Canada, along with the rest of the developed world, has witnessed a precipitous drop in
traditional defined benefit pension plan coverage. The result has been a shift to defined
contribution plans and an increased reliance on personal savings vehicles. This process has
effectively shifted the risk away from employers to the individual. The consequence of this shift
is an individual-centric retirement model possessing heightened complexity and significantly
On average, the fees paid under a pension plan structure are 0.38% of the assets under
management while comparable mutual fund fees average 2.1%. Although the numbers appear
small, on a relative basis, this constitutes a cost difference of over five times. Ultimately, the
cost difference results in a Canadian mutual fund investor having to delay retirement by over 7
years compared to a pension fund investor with the same investment performance. Does the
mutual fund industry’s investment performance justify the significantly higher costs?
Overwhelmingly, the academic evidence suggests no! In fact, the vast majority of active mutual
fund managers consistently underperform a simple market index such as the S&P/TSX
Composite Index. The Canadian retirement model has shifted towards a system where the
dominant retirement vehicle consistently underperforms and aggressively over charges.
In addition to unjustified fees, the individual-centric retirement model shifts the
responsibility for investment decision making onto the individual. This requires the individual
Townsend, Robert. (2015). Increased Efficiency for Canadian Retirement Investment ( Unpublished master's thesis). University of Calgary, Calgary, AB.