN survey finds that while these initiatives have successfully used new methods to channel development financing to combat diseases, they have hardly yielded any additional funding on top of traditional development assistance.
This source explains it straight from the horse’s mouth. The UN is not taking in enough money for its various schemes. In fact, real contributions are shrinking. Therefore it is necessary to come up with new and innovative ways to tax developed nations.
Of course one of the most common ways is with the “climate change” scam. But it is hardly the only one. The UN views many forms of wealth simply as money to tap into.
5. UN Eyeing Up African Pensions
(Page 10) III. PENSION FUNDS DIRECT INVESTMENT IN INFRASTRUCTURE
International experience At 36.6 percent of GDP, assets of the pension funds in OECD countries are relatively large. As of end-2013, pension-fund assets were even in excess of 100 percent in countries such as the Netherlands, Iceland, Switzerland, Australia, and the United Kingdom (Figure 1). In absolute terms, pension funds in OECD countries held $10.4 trillion of assets. While large pension funds (LPFs) held about $3.9 trillion of assets, assets in public and private sector and public pension reserves (PPRFs) stood at $6.5 trillion.
(Page 30) C. Policy framework for investment in infrastructure Pension funds—just like other investors, domestic and foreign—need a fair, transparent, clear, and predictable policy framework to invest in infrastructure and other assets. This is important as infrastructure assets have a number of characteristics that increase investors’ perception of risk. First, infrastructure projects typically involve economies of scale and often lead to natural monopolies with high social benefits and, at times, lower private returns. As a result, infrastructure projects may require heavy government involvement. Second, infrastructure projects are often large and long-lived with a significant initial investment but with cash flows that accrue over a long horizon.
In this regard, improving the policy framework for investment can be useful to countries seeking to develop the investor base for infrastructure. For instance, the OECD’s Policy Framework for Investment (PFI) uses self-assessments and/or an external assessment by the OECD to help a country elaborate policies for capacity building and private sector development strategies, and inform the regional dialogue (OECD, 2015b). The PFI’s investment policy refers not only to domestic laws, regulations, and policies relating to investment but also goals and expectations concerning the contribution of investment to sustainable development, such as infrastructure
(Page 31) D. Infrastructure financing instruments available to pension funds Even in well-performing pension systems where the governance, regulation, and supervision of pension funds are conducive to investment in infrastructure and there is a sound policy framework for investment, there is still a need for adequate instruments to channel pension fund assets into the infrastructure sector. Pension funds can use a number of channels to invest in infrastructure. Direct exposure is gained mainly through the unlisted equity instruments (direct investment in projects and infrastructure funds) and project bonds, while indirect exposure is normally associated with listed equity and corporate debt. More specifically, pension funds can rely on a number of options such as
The paper itself is quite long, but here is the gist of it. The UN wants to take African pension funds and use them to “invest” it UN type of schemes.
While this seems harmless enough, remember the Paris Accord. The UN thinks nothing of taxing the developed world hundreds of billions of dollars under false pretenses in order to invest in the commodities market. Nor does the UN object to giving “infrastructure loans” to nations that will likely never be able to pay it back.
It should alarm people that an organization with no inherent loyalty to the region would want to use African pension funds to finance its own agenda.
6. UN Environment Programme (UNEP)
United Nations Environment Programme – Finance Initiative (UNEP FI) is a partnership between United Nations Environment and the global financial sector created in the wake of the 1992 Earth Summit with a mission to promote sustainable finance. More than 250 financial institutions, including banks, insurers, and investors, work with UN Environment to understand today’s environmental, social and governance challenges, why they matter to finance, and how to actively participate in addressing them.
UNEP FI’s work also includes a strong focus on policy – by facilitating country-level dialogues between finance practitioners, supervisors, regulators and policy-makers, and, at the international level, by promoting financial sector involvement in processes such as the global climate negotiations.
Keep in mind the “New Development Financing” agenda discussed earlier. Money is taken and used to “invest” in 3rd World Development Programs. Countries that are unable to pay back are forced either to give up sovereignty, or comply with other arrangements.
Banks are in the business of making money. Alternatively, they are in the business of acquiring assets which can be converted into money, or otherwise make them money. What if this banking alliance has no altruistic roots, and is meant to be predatory?
Make no mistake, this is exactly what happens to these people, by the way. One cross-country comparison between microloan recipients in Bangladesh and payday loan recipients in Canada found that both ‘products’ tend to attract the same kinds of people to them from very similar backgrounds, for largely the same reasons — i.e., neither group tends to use these loans for re-investment, such as starting a business; rather, they use them to cover day-to-day expenses at exorbitant interest rates, thus entrapping themselves in a cycle of never ending debt (Islam & Simpson, 2018). If you know how bad the consequences of payday lending can be for people in the first world, imagine how bad it is for someone who’s already living in third world-levels of poverty.
Now, part of the reason why the UNEP, of all possible agencies, is so heavily invested (emotionally and literally) into fintech and other start-up technologies is because many of the “incumbent banks” — the top-players of our current system — don’t think that completely up-ending the global financial system to move the focus away from profits and toward complying with heavy-handed, UN-decided environmental regulations is a particularly attractive road to go down. In the next excerpt, the UNEP openly admit that start-ups in this area are better to invest in for the pursuit of ‘change’, specifically because their owners tend to be new to the world of business and, as such, don’t know enough about what they’re doing to avoid being manipulated — and that’s where the UNEP comes in.
Uppity Peasants argues that the UNEP is driven much more on a business model than on any kind altruistic path. Further, the circumstances which the aid recipients require the resources to cover essential expenses means they are unable to invest anything. This is similar to a payday loan type of system.
7. Green Finance For 3rd World $5-7 Trillion
(Page 13)In 2015, governments adopted three major agreements that set out their vision for the coming decades: a new set of 17 sustainable development goals (SDGs), the Paris Agreement on climate change and the ‘financing for development’ package. Finance is central to realizing all three agreements – and these now need to be translated into practical steps suited to each country’s circumstances.
Sustainable Energy for All estimates that annual global investments in energy will need to scale up from roughly US$400 billion at present to US $1-1.25 trillion. Of that, US$40-100 billion annually is needed to achieve universal access to electricity. Overall, US $5-7 trillion a year is needed to implement the SDGs globally. Developing countries are estimated to face an annual investment gap of US$2.5 trillion in areas such as infrastructure, clean energy, water and sanitation, and agriculture.
(Page 14) The challenge for financial systems is twofold: to mobilize finance for specific sustainable development priorities and to mainstream sustainable development factors across financial decision-making.
Capital needs to be mobilized for inclusion of underserved groups (e.g. small and medium enterprises), raising capital for sustainable infrastructure (e.g. energy, housing, transport, urban design) and financing critical areas of innovation (e.g. agriculture, mobility, power).
Sustainability needs to become mainstream for financial institutions. This starts with ensuring market integrity (e.g. tax, corruption, human rights) and extends to integrating environmental and social (E&S) factors into risk management (e.g. climate disruption, water stress). Sustainability also needs to be incorporated into the responsibilities and reporting of market actors to guide their decision-making. Momentum is building to align financial systems with the financing needs of an inclusive, sustainable economy. This is complementary to ‘real economy’ actions such as environmental regulations, reform of perverse subsidies and changes to resource pricing. However, while these are critical, it is increasingly recognized that changes are also needed in the financial system to ensure that it is both more stable and more connected to the real economy.
Some interesting points here:
$5 to $7 trillion (yes trillion) needed annually fulfill these goals. The billions stated before was lowballed.
The “sustainability” agenda needs mass marketing.
Finance needed for:
17 goals of Agenda 2030
Paris Climate Accord
Finance for development
3 above items to be integral part of national agendas.
Most of this has nothing to do with the environment
In fact, it reads like a global version of the US Green New Deal, proposed by Alexandria Ocasio-Cortez. In fact, her Chief of Staff, Saikat Chakrabarti, admitted it was about changing the economy, not the environment.
8. International Chamber Of Commerce
THE INTERNATIONAL CHAMBER OF COMMERCE ICC is the world’s largest business organization with a network of over 6 million members in more than 130 countries. We work to promote international trade, responsible business conduct and a global approach to regulation through a unique mix of advocacy and standard setting activities—together with market-leading dispute resolution services. Our members include many of the world’s largest companies, SMEs, business associations and local chambers of commerce.
We are the world business organization.
That quote came from their policy guide. Pretty straightforward. They want to run business on a global level. Now, let’s get to the meat and potatoes, the tax proposals:
Interplay between tax policy making and economic growth The world’s population is predicted to increase by 2 billion people by 2050, and the population of the world’s least developed countries is projected to double by 2053, in some countries even tripling. By 2025 half of the world’s population will be living in water-stressed areas. Under such circumstances, the need for large-scale investment in economic growth and development becomes evident.
Whilst there is no panacea, it is evident that greater alignment of investment and tax policies would be essential in promoting investment, job creation and economic growth. International commerce remains a powerful mechanism to help lift people out of poverty. Tax is intrinsically linked to development as taxation provides the revenue that states need to mobilize resources and reinforce a country’s infrastructure. Taxation “provides a predictable and stable flow of revenue to finance public spending, and shapes the environment in which investment, employment and trade takes place.”
Further, it is important to have a fair, efficient, and effective revenue collection infrastructure to promote economic and social development. Domestic resource mobilization (DRM) has been proposed as a way to meet the SDGs with the development finance already available. However, DRM can be impeded by unclear and confusing tax systems. It is imperative that companies are able to move products and services into areas where they are most needed without unnecessary administrative impediments.
Having a reliable and consistent taxation policy seems reasonable enough. However, the ICC is not being clear on the reason behind the push. They want better taxation methods in order to INCREASE the amount of revenue available.
Governments often side with these groups, even when it is not in the best interests of the citizens themselves. “Investment” dollars are then shovelled into infrastructure projects.
Tax the people, so that the money can be “properly” spent, as the UN and their partners see fit.
9. Addis Ababa Action Agenda
(Page 10) DOMESTIC PUBLIC RESOURCE
For all countries, public policies and the mobilization and effective use of domestic resources, underscored by the principle of national ownership, are central to our common pursuit of sustainable development, including achieving the sustainable development goals. Building on the considerable achievements in many countries since Monterrey, we remain committed to further strengthening the mobilization and effective use of domestic resources
(Page 10) 22. We recognize that significant additional domestic public resources, supplemented by international assistance as appropriate, will be critical to realizing sustainable development and achieving the sustainable development goals. We commit to enhancing revenue administration through modernized, progressive tax systems, improved tax policy and more efficient tax collection. We will work to improve the fairness, transparency, efficiency and effectiveness of our tax systems, including by broadening the tax base and continuing efforts to integrate the informal sector into the formal economy in line with country circumstances.
23. We will redouble efforts to substantially reduce illicit financial flows by 2030, with a view to eventually eliminating them, including by combating tax evasion and corruption through strengthened national regulation and increased international cooperation. We will also reduce opportunities for tax avoidance, and consider inserting anti-abuse clauses in all tax treaties. We will enhance disclosure practices and transparency in both source and destination countries, including by seeking to ensure transparency in all financial transactions between Governments and companies to relevant tax authorities. We will make sure that all companies, including multinationals, pay taxes to the Governments of countries where economic activity occurs and value is created, in accordance with national and international laws and policies
(Page 13) 27. We commit to scaling up international tax cooperation. We encourage countries, in accordance with their national capacities and circumstances, to work together to strengthen transparency and adopt appropriate policies, including multinational enterprises reporting country-by-country to tax authorities where they operate; access to beneficial ownership information for competent authorities; and progressively advancing towards automatic exchange of tax information among tax authorities as appropriate, with assistance to developing countries, especially the least developed, as needed. Tax incentives can be an appropriate policy tool. However, to end harmful tax practices, countries can engage in voluntary discussions on tax incentives in regional and international forums.
(Page 45) 98. We affirm the importance of debt restructurings being timely, orderly, effective, fair and negotiated in good faith. We believe that a workout from a sovereign debt crisis should aim to restore public debt sustainability, while preserving access to financing resources under favourable conditions. We further acknowledge that successful debt restructurings enhance the ability of countries to achieve sustainable development and the sustainable development goals. We continue to be concerned with non-cooperative creditors who have demonstrated their ability to disrupt timely completion of the debt restructurings.
In no way does this cover the entire document. However, there are 3 themes which get repeated over and over again.
Efficient tax collection
Global tax regulations and data sharing
“Sustainable” debt and borrowing
There is very little in this document, about actually improving lives, improving infrastructure, or improving the environment. Instead, it is all about implementing a global taxation system, while eliminating “off the books”, or illicit cash.
10. Global Tax Avoidance Measures
Exchange of information for tax purposes Exchange of information has long been included as a feature of tax treaty models. By agreeing to exchange information with respect to taxpayers, countries can become more aware of the global activities taxpayers are engaging in and impose tax that should be due.
The upcoming 2017 revision of the United Nations Model Double Taxation Convention between Developed and Developing countries is expected to bring a new revised version of the exchange of information provision, following the approval of the new United Nations Code of Conduct. The Committee agreed in 2016 to a proposal for a United Nations Code of Conduct on Cooperation in Combating International Tax Evasion. This Code supports the automatic exchange of information for tax purposes as the way forward for countries generally, but recognizes that it is vital for developing countries to exchange information, even if they are not ready for automatic exchange. The Code of Conduct has been approved by the Committee of Experts in 2016, and set automatic exchange of information as the new universal standard after ECOSOC adopted the Code of Conduct in a Resolution in 2017, during the ECOSOC Special Meeting on International Cooperation on Tax Matters. .Furthermore, the OECD model convention and commentaries is expected to broaden the scope of the exchange of information article to allow triangular, or multi-party exchange of information requests.
While this certainly sounds like some well meaning way to prevent money laundering and tax fraud, there is another angle to look at.
Having a global (or at least more centralized) database of people and their taxable income will allow for more efficient and effective tax collection. This is especially true whenever a new “development project” needs funding.
Furthermore, if there is such a global system, it will be easier to determine who isn’t paying “their fair share” when it comes to contributions. Those national governments can then act accordingly. Also, who doesn’t view this as becoming a global version of Revenue Canada, or the American IRS?
11. From Billions To Trillions (SF 2.0)
Achieving the Sustainable Development Goals (SDGs) will require an enormous increase in external financing flows to developing countries. Development Finance Institutions (DFIs) have gradually started to shift their business model towards de-risking services to crowd in long-term, low-risk private capital. However, the targeted scaling up of private investment from billions to trillions to realise the SDGs contains massive risks for stability. And good macro-policies are needed, in turn, to address such underlying risks. Countries that need the greatest amount of development finance are often those that have domestic financial resource constraints and underdeveloped markets. Financing their growth and investment opportunities makes the management of exchange rate risks, which are inherent in development finance, a critical challenge.
Merely supplying development finance is not enough. It needs to be done in socially and economically sustainable ways, where risks are allocated to those who can best manage and sustain them. Efficient use of limited public resources, through improved policies and regulatory processes, is required to achieve the SDGs and related efforts. Governments around the world must work together to offer feasible business opportunities to the private sector that are in line with domestic and international development objectives. Only with such coordinated action will we succeed in moving from billions to trillions to realise sustainable progress for all.
This article should serve as a warning to anyone who thinks that this global development system is going to be steady. Wrong. Once considered “fully operational”, the next step is to upscale it, and make it far bigger.
It is not governments who will be paying for these globalist schemes. It is the working class tax-payers who will see more and more of their wealth transferred to these projects.
Of course, once your money leaves Canadian soil, there is little to no accountability or control over what happens to it. But that it routinely downplayed.
12. What To Make From All This?
To state the obvious: these agendas and agreements are bringing nations towards a global taxation model. Countries (presumably under UN control) will be expected to share data on tax paying citizens and other people earning money. While this is touted as an anti-tax avoidance measure, the real goal is making sure the global order accounts for all money and where it goes.
Going towards a “cashless society” also helps in that regard. Hence the push for more and more electronic options, while making cash payments more difficult.
Beyond enforcement, knowing which nations have money and how much will make it easier to determine who shall pay how much as their “fair share” of future projects. We won’t have nations in the traditional sense, just shareholders.
International agreements like the Paris Accord have nothing to do with the environment. That is just the sales pitch. Instead, it an excuse to funnel huge sums of money to the UN to finance their business model. It is taking advantage of an altruistic goal.
This is about having a globalist, centralized economy and taxation. The environmental and humanitarian claims are just talking points.
For some context on the Canadian situation: CLICK HERE, for CPP #1: Investing $2B In Mumbai, India. CLICK HERE, for CPP #2: Taking Money Out Of Canada, & Liabilities. CLICK HERE, for CPP #3: Where Is The Money Going? Structural Shortfalls.
CLICK HERE, for UN Principles for Responsible Investing, Statement on ESG in credit risk and ratings. CLICK HERE, for review of UN PRI (& ESG Agenda) CLICK HERE, for CPPIB, sustainable investing. CLICK HERE, for CPPIB PRI (2010 report) CLICK HERE, for CPPIB’s self proclaimed “focus areas”. CLICK HERE, for climate change brochure. CLICK HERE, for the human rights brochure. CLICK HERE, for the $100T industry that is climate bonds. CLICK HERE, for 2018 Sustainable Investing Report.
For some context on the American situation: CLICK HERE, for Social Security unable to pay obligations by 2034.
2. Quotes From 2010 Policy Guide
We are guided by certain principles as they relate to responsible investing. These include, but are not limited to, the following:
• The overriding duty of the CPP Investment Board, consistent with its mandate, is to maximize investment returns without undue risk of loss;
• Portfolio diversification is an effective way to maximize long-term riskadjusted returns;
• Portfolio constraints either increase risk or reduce returns over time;
• Responsible corporate behaviour with respect to environmental, social and governance (ESG) factors can generally have a positive influence on longterm financial performance, recognizing that the importance of ESG factors varies across industries, geography and time;
• Disclosure is the key that allows investors to better understand, evaluate and assess potential risk and return, including the potential impact of ESG factors on a company’s performance;
• Investment analysis should incorporate ESG factors to the extent that they affect risk and return;
CLICK HERE, for CPPIB expecting to invest more than just 8% in China.
3.0 Investment Strategy In the context of our long-term investment horizon, the CPP Investment Board aspires to integrate ESG factors into investment management processes, where relevant, for all asset classes within the portfolio. As stated in our principles above, it is our belief that responsible corporate behaviour with respect to ESG factors can generally have a positive influence on long-term financial performance.
For public equities, the CPP Investment Board’s responsible investing team works with internal portfolio managers to assess ESG risks and opportunities as they relate to overall corporate performance. In our private market and real estate investments, ESG factors are evaluated, where applicable, in the due diligence process and monitored over the life of the investments
4.4 Industry Dialogue The CPP Investment Board participates in broader domestic and international discussion about definitions, priorities, standards and best practices in responsible investing.
The CPP Investment Board participates in a number of organizations, including:
• UN Principles of Responsible Investment
• Canadian Coalition for Good Governance
• Pension Investment Association of Canada
• International Corporate Governance Network
• Council of Institutional Investors
First things first. This policy guide was released in August 2010 when Stephen Harper was Prime Minister, not Justin Trudeau.
The guide outlines repeatedly how UN principles for responsible investment (PRI) will be followed. It also states that environmental, social, governance factors (ESG) will also be taken into account. This is right out of the UN agenda.
3. CPPIB’s So-Called “Focus Areas”
Shouldn’t a pension fun be focused on growing the size of the fund first and foremost? Why does virtue signalling have to factor into absolutely everything? But this isn’t the worst of it. Let’s dig a little deeper into these categories.
4. CPPIB Starts Issuing “Climate Bonds”
In June 2018, CPPIB completed its inaugural issuance of green bonds, becoming the first pension fund in the world to do so. Investors bought $1.5 billion of the 10-year bond, which Bloomberg reported was a record at the time for a single green bond transaction in Canada.
Since their introduction in 2007, green bonds have become a mainstream way for companies, governments and other organizations to raise funds for projects with environmental benefits. The issuance of a green bond was a logical next step to our investment-focused approach to climate change. Capital was raised to provide additional funding as we pursue acquisitions of strong, long-term investments eligible under our Green Bond Framework. In the 12 months to June 30, 2018, we announced plans to invest more than $3 billion in renewable energy assets.
This sounds lovely, except the CPPIB seems oblivious to the complete money pit that “green initiatives” have shown to be in projects across Canada and elsewhere. I really don’t see how they will be able to repay investors for these bonds.
Climate change is one of the most significant physical, social, technological and economic challenges of our time. Its impacts are expected to be pervasive and broad-ranging. Scientists believe it is critical to limit global warming to less than two degrees Celsius (2°C) above pre-industrial levels in order to prevent irreversible damage. Rising temperatures and sea levels create physical and transition risks, such as water scarcity, threats to biodiversity, extreme weather and policy and market risks.
Such changes also create potential investment opportunities in areas such as technological innovation and renewable energy (see table on page 2 for details) that may present themselves in the near, medium or long term. Given our exceptionally long investment horizon, we are actively addressing climate change to increase and preserve economic value, in accordance with our mandate. The implications of the global transition to lower carbon sources of energy will be far reaching for investors and companies alike.
It is difficult to tell what (if any) the board actually believes in this climate change, and how much is simply a shrewd business move. See here, for more info on climate bonds.
It appears that CPPIB is simply trying to profit from the political winds that is the climate change agenda. And it is using Canadian pension funds to finance this openly partisan agenda.
5. Human Rights As Business Perspective
Why We Engage
Human rights are relevant from an investment perspective because operational disruptions and reputational damage can arise when these matters are not appropriately managed. Effective human rights management is important for companies’ enhancement of long-term value.
We believe strong human rights practices contribute to sustaining long-term value. Working with companies in our portfolio on this topic is an important part of our mandate to maximize long-term returns. Companies with strong human rights policies and practices are less likely to face disruptions to operations from legal and regulatory risk, protests, workforce action and other activities. They are also less likely to suffer reputational damage due to human rights-related controversies. We also assess human rights risks within the supply chain of companies, primarily considering poor working conditions and labour issues (such as child labour). We are currently focusing our efforts on supply chain management in the consumer and information technology sectors.
So much for principles here. Human rights not from a moral or ideological perspective, but purely from a commercial one.
6. Sustainable Financing Report For 2018
Note: the report indicates that only 15% of the various investments are actually within Canada. The rest are abroad, including 38% in the US.
Also worth noting: the CPPIB claims to have $356.1 billion in assets. The reality (using close-group valuation actually rates it at almost $1 trillion in liabilities all told.
We integrate environmental, social and governance factors into our investment analysis, both before and after making investments. Our Sustainable Investing group works with investment teams throughout CPPIB to help them identify and assess ESG matters.
CPPIB’s assessment of ESG considerations can be an important factor in determining whether a potential investment is attractive. Where such ESG considerations are material, they can significantly affect our assessment of a company’s risk profile and value.
CPPIB’s Sustainable Investing group works across the organization to support investment analyses on the impact of ESG factors. It also conducts research on industry standards and best practices, and expands our knowledge and resources by collaborating with external partners and industry associations.
Subsequent pages go on at length about the ESG (environment, social, government) goals. However, the point is pretty clear. All investment decisions, including areas to invest in, are looked at through this lens.
7. Why Involve Our Pensions In This?
This reeks of social engineering more than any real sound financial advice. The CPPIB seems to drink the climate change Kool-Aid in its entirety with this.
While diversifying a portfolio makes sense, it is rather troubling that the overwhelming majority (85%) of the fund is actually being sent overseas. Wouldn’t it make more sense to be investing in Canadian projects and infrastructure?
Once the money leaves Canada, it becomes difficult, if not impossible to track and keep control of.
For some context on the Canadian Situation: CLICK HERE, for CPP #1: Investing $2B In Mumbai, India. CLICK HERE, for CPP #2: Taking Money Out Of Canada, & Liabilities. CLICK HERE, for CPP #3: Where Is The Money Going? Structural Shortfalls.
On the American situation: CLICK HERE, for the 2019 Annual Report to Congress.
CLICK HERE, for an interesting powerpoint on liability calculation. CLICK HERE, for a 2018 paper: UNFUNDED OBLIGATION AND TRANSITION COSTS FOR THE OASDI PROGRAM CLICK HERE, for the Brookings Institute & privatization.
2. Side Note On Signatories
Although unrelated to the long term problems with the Social Security program, it is worth pointing out — as a side note — some scandals with 2 people involved. Steve Mnuchin, is long suspected or corruption, and Alex Acosta was the Prosecutor who previously let Jeffrey Epstein off on child sex charges.
3. Open-Group v.s. Closed Group Valuation
From this presentation. The author makes the assumption that “open-group valuation” should be used for public pensions such as Social Security, while private pensions should rely on “closed-group valuation” methods of accounting.
The difference is this: Open-group valuation principles mean that a pension is solvent and in good shape as long as it’s current assets and payouts are able to keep up with the demands of retirees at the moment. It doesn’t require that the pension plan be fully funded. The reasoning is there is a “social contract”, and that the Government can raise more money (tax more) to cover the shortfalls.
Closed-group valuation principles require that “all” liabilities be taken into account. The is a far more accurate method, as payments from all workers are considered, if those who won’t retire for decades. The rationale is that private companies could go bankrupt at any time, and need to take the actual amounts into account.
For obvious reasons, the closed-group valuation method is a far more accurate approach in calculating the health of pension plans. It forces “all” assets and liabilities to be disclosed.
To be fair, it is a valid point that private pension funds cannot exactly just “take more money” to cover their shortfalls. Still, the open-group approach is very misleading.
4. The Approach Explained in 2018 Paper
1. Introduction In calculating the unfunded obligation of the Old-Age and Survivors Insurance and Disability Insurance (OASDI) program, we include the entire cost of paying scheduled benefits in full and on time, even after trust fund reserves are depleted. However, when the trust fund reserves are depleted, current law limits expenditures to the amount of continuing income received by the fund. Thus, the measures of unfunded obligation represent the shortfall of financial resources scheduled under current law to cover the cost associated with timely payment of scheduled benefits for the period.
The unfunded obligation for any program must be defined on the basis of the intended funding method for the program. Because the OASDI program is financed on essentially a current-cost or pay-as-you-go basis, the open group unfunded obligation measure is appropriate. Programs that are intended to be essentially fully advance-funded require the use of other measures, reflecting a closed group perspective, to assess their unfunded obligation (or liability). However, these closed group measures are more accurately described as theoretical measures of “transition cost” for the OASDI program. Estimates of the unfunded obligation vary depending on the valuation period and the assumptions used. Transition cost measures also vary depending on which plan participants are included.
(See this source.) This paper explains that the open-group valuation method is appropriate because people will always be paying into it. While this is a valid point, it doesn’t take away from the growing amount of unfunded liabilities.
In fact, it helps to conceal just how much the program owes and still is obligated to pay out. The only way this works is with an infinitely growing population, and ever growing contributions.
Basically, a giant Ponzi scheme, where participation is mandatory, under threat of arrest and detention.
5. Quotes From 2019 Report
In 2018 At the end of 2018, the OASDI program was providing benefit payments1 to about 63 million people: 47 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 10 million disabled workers and dependents of disabled workers. During the year, an estimated 176 million people had earnings covered by Social Security and paid payroll taxes on those earnings. The total cost of the program in 2018 was $1,000 billion. Total income was $1,003 billion, which consisted of $920 billion in non-interest income and $83 billion in interest earnings. Asset reserves held in special issue U.S. Treasury securities grew from $2,892 billion at the beginning of the year to $2,895 billion at the end of the year.
Short-Range Results Under the Trustees’ intermediate assumptions, Social Security’s total cost is projected to be less than its total income in 2019 and higher than its total income in 2020 and all later years. Social Security’s cost has exceeded its non-interest income since 2010. For 2019, program cost is projected to be less than total income by about $1 billion and exceed non-interest income by about $81 billion.
This information is from the overview (Page 2). it states that on paper, the revenue generated (both from employee deductions and from interest/dividends generated was slightly higher than the payments it distributed.
On paper, this seems fine. However, getting to the “long-range results” it tells a different story. However, it still relies on the “open-group valuation” method.
The projected OASDI annual cost rate increases from 13.91 percent of taxable payroll for 2019 to 16.62 percent for 2040 and to 17.47 percent for 2093, a level that is 4.11 percent of taxable payroll more than the projected income rate (the ratio of non-interest income to taxable payroll) for 2093. For last year’s report, the Trustees estimated the OASDI cost for 2093 at 17.72 percent, or 4.36 percent of payroll more than the annual income rate for that year. Expressed in relation to the projected gross domestic product (GDP), OASDI cost generally rises from 4.9 percent of GDP for 2019 to about 5.9 percent by 2039, then declines to 5.8percent by 2052, and then generally increases to 6.0 percent by 2093.
For the 75-year projection period, the actuarial deficit is 2.78 percent of taxable payroll, decreased from 2.84percent of taxable payroll in last year’s report. The closely-related open-group unfunded obligation for OASDI over the 75-year period is 2.61 percent of taxable payroll, decreased from 2.68 percent of payroll in last year’s report. The open-group unfunded obligation for OASDI over the 75-year period is $13.9 trillion in present value and is $0.7 trillion more than the measured level of $13.2 trillion a year ago. If the assumptions, methods, starting values, and the law had all remained unchanged, the actuarial deficit would have increased to 2.90 percent of taxable payroll, and the unfunded obligation would have risen to about 2.74 percent of taxable payroll and $13.7 trillion in present value due to the change in the valuation date.
(Those quotes from page 4) Using the “open-group” method, the unfunded liabilities over 75 years is $13.9 trillion, or adding the equivalent of $185 billion/year. The authors also state a few blunt facts in the conclusion
Conclusion Under the intermediate assumptions, the projected hypothetical combined OASI and DI Trust Fund asset reserves become depleted and unable to pay scheduled benefits in full on a timely basis in 2035. At the time of depletion of these combined reserves, continuing income to the combined trust funds would be sufficient to pay 80 percent of scheduled benefits. The OASI Trust Fund reserves are projected to become depleted in 2034, at which time OASI income would be sufficient to pay 77 percent of OASI scheduled benefits. DI Trust Fund asset reserves are projected to become depleted in 2052, at which time continuing income to the DI Trust Fund would be sufficient to pay 91 percent of DI scheduled benefits.
Lawmakers have a broad continuum of policy options that would close or reduce Social Security’s long-term financing shortfall. Cost estimates for many such policy options are available at www.ssa.gov/OACT/solvency/provisions/
A few points to take away here
(A) Old Age Survivors Insurance (OASI) will become depleted in 2034, and only able to pay 77% of its obligations.
(B) Disability Insurance (DI) will be depleted in 2052, and only able to pay 91% of obligations by then.
(C) Raising deductions taken from employees is necessary.
But this is using open-group valuation methods of accounting. So how much
6. Getting An Answer On Unfunded Liabilities
It has been difficult getting an accurate answer on the true size of the Social Security deficit. Estimates range from $10 trillion to over $100 trillion.
The government cited $13.7 trillion in liabilities using the less accurate “open-group” valuation. Still, that is an awful lot of money, even if it is the full amount.
7. Why Not Reform Or Privatize?
The Brookings Institute explains in this article why efforts to privatize or reform Social Security have so far gone no where. Media scare is not the only reason for this.
Any transition to a private system must overcome a major financial hurdle, however. Social Security has accumulated trillions of dollars in liabilities to workers who are already retired or who will retire soon. To make room for a new private system, policymakers must find funds to pay for these liabilities while still leaving young workers enough money to deposit in new private accounts. This requires scaling back past liabilities – by cutting benefits – or increasing contributions from current workers. Most large-scale privatization plans also involve major new federal borrowing. Consequently, if a balanced budget amendment becomes part of the constitution, it would torpedo any attempt to replace most of Social Security with a private retirement system.
Privatizing Social Security can boost workers’ rate of return by allowing retirement contributions to be invested in private assets, such as stocks, which yield a better return than the present pay-as-you-go retirement system. Returns can be boosted still further if the government borrows on a massive scale to pay for past Social Security liabilities, allowing workers to invest a larger percentage of their pay in high-yielding assets. Exactly the same rate of return can be obtained, however, if the current public system is changed to allow Social Security reserves to be invested in private assets.
The article is blunt about the situation.
The system DEPENDS ON a constant inflow of new money from younger workers in order to stay solvent. If current workers were to start pulling their money from Social Security (and saving or investing elsewhere), the program would be immediately strapped for cash. This means benefits cuts to those receiving it, and higher premiums for those paying into it.
Of course, as workers who remain have to pay higher premiums, they, quite reasonably, will look for other options. This could easily create a snowball effect where more and more people pull their contributions. This will cause the collapse of Social Security.
So it’s not really the “privatization” boogeyman here. It is that the system needs an ever growing pool of new money to pay off retirees.
Yes, it’s a government run Ponzi scheme.
8. Government Pensions Are Ponzi Schemes
As was demonstrated in previous articles, the Canadian Pension Plan has almost a trillion dollars in unfunded liabilities. While claiming to have almost $400 billion in assets, the truth is that the full size of liabilities put it well in the hole.
The U.S. Social Security system faces the same issues, although the scope is worse. Even the open-group accounting method lists $13 trillion in liabilities.
There are efforts to “reform” which include: (a) raising premiums; (b) cutting benefits; and (c) raising the age of retirement. However, this may just be like shuffling the deck chairs on the Titanic. Futile. As long as a fund depends on paying off retirees with the contributions of workers, it is set up for failure.
Letting workers invest in private funds will hasten the demise, as it would deplete the funds needed to pay off existing retirees.
One has to shake their head. Bernie Madoff ran a Ponzi scheme and was sent to prison. As would any private citizen. But when the government does it, it’s called a social safety net.
Same conclusion as before: Americans are pretty screwed.
CLICK HERE, for a 2017 UN report on leveraging African pension funds for financing infrastructure development. CLICK HERE, for 2019 report on development financing. CLICK HERE, for closing infrastructure funding gap.
2. Obtain Your Statement Of Contributions
Any Service Canada should be able to help you apply for a copy of your statement of contributions. One tip is to do it after a tax assessment to get the most up to date information. You will need your social insurance number.
Also, you can request your statement by mail.
Contributor Client Services
Canada Pension Plan
PO Box 818 Station Main
Winnipeg MB R3C 2N4
Once you have received it, you will get a lot of new information you didn’t have before. Yes, I have mine from 2018, and am ordering a 2019 statement.
3. Information From Statement Of Contributions
A quote from the 2018 statement:
You and your employer each paid 4.95% of your earnings between the minimum of $3,500 and the maximum of $55,900 for 2018. These are called “pensionable earnings. Self employed individuals paid contributions of 9.9% on these amounts.
The maximum retirement pension at age 65 this year is $1,134.17 per month.
A few things to point out here:
You and your employer “both” paid 4.95% of your earnings between the minimum and maximum amounts. So if you made $25,000 then $21,500 of it would be taxable. Both you and your employer would have contributed $1,064.25 towards it. Combined is $2128.50.
Suppose you made over $55,900. Then $52,400 of it would have been taxable, and both you and the employer would have paid $2,593.80 into it. Combined is $5187.60.
Let address the elephant in the room. How much: (a) will CPP actually pay out for you; and (b) what would you make if you invested the CPP contributions yourself?
4. How Much Will CPP Pay Out For You?
Assuming retirement at age 65, and average life expectancy is 82. That gives 17 years, (204 months) of receiving pension contributions.
For the 2019 year, the maximum is listed as $1,154.58, and the average is $679.16. None of this covers Old Age Security (OAS) or Guaranteed Income Supplement (GIS). Those are separate and fall outside of CPP.
The average earner:
($679.16/month)X(17 year)X(12 month/year) = $138,540
The top earner:
($1,154.58/month)X(17 year)X(12 month/year) = $235,534
For simplicity, inflation is ignored, as is indexing of contributions.
5. Invest Your Own CPP Contributions
Yes, contributions and interest rates vary, but for simplicity, let’s keep them consistent.
For the top earner, let’s do this scenario:
(a) Worked for 40 years
(b) Contributed full amounts
(c) Invested at 8% annually.
Yes, the interest is absurd, but CPPIB claims that is what it is getting. In fact, CPPIB states that it gets 6.6-18% interest on its fun each year.
Over $1.3 million. That is what you would have after 40 years, making full contributions, assuming those contributions (both yours and the employer’s) were fully invested. A far cry from the $235,000 that you would make from 17 years of CPP payouts. Over a million more in fact.
Even just a 3% return — which is very doable — would net you $390,000 over those 4 years. Almost double what CPP would be paying out.
For an average earner, let’s try different numbers:
(a) Worked for 30 years
(b) Earned ~$30,000 annually contributed $2,970
(c) Invested at 6% annually.
$235,000 the person would have earned. This is about $100,000 more than simply taking the average payouts from Canada Pension Plan.
Why the different numbers? Perhaps the person took several years off for childcare. Perhaps there were years with low earnings. And 6% is a more realistic return, although good luck getting that from a bank. To repeat, CPPIB claims 6-18% returns (after costs) annually.
To be fair, people who go decades without working are unlikely to ever be able to save and invest the equivalent of what CPP is paying out.
For example, my own statement of contributions estimates if I were magically 65 today. With only a decade of work, I would be getting $317/month. Over the next 17 years that would pay out about $65,000, far more than I would have put in.
But long term and steadily employed workers get screwed.
6. Performance CPPIB Claims In Investments
This was addressed in the previous piece. In the CPPIB Annual Reports, the Board claims to have staggering growth year after year. Of the years listed, the interest ranges from 6% to 18%.
Value of Fund
Rate of Return
Also, as outlined in the last article, the accounting method used also changes how your pension plan comes across. You can select your data, and paint a rosy picture. Or you can take ALL assets and liabilities into account.
When the Canada Pension Plan was properly audited in 2016, it was found to have $884.2 billion in unfunded liabilities. The 2019 Annual report lists $392 billion as the value of the fund. However, with over a trillion dollars in liabilities, that illusion came crashing down.
$239 billion in growth over the last decade, an 11% annual increase. But in spite of that, CPP is not paying out retirees anywhere near what they have put in.
Why? Where is the money going?
7. CPP Unfunded Liabilities Swept Under Rug
Here are quotes from some of the actuarial reports. Interesting how they go out of their way to gloss over the truth about the CPP. In 2 of the reports, the total unfunded liabilities are reduced to a mere footnote.
Page 113 in 2000 audit. Actuarial liability 486,682M Actuarial value of assets 43,715 or 9%, Unfunded liability 442,967M or 91% of total. That’s right, ten times as many liabilities as assets.
Page 73 in 2006 audit report. $619.9B in unfunded liabilities. Updated in 2009 to reflect another $67.9B on the interest (just the interest) of those unfunded liabilities.
Footnote from 2012 audit. When the “closed-group approach” is used to audit the program, the assets are $175.1 billion, actuarial liability of the Plan is equal to $1,004.9 billion, and the assets shortfall is equal to $829.8 billion
Footnote from 2015 audit. Using “closed-group approach” to audit, the actuarial liability of the Plan is equal to $1,169.5 billion, the assets are $285.4 billion, and the assets shortfall is equal to $884.2 billion
Despite the glowing reviews our politicians give, the Canada Pension Plan is not doing well. In fact, it has close to a trillion dollars in unfunded liabilities. This is not sustainable in the slightest.
Younger workers will be paying into a system they have no realistic hope of ever collecting on. Not a good social safety net.
By now you are probably wondering these things:
The CPP, for most people, will never actually pay out anywhere near the amount that the person contributes over their lifetime. This is on top of the nearly 1 trillion shortfall that the plan has. So if the plan won’t pay out fully, and yet is so broke, where is the money going?
Who is running the show?
8. Open-Group v.s. Closed-Group Valuation
The difference is this: Open-group valuation principles mean that a pension is solvent and in good shape as long as it’s current assets and payouts are able to keep up with the demands of retirees at the moment. It doesn’t require that the pension plan be fully funded. The reasoning is there is a “social contract”, and that the Government can raise more money (tax more) to cover the shortfalls.
Closed-group valuation principles require that “all” liabilities be taken into account. The is a far more accurate method, as payments from all workers are considered, if those who won’t retire for decades. The rationale is that private companies could go bankrupt at any time, and need to take the actual amounts into account.
9. CPPIB Board Members Well Connected
Principal and Vice Chancellor (President), McGill University
Current Director of the Royal Bank of Canada
Hydro One (Ontario)
Former Director of The Bank of Nova Scotia
Premier’s Enterprise Team for the Province of Manitoba
William ‘Mark’ Evans
Former member of the Management Committee at Goldman Sachs
Co-founded TrustBridge Partners in China (2006)
Kindred Capital in Europe (2016)
Standard Chartered Bank plc
ANZ Banking Group
National Australia Bank
Commonwealth Bank of Australia
Allied Irish Banks plc
Morgan Stanley Bank International Ltd
The Charity Bank Ltd
Chair of the Board of the Royal Bank of Canada
Director of Air Canada since May 2016
Chair since April 2019 of Altas Partners
Director of WestJet Airlines
Jo Mark Zurel
Not proof of any wrongdoing, but the board is certainly connected to other institutions.
$44M in from Power Corporation (Desmarais)
$17M in Hydro One Ltd (Heather Munroe-Blum is former board member)
$555M in RBC (Heather Munroe-Blum is board member)
$292M in Scotia Bank (Sylvia Chrominska is former chair)
In fairness, there are hundreds of companies CPPIB invests in. But always keeping an eye out for potential conflicts of interest.
But having all of these assets (both within Canada and abroad), doesn’t really explain the trillion dollar shortfall. There has to be something else that the CPPIB is wasting Canadian pensioners’ retirement savings on.
11. Pensions Sent For UN Development Projects?
Yes, this sounds absurd, but consider this report from the UN about using pensions to leverage development projects. True, this report refers to African pension funds. But it is entirely possible that Canada could get involved (or already be involved) in some similar scheme.
III. PENSION FUNDS DIRECT INVESTMENT IN INFRASTRUCTURE
International experience At 36.6 percent of GDP, assets of the pension funds in OECD countries are relatively large. As of end-2013, pension-fund assets were even in excess of 100 percent in countries such as the Netherlands, Iceland, Switzerland, Australia, and the United Kingdom (Figure 1). In absolute terms, pension funds in OECD countries held $10.4 trillion of assets.25 While large pension funds (LPFs) held about $3.9 trillion of assets, assets in public and private sector and public pension reserves (PPRFs) stood at $6.5 trillion.
Individual pension funds can be relatively large in some countries such as the Netherlands (ABP at $445.3 billion and PFZW at $189.0 billion) and the U.S. (CalPERS at $238.5 billion, CalSTRS at $166.3 billion, and the New York City Combined Retirement System at $150.9 billion). Similarly, PPRFs are relatively large in the U.S. (United States Social Security Trust Fund at $2.8 trillion) and Japan (Government Pension Investment Fund at $1.2 trillion). Among emerging markets, South Africa (Government Employees Pension Fund (GEPF) at $133.4 billion) and Brazil (Previ at $72 billion) have the largest funds in Africa and Latin America, respectively.
Pension funds can dedicate a share of their assets specifically to infrastructure. Such direct investment in infrastructure is implemented through equity investment in unlisted infrastructure projects (through direct investment in the project or through a private equity fund). Such investment can also take the form of debt investment in project and infrastructure bonds or asset-backed security. In contrast, pension funds can allocate a share of their funds indirectly to infrastructure through investment in market-traded equity and bonds. Listed equity investment can take the form of shares issued by corporations and infrastructure project funds while debt investment is often in the form of corporate market-traded bonds.
As is plain from the text, (Page 10), the UN views pensions as a potential investment vehicle for their agendas. And is clear from the pages in the reports, the UN has been sizing up pension funds from all over the world.
This is more than just an academic exercise
IV. OBSTACLES TO PENSION FUNDS INVESTMENT IN INFRASTRUCTURE
The extent to which pension funds can invest in infrastructure depends on the availability of assets in the pension system. Asset availability, in turn, is driven by a number of factors including the pension system’s environment, design, and performance. Even in a well-performing pension system with ample assets available for investments, the governance, regulation, and supervision of pension funds can restrict those funds’ ability to actually invest in infrastructure. If such constraints are lifted, then pension funds need to consider the risks of infrastructure projects and demand a fair, transparent, clear, and predictable policy framework to invest in infrastructure assets. Once this hurdle is overcome, pension funds will need adequate financial and capital market instruments to implement their investment decisions.
Simple enough (page 13). Lift the regulations, and the pension money will be free to flow to UN development projects. And after all, who knows better about spending other people’s money?
The endless foreign aid gestures that our government engages in: is that really our pension money being sent abroad?
We can see from Table 2 (Page 16) that the UN has been sizing up:
Canada Pension Plan ($173B in assets)
Ontario Municipal Employees ($62B in assets)
Ontario Teachers’ Pension Plan ($128B in assets)
Quebec Pension Plan ($39B in assets)
The recent OECD policy guidance for investment in clean energy, which is based on the PFI illustrates how policymakers can identify ways to mobilize private investment in infrastructure (OECD, 2015c). The policy guidance focuses on electricity generation from renewable energy sources and improved energy efficiency in the electricity sector, and provides a list of issues and questions on five areas of the PFI (investment policy, investment promotion and facilitation, competition policy, financial market policy, and public governance).
(Page 31) Clearly the UN is pushing its enviro agenda and suggesting that public pensions be used to finance at least part of it.
12. So Why Is CPP So Underfunded?
A number of factors most likely.
(A) Most pension plans are ponzi-style. In order to stay funded, it requires an ever growing number of contributors in order to pay off older contributors. Rather than having members who can sustain themselves, this is dependent on infinite growth.
(B) Although a person contributing to a pension in their career would “theoretically” be self-sufficient, it is clear the interest and gains are not what CPPIB pretends. If the fund was growing at 10%+ year over year, it would be different. We are not getting the full story.
(C) Public sector pensions are not sustainable either. So, very likely that some CPP money is being diverted to help cover the shortfalls.
(D) Due to political pressure, the powers that be find it more convenient to downplay the serious shortfalls rather than meaningfully address it. No political will to ask the hard questions.
(E) There has to be money going to outside projects, such as the UN plot to use pensions to fund their development agenda. The UN is a money pit, and the waste is probably enormous.
CLICK HERE, for 2016 Triannual Report from Canada’s Chief Actuary. CLICK HERE, for Chief Actuary’s 2016 Supplemental Report. CLICK HERE, for information on Canada’s “Green Bonds”. CLICK HERE, for a previous article on “green bonds. CLICK HERE, for previous article, $2B in CPP funds sent to India. CLICK HERE, for a Financial Post article suggesting CPP is being used to prop up public sector pensions. CLICK HERE, for a Fraser Institute article on CPP unfunded liabilities.
CLICK HERE, for Office of the Superintendent of Financial Institutions, for sustainability of CPP. Using “closed door approach” there are $884.2B in unfunded liabilities. Turn to pages 46-50.
Middle class Canadians are working harder than ever, but many are worried that they won’t have enough put away for their retirement. One in four families approaching retirement—1.1 million families—are at risk of not saving enough. That is why a stronger Canada Pension Plan (CPP) is a key part of the promise that the Government of Canada made to Canadians to help the middle class and those working hard to join it.
Today, Minister of Finance Bill Morneau tabled the Chief Actuary’s 28th Actuarial Report on the CPP in Parliament. The report confirms that the contribution and benefit levels proposed under the CPP enhancement agreed upon by Canada’s governments on June 20, 2016 will be sustainable over the long term, ensuring that Canadian workers can count on an even stronger, secure CPP for years to come.
On October 6, 2016, the Government of Canada delivered on its commitment to a stronger CPP with the introduction of legislation in Parliament to implement the agreement reached by Canada’s governments to enhance the CPP to give Canadians a stronger public pension that will help them retire in dignity.
This can’t really be taken at face value, as it is all self serving. The notice fails to even acknowledge the elephant in the room, which we will get into.
3. Quotes From Actuary’s 2016 Report
The Canada Pension Plan Investment Board (CPPIB) invests base CPP funds according to its own investment policies which take into account the needs of contributors and beneficiaries, as well as financial market constraints. It is expected that a separate investment policy will be developed by the CPPIB with respect to the additional CPP assets. Since at the time of the preparation of the 28th Report there is no such separate investment policy in existence, the real rate of return assumption was developed to reflect the financing objective of the additional Plan. As the actual CPPIB investment strategy for the additional CPP assets becomes known, it will be reflected in subsequent actuarial reports by revising the real rate of return assumption
This is a bit troublesome. It will become “known” to the public, or it will become “known” to the people doing the investments? (Page 15 of report.)
(Page 30 of report.) The CPPIB estimates that the percentage of base contributions from investment profits will creep up, and that the additional CPP will eventually become mostly funded from investment income by 2075.
The future income and outgo of the additional CPP depend on many demographic and economic factors. Thus, many assumptions in respect of the future demographic and economic outlook are required to project the financial state of the additional Plan. These assumptions impact the contribution rates, cash flows, amount of assets, as well as other indicators of the financial state. This section discusses the sensitivity of the minimum first and second additional contribution rates to the use of different assumptions than the best estimate.
Can’t fault the report for admitting it has to make assumptions. However, the trends of the current government are not great. Admitting large numbers of “refugees” who are and will remain a burden will not contribute to public coffers. Nor will vast amounts of seniors or others who won’t work. Furthermore, making industrial projects more difficult (Bills C-48 and C-69), means additional Canadians not working.
The actuarial projections of the financial state of the Canada Pension Plan presented in this report reveal that if the CPP is amended as per Part 1 of Bill C-26, the constant minimum first and second additional contribution rates that result in projected contributions and investment income that are sufficient to fully pay the projected expenditures of the additional Canada Pension Plan would be, respectively, 1.93% for the year 2023 and thereafter and 7.72% for the year 2024 and thereafter.
This report confirms that if the Canada Pension Plan is amended as per Part 1 of Bill C-26, a legislated first additional contribution rate of 2.0% for the year 2023 and thereafter, and a legislated second additional contribution rate of 8.0% for the year 2024 and thereafter, result in projected contributions and investment income that are sufficient to fully pay the projected expenditures of the additional Plan over the long term. Under these rates, assets of the additional Plan would accumulate to $70 billion by 2025, and to $1,330 billion by 2050.
No real surprise. The report concludes that the changes that the Government wants to bring in are exactly what are needed to make the plan sustainable.
4. CPPIB Claims Plan Sustainable Past 2090
Within this strategic framework, fiscal 2017 was a good year for CPPIB. Our diversified portfolio achieved a net return of 11.8% after all costs. Assets increased by $37.8 billion, of which $33.5 billion came from the net income generated by CPPIB from investment activities, after all costs, and $4.3 billion from net contributions to the CPP. Our 10-year real rate of return of 5.1%, after all CPPIB costs, remains above the 3.9% average rate of return that the Chief Actuary of Canada assumes in assessing the sustainability of the CPP. In his latest triennial review issued in September 2016, the Chief Actuary reported that the Base CPP is sustainable until at least 2090.
CPPIB toots its own horn, stating that the plan is sustainable at least until 2090. Page 5 is a quote from the 2017 annual report.
5. Quotes From 2019 CPPIB Annual Report
This is a graph included at the beginning of the report (page 3). It projects that by the year 2040, the Canada Pension Plan will have over $1.5 trillion in assets. This is in comparison to the $393 billion that there currently is.
It shows that actual assets have been higher than projected assets for the last 3 years.
The most recent triennial report by the Chief Actuary of Canada indicated that the CPP is sustainable over a 75-year projection period. Projections of the CPP Fund, being the combined assets of the base and additional CPP accounts, are based on the nominal projections from the 29th Actuarial Report supplementing the 27th and 28th Actuarial Reports on the Canada Pension Plan as at December 31, 2015.
The report shows a graph with projected assets. However, it doesn’t seem to address liabilities. Specifically, the pension contributions of much younger people who are paying into the system and are entitled to get it out when they retire.
This is impressive. Over the last decade, $239 billion has been added to the fund, an equivalent of 11% annual growth. Of course, one may be forgiven for asking why premiums are so high if it’s all just going into a government fund.
6. CPPIB Claims Fund Is Worth Billions
Note: The sources for this data is in all of the annual reports, going back a decade, which are linked up in SECTION 1.
Inv. Income refers to investment income. This is money CPPIB claims that the funds make annually. Notice the rate of return varies from 6-18%. That is money that CPPIB makes, not money that YOU will be making from the pension plan.
Value of Fund
Rate of Return
The value of the pension fund is skyrocketing? Isn’t it? Looking at the values from the annual reports, it has tripled in value in just a decade. This is incredible growth.
What then is the problem?
7. CPPIB Has Billions In Unfunded Liabilities
Not just billions, but hundreds of billions in liabilities.
The Plan is intended to be long-term and enduring in nature, a fact that is reinforced by the federal, provincial, and territorial governments’ joint stewardship through the established strong governance and accountability framework of the Plan. Therefore, if the Plan’s financial sustainability is to be measured based on its asset excess or shortfall, it should be done so on an open group basis that reflects the partially funded nature of the Plan, that is, its reliance on both future contributions and invested assets as means of financing its future expenditures. The inclusion of future contributions and benefits with respect to both current and future participants in the assessment of the Plan’s financial state confirms that the Plan is able to meet its financial obligations over the long term1 2
What is the difference between open group basis and closed group basis?
The open group approach addresses assets and liabilities with respect to their expectations v.s. reality. The closed group approach, however, measures total assets and liabilities. And to see how much of a difference it makes, see the following two screenshots.
If you use the open group approach, everything looks fine. Reality comes very close to what you are expecting. However, the “closed group approach” takes everything into account, not just expectations.
Remember, when younger workers are paying into CPP, the organization has the money, but it isn’t theirs. It belongs to the workers, even if they won’t retire for 20, 30, or 40 years. The only way “open group approach” works is if the CPPIB had no intention of paying younger workers back.
All things considered, Canada Pension Plan is short $884.2 billion (as of 2016). This is if you don’t use selective accounting.
Paying off current obligations, by taking money from new people. Isn’t that how a ponzi scheme works? To be fair though, there is “some” investing done by CPPIB. It’s just that the bulk of the new money comes from the younger suckersworkers.
Guess this partially explains why all parties are so pro-mass-migration. Workers are needed to be shipped in to contribute deductions to fund the shortfall.
8. Is CPP Used To Prop Up Public Pensions?
As the federal and provincial governments continue discussing changes to the Canada Pension Plan, it is worth recalling that there are no public discussions of the most important pension issue in Canada: The unsustainable gap between the pensions of public servants and most everyone else. In fact, some critics maintain that the push to expand the CPP is driven by an unspoken need to prop up public-sector pension plans a little longer. However, doing so will only delay the inevitable overhaul of both the benefits and the funding of public-sector pensions.
The key issues surrounding public-service pension-plan benefits are mostly unspoken, both to their members and to taxpayers. Public-sector unions allow their members to believe the fiction that members contribute a fair share of their own retirement benefits, when really, the vast majority is funded by taxpayers. Few people appreciate how the CPP is folded into public-sector pension benefits: since benefits are “defined” in advance, an increase in CPP benefits reduces the amount that a public-sector pension needs to pay out to retired workers (leaving unchanged the total benefit payout to public-sector retirees). Meanwhile, taxpayers are kept in the dark about the full measure of unfunded future benefits they will have to pay, even as they shoulder more of the burden for their own retirement.
That is a theory floated over the years. Unfortunately, it gets difficult to prove given how CPPIB will not be honest about their $884.2 billion in unfunded liabilities. Their annual reports seem designed to conceal the truth.
An interesting argument though. If public sector union workers are retiring (or are retired), then they have likely been promised a good pension. However, if those union funds can’t cover it, would CPP be dipped into to make up the difference?
9. CPPIB “Invests” 85% Outside Of Canada
(From page 11 of the 2019 report)
Our 2025 strategy With two decades under our belt, CPPIB has hit its stride and truly knows its potential as a global active manager of capital. Last year, I wrote about the Board-approved strategic direction for CPPIB in 2025. Over this past year, we’ve continued to refine this 2025 strategy, and chart the course for the coming years.
Pillars of our 2025 plan include investing up to one-third of the Fund in emerging markets such as China, India and Latin America, increasing our opportunity set and pursuing the most attractive risk-adjusted returns. We have reoriented our investment departments to deliver on this growth plan, to manage a larger Fund and to achieve our desired geographic and asset diversification.
To ask the obvious question: why is the CPPIB so eager to plow its money into FOREIGN ventures? Wouldn’t putting the bulk of it into Canadian projects make more sense?
This is not just a return-on-investment issue. Plowing that money into Canadian industries would help Canadians, and help drive Canadian employment, would it not? This is supposed to be a “Canadian” pension fund.
(From page 13 of the 2019 report). The CPPIB expects that by 2050, nearly 1/2 of all income to the pension plan will be from interest and dividends on its portfolio
For reference, the fund value is calculated using this rough formula
Employee & Employer CPP Contributions + Fund Investment Returns – CPP payouts = Value
So how much of CPPIB investments are in Canada?
That’s right, just 15.5% in Canada. The other 84.5% is invested abroad. Where specifically is this money going?
(1) Midstream joint venture United States US$1.34 billion Formed a joint venture with Williams to establish midstream exposure in the U.S., with initial ownership stakes in two of Williams’ midstream systems.
(2) Grand Paris development Paris, France Formed a joint venture with CMNE, La Française’s majority shareholder, to develop real estate projects linked to the Grand Paris project, a significant infrastructure initiative in Paris.
(3) Ultimate Software United States Total value: US$11 billion Acquired a leading global provider of cloud-based human capital management solutions, alongside consortium partners Hellman & Friedman, Blackstone and GIC. (4) CPPIB Green Bond Issuance Canada and Europe C$1.5 billion/€$1.0 billion First pension fund to issue green bonds in 10-year fixed-rate notes. Our inaugural Green Bond was a Canadian dollar-denominated bond, followed by a eurodenominated bond.
(5) ChargePoint United States Total value: US$240 million Invested as part of a funding round in preferred shares of ChargePoint, the world’s leading electric vehicle charging network.
(6) European logistics facilities Europe €450 million Formed a partnership with GLP and Quadreal to develop modern logistics facilities in Germany, France, Italy, Spain, the Netherlands and Belgium.
(7) Companhia Energética de São Paulo (CESP) São Paulo, Brazil R$1.9 billion Together with Votorantim Energia, acquired a controlling stake in CESP, a Brazilian hydro-generation company.
(8) Pacifico Sur Mexico C$314 million (initial) Signed an agreement alongside Ontario Teachers’ Pension Plan to acquire a 49% stake in a 309-kilometre toll road in Mexico from IDEAL.
(9) WestConnex Sydney, Australia Total value: A$9.26 billion Invested in WestConnex, a 33-kilometre toll road project in Sydney, alongside consortium partners Transurban, AustralianSuper and ADIA.
(10) Logistics facilities Korea Up to US$500 million Partnered with ESR to invest in modern logistics facilities in Korea.
(11) Challenger fund Australia and New Zealand A$500 million Partnered with Challenger Investment Partners to invest in middle-market real estate loans in Australia and New Zealand.
(12) Ant Financial China US$600 million Invested in Ant Financial, a company with an integrated technology platform and an ecosystem of partners to bring more secure and transparent financial services to individuals and small businesses.
(13) Renewable power assets Canada, U.S., Germany C$2.25 billion Acquired 49% of Enbridge’s interests in a portfolio of North American onshore wind and solar assets and two German offshore wind projects, and agreed to form a joint venture to pursue future European offshore wind investment opportunities.
(14) Berlin Packaging United States US$500 million Invested US$500 million in the recapitalization of Berlin Packaging L.L.C. alongside Oak Hill Capital Partners. Berlin Packaging is a leading supplier of packaging products and services to companies in multiple industries.
That’s right. Our Canadian pension fund is being used to prop up projects in: Australia, Belgium, Brazil, Germany, Italy, Mexico, the Netherlands, New Zealand, South Korea, Spain and the United States.
We won’t invest in Canadian industries, but we will bail them out. Great idea.
What about item #4, those green bonds?
10. CPPIB Endorses Climate Change Scam
So called green bonds are now available for sale. So state the obvious, if climate change were really a threat to humanity, then this is blatantly taking advantage of it.
Support for environmental companies or projects and clean technology is a strategic priority for EDC as demand rises for goods and services that allow for a more efficient use of the planet’s resources. Opportunities to create trade are abundant in this sector and Canada possesses a large pool of both established and emerging expertise in clean technology subsectors such as water and wastewater, biofuel, and waste to energy, to name a few.
Eligible transactions will include loans that help mitigate climate change with clean technology or improved energy efficiency. They also include transactions that specifically focus on soil, or help mitigate climate change. Our rigorous due diligence requirements ensure that all projects and transactions we support are financially, environmentally and socially responsible.
What happens when it becomes politically untenable for these globalist politicians to keep wasting taxpayer money on this hoax? Will it collapse? Will we have to perpetuate the lie in order to ensure that our “investments” don’t disappear?
Another factor that is reshaping the global investment environment is climate change. As a long-term investor, understanding environmental impacts on our investments is a key consideration and we continue to chart both the risks and opportunities stemming from climate change. This year, we launched our inaugural Green Bond, becoming the first pension fund to do so. We followed that with a euro-denominated offering. These issuances provide additional funding for CPPIB as it increases its holdings in renewables and energy-efficient buildings as world demand gradually transitions in favour of such investible assets.
(From Page 10 of the 2019 report.) Perhaps no one informed them that the climate change agenda is a scam, and has become a money pit.
This is hardly the first time that green bonds have come up. It will not be the last either.
When they say “risks and opportunities”, what are the opportunities? Will it be investing in a bubble that is sure to burst? Will it be taking advantage of desperate people?
Euro-denominated offerings? Why, is it a bigger market there?
11. What You Aren’t Being Told
The CPPIB admits that the bulk of its fund (around 85%) is actually invested outside of the country. That’s right, Canadians’ pension contributions being used to finance foreign investments. People assume that their money will be recirculated locally, but that is not the case.
CPPIB admits that it embraces the climate change scam. It goes as far as to endorse so-called “green bonds”. Again, this isn’t something the average person would know.
There is a credible case to be made that CPP funds are being used to top of public sector accounts, which are underfunded.
The CPP Investment Board intentionally distorts the truth about the unfunded liabilities. Using the OPEN GROUP approach, they show that actual assets are very close to expected assets, and they can cover their liabilities.
However, the more honest CLOSED GROUP approach will address “all” assets and liabilities, not just current ones. As it turns out, in 2016, the Canada Pension Plan had $285.4B in assets, and $1169.5B ($1.169.5 trillion) in liabilities. This works out to a $884.2B shortfall.
CPP is grossly underfunded.
CPP is being used to top up public pensions.
CPP is being invested in “green” schemes.
CPP is mainly being “invested” out of Canada.
CPP requires ever growing populations.
In short, we are screwed.