Should you invest like the Canada Pension Plan?
The inspiration for this subject and our thoughts for this post was the recent release of the Canada Pension Plan (CPP) Investment Board report – that highlighted the plan generated a net return of 7.8% for the fiscal year 2026, pushing its total net assets to $793.3 billion.
Over the long-term, the fund has delivered a 10-year annualized net return of 8.8%.
That’s pretty good overall but at a cost.
So that made us wonder, should you invest like the Canada Pension Plan?
Read on for our thoughts including a reference to how we invest today!
Should you invest like the Canada Pension Plan?
The Canada Pension Plan (CPP) officially began operating and collecting contributions on January 1, 1966. The legislation was passed by Parliament and received Royal Assent on April 3, 1965.
CPP celebrated it’s 50th anniversary a few years back!
It was founded during a period of “increasing focus on social security, the underlying goal of the CPP was to help ensure all workers in Canada would have a minimum level of financial security in retirement.”
Over the years, notwithstanding the press release commentary above, we all know by now that our CPP has been highly praised in Canada as one of our strongest national federal-provincial programs, and remains widely credited for helping to reduce seniors’ poverty.
“Statistics Canada data shows a dramatic 25% decrease in the poverty rate among Canadian seniors over the past four decades, from 36.9 % in 1976 to 12.3 % in 2010 – a decrease largely attributable to the establishment of the CPP and, in Québec, the Québec Pension Plan, according to a report by the Conference Board of Canada.*”
This helps our plan to be admired around the world although there remain opportunities to make it better…
And, despite rhetoric on this particular subject now and then, it is very sustainable too.
Every three years, the Office of the Chief Actuary of Canada (OCA), an independent federal body that provides checks and balances on the future costs of the CPP, evaluates the financial sustainability of the CPP over a long period.
In the most recent triennial review published in December 2025, the Chief Actuary reaffirmed that, as at December 31, 2024, both the base and additional CPP continue to be sustainable over the long term at the legislated contribution rates.
The Chief Actuary’s projections are based on the assumption that, over the 75-year projection period following December 31, 2024, the base CPP account will earn an average annual rate of return of 4.05% above the rate of Canadian consumer price inflation. The corresponding assumption is that the additional CPP account will earn an average annual real rate of return2 of 3.53%.
Of note: The base portion of the Canada Pension Plan (CPP) refers to the original, foundational tier of the pension program that operated before the CPP enhancement was introduced in 2019.
Should you invest like the Canada Pension Plan?
So, the plan is solid, it is admired, it is essential to creating a social income safety net along with OAS (Old Age Security), and it is well-funded.
Beyond that, the performance has been good too but again, at a cost.
The CPP Fund is divided into the Base CPP and the Additional CPP accounts and the 2026 recent results break down as follows:
- Base CPP: Grew to $712.9 billion with a net annual return of 8.0% and a 10-year annualized return of 8.8%.
- Additional CPP: Reached $80.4 billion with an annual net return of 5.4% and an annualized return of 6.0% since its inception.
So, back to our question, should you invest like CPP?
Well, you can for the most part, without all the opportunity costs we incur as taxpayers.
The solution?
Own a low-cost, growth-oriented all-in-one ETF.
As Andrew Coyne in this Globe and Mail article (subscription) so eloquently put it (!) when it comes to CPP manager alpha or added-value:
“How much “value-added” did the CPP managers earn this year? Er, none, as it happens. Actually, they got beat by the indexes, too. Sorry, did I say beat? Correction: they got smoked. The Fund earned 7.8 per cent. That 85-15 portfolio? 13.9 per cent.”
And going further:
“Well, one year. Anyone can have a bad year. But the same pattern was observed last year: CPP Investments returned 9.3 per cent, but the market-index portfolio earned 13.4 per cent. And the year before that: CPP 8.0 per cent, monkeys flinging darts at the listings 19.9 per cent.”
Ouch.
Andrew cited the fund has a new benchmark to follow, something close to 85% equities and 15% fixed income, which is largely what you can own on your own as a DIY investor in a “GRO” fund that typically holds a 80%/20% asset mix.
The returns from CPP and a “GRO” fund are very comparable – without the costs/opportunity costs.
We’ve talked about “GRO” funds before and like them – you can read about that below.
“Beyond HEQT or other “EQT ” funds we like for long-term growth, we have a bias to ETFs with tickers such as XGRO, VGRO and ZGRO – which are 80% equities and 20% fixed income. That should work for most investors – younger savers and retirees alike.
While the traditional 60/40 balanced fund is far from dead, we prefer to own more growth oriented assets in our asset accumulation years. The bonds at 20% weighting will help you stomach market volatility. Besides, owning more bonds than that (i.e., using a balanced fund with 40% bonds) could put a small dent in your asset accumulation total returns.”
From Andrew on costs/opportunity costs:
“While the Fund earned an average of 8.8 per cent annually, ol’ 85-15 earned 10.7 per cent – nearly two full percentage points more, on average, every year. These are staggering numbers. Take that first measure, the annualized 0.5 percentage point gap since 2007. Compounded, it means the contribution of active management has been to reduce the size of the national nest egg by more than $100-billion. Had the Fund stuck to passive management, its portfolio would today stand, not at $793-billion, but somewhere north of $900-billion.”
And the costs to taxpayers don’t end there.
You should also know by now that active money management costs money – you know that if you’re still paying it. You’re paying a money manager to beat or at least match the index over time – which CPP does not do.
And the costs are very, very high to Canadian taxpayers.
From Andrew:
“It’s the astronomical cost of the exercise. From around 150 employees in 2006, the CPPIB has ballooned to more than 2,000 today. Personnel costs now total over $1.2-billion, or an average of more than $570,000 per employee. Total costs, including operating expenses and management fees (but not including taxes or financing charges) now exceed $5.4-billion. Twenty years ago they were $54-million.”
All told, “to have spent all this money, more than $55-billion in all since 2007, in the fruitless quest to beat the market – in fact, to deliver returns that substantially underperform what could have been achieved by a passive investment strategy, at a fraction of the cost – is nothing short of a massive public policy debacle.”
Or in not so many words and more blunt:
Tobi Lutke, Shopify CEO.
Should you invest like the Canada Pension Plan?
Our answer is, yes, you should consider it and consider it because of the following key reasons that Tobi is a fan of:
- Long-term, global growth for young savers and retirees alike – the latter who can thrawt off long-term inflationary risks with their retirement portfolio with a higher bias to equities, and
- Low operating costs that beat the pants off most big investing brains over time anyhow, including the billions paid to CPP managers.
Thanks for your readership.
Mark and Joe.