Bill C-25 (Historical)

Pooled Registered Pension Plans Act

An Act relating to pooled registered pension plans and making related amendments to other Acts

This enactment provides a legal framework for the establishment and administration of pooled registered pension plans that will be accessible to employees and self-employed persons and that will pool the funds in members’ accounts to achieve lower costs in relation to investment management and plan administration.

[Kevin Skerrett, Senior Research Officer, Canadian Union of Public Employees]

Thank you, Mr. Chair.

My name is Kevin Skerrett. I work as a senior research officer on pensions at the national office of CUPE, the Canadian Union of Public Employees. In my role as researcher for the past 15 years, I've provided support to our locals and provincial sections dealing with pension issues, including collective bargaining.

We would first like to thank this committee for the opportunity to present to you today on Bill C-25. As we are all aware, this proposed legislation arrives in a period of very significant challenges for those of us working to defend, strengthen, and improve retirement security for Canadians.

CUPE is the largest trade union in Canada. We represent well over 600,000 workers, mostly in the public sector, but not entirely. While a majority of our members belong to secure defined benefit-type workplace pension arrangements, we have a significant minority, maybe about a third or 200,000 members, who do not have any workplace plan, or only have some form of defined contribution system or an RRSP.

I'll limit our comments today to three main issues. First of all, I'd like to strongly affirm our agreement with the written submission that was provided to the committee by our colleagues at the CLC. CUPE is the largest affiliate of the CLC. We feel that submission presents a powerful and comprehensive case that the basic design of the PRPP as represented in this legislation is fundamentally flawed.

Insofar as our common goal, the goal we all share, and the government's stated goal, is to enhance the current and future retirement security of Canadians, we do not see evidence that the introduction of a completely voluntary individual savings scheme, with absolutely no benefit security, will do anything to achieve this objective.

In contrast, the proven viable proposals from the CLC and other quarters for a fully funded and phased in doubling of the CPP at no cost to government budgets would greatly improve the pension and retirement prospects for those lower- and middle-income workers the current system is now failing.

This leads me to the second point we would like to make today, and that is about workplace pension arrangements. It is no secret that the defined benefit workplace pension plans that most of our members belong to, and many other workers, are under significant attack in both the private and public sectors.

In the private sector many of us have seen some high-profile cases where secure defined benefit arrangements with large employers—we think of Inco, U.S. Steel in Hamilton, the Royal Bank more recently, and even Air Canada last year—saw decent defined benefit-type arrangements replaced either entirely or partly with less secure defined contribution arrangements for newly hired employees. That's part of the landscape that is evolving.

Public sector workers, the bulk of our members, are also seeing pressures to give up secure benefits, often in the form of losses of indexation provisions—protection of the purchasing power of pensions.

In this context we believe that it is not only workers that have an interest in expanding the secure and efficient CPP, but also many employers. While most employer organizations will express opposition to expanding the CPP, we are convinced that many individual employers would in fact be supportive if an expanded CPP were recognized as an opportunity to rearrange their workplace-based pension arrangement and thereby reduce their cost and cost volatility.

[Leslie Byrnes, Vice-President, Distribution and Pensions, Canadian Life and Health Insurance Association Inc.]

Thank you, Mr. Chair and members of the committee.

I'm very pleased to have the opportunity to be here today on behalf of the Canadian Life and Health Insurance Association and to share our views as the Standing Committee on Finance considers Bill C-25, the Pooled Registered Pension Plans Act.

The CLHIA is a voluntary association whose member companies account for 99% of our country's life and health insurance business. The industry provides a wide range of financial security products, such as life insurance, annuities, and supplementary health insurance, to about 26 million Canadians. Also, over two-thirds of Canada's pension plans, primarily defined contribution plans for small and mid-sized businesses, are administered by our life insurance companies.

We commend the government for introducing Bill C-25.

It targets the gap in Canada's retirement savings system that was identified in Jack Mintz's 2009 research for the joint working group of finance ministers, that gap being modest and middle-income Canadian households that may not be saving enough for retirement. It builds on the consensus among all federal, provincial, and territorial finance ministers, and it does so by seeking to build on the strengths of the third element of our three-pillar retirement saving system, namely, private sector savings.

The goal of the first two pillars, the public part, through OAS/GIS and CPP/QPP, is to provide a minimum income to meet basic needs. Canada is recognized internationally as doing a very good job at that.

It's the third pillar, private sector savings through workplace plans and individual savings, that's intended to provide income beyond the basic needs. This is where the shortfall exists, particularly with those who don't have access to a workplace retirement plan.

We believe PRPPs can be a vehicle to make a fundamental difference to the retirement savings landscape in Canada. The keys to their success are several.

One is their low cost: pooling will help to enhance scale and efficiencies. Another is simple designs that help keep those costs down. Also, professional administrators will relieve small and mid-sized businesses from the administrative and legal burdens that prevent so many businesses from offering retirement plans today. Next is harmonization across the country, which will be important in gaining the scale and efficiencies and which, again, are so important to getting at those low costs. Also, there are automatic features that provide behavioural nudges to encourage people to start saving, with appropriate opt-out provisions, of course.

We're hearing that small businesses are keenly interested in PRPPs. We've provided the clerk with the results of a survey of small and mid-sized businesses that we commissioned before Christmas. I'd just like to highlight a few points.

First, and hardly surprising, the smaller the company, the less likely they are to have a workplace retirement plan. Second, two-thirds of respondents said they would be interested in offering PRPPs. Third, over 70% of that group said they would be interested in contributing to a PRPP, even though they realize they wouldn't be required to do so. Finally, over 70% of all respondents thought that all employees should have access to some form of retirement savings plan at the workplace.

Clearly, there is still work to be done. Bill C-25 sets out the framework, but much of the detail will of course be spelled out in the regulations. As well, to ensure that PRPPs can be effective national plans, we'll also need provincial legislation. We look forward to working with governments and policy-makers on these next steps.

Thank you again, Mr. Chair, for the chance to appear here today. I'd be pleased to provide any further input.

[Chris Roberts, Senior Researcher, Social and Economic Policy Department, Canadian Labour Congress]

Thank you very much.

Thank you to the members of the committee for giving us the opportunity to appear before you today and to present our views on Bill C-25. My remarks to the committee today are developed and amplified in the written submission that I believe you all have before you.

Just as a quick word about the Canadian Labour Congress, it's the national voice of 3.2 million workers in Canada. We bring together Canada's national and international unions, along with provincial and territorial federations of labour and 130 district labour councils whose members work in virtually all sectors of the Canadian economy, in all occupations, and in all parts of Canada.

The CLC is particularly concerned that a growing body of evidence suggests that a very significant proportion of middle-income earners are entering retirement with significant debt levels and facing a major post-retirement decline in their standard of living. The most recent study suggests that half of baby boomers earning modest incomes—so between $35,000 and $80,000 a year, on average—risk at least a 25% decline in their standard of living after retirement.

While the causes of this are several, a significant factor contributing to this outcome is the declining access of employees to workplace pension plans. By 2009, just under 10 million employees, or over 60% of all paid workers, had no workplace pension plan coverage whatsoever. Factoring in the self-employed, there are 12.4 million Canadians in the labour force with no pension plan coverage. The problem is especially acute in the private sector, where three-quarters of paid workers have no access to a pension plan at work.

In the CLC's submission, a phased-in, fully funded doubling of future Canada Pension Plan retirement benefits remains the most efficient and cost-effective means of addressing the problem of inadequate retirement savings in Canada. Unmatched by any private sector retirement savings scheme, the CPP delivers a secure, dependable retirement benefit, protected against inflation and payable until death, at a very low cost. The CPP is funded through earnings based on contributions so that future beneficiaries are not dependent on future tax revenue. Virtually all working Canadians are already members and contributors to the CPP.

By contrast, PRPPs are voluntary arrangements that employers may choose to make available to employees, and to which both employers and employees may choose to contribute. Significant challenges confront PRPPs in achieving anything close to the universal portability that the CPP already provides. Built on voluntary individual savings accounts, PRPPs cannot provide income predictability or security in retirement, as the CPP now does.

In the CLC's submission, PRPPs will not reverse the decline in workplace plan coverage. The crisis of workplace pension plan coverage in Canada is largely a crisis of coverage in small workplaces. Currently the vast majority of workers employed by small employers have no access to a workplace pension plan or a workplace-based voluntary savings vehicle. This has to do with a higher likelihood of bankruptcy and high rates of job creation and destruction, as well as high labour turnover in small enterprises.

Taken together, the economic and financial circumstances facing small and medium-sized enterprises make the voluntary take-up of PRPPs by small employers no more likely than the take-up of group RRSPs or defined contribution plans. The reasons for that are developed more extensively in our written submissions.

I want to say, finally, that there is little evidence that savings rates are a function of fees. To be sure, high fees are a serious problem for building retirement savings, but it is the presence of a mandatory plan in the first instance that predicts adequate savings in retirement, not low fees in voluntary savings plans.

In sum, PRPPs are unlikely to significantly expand workplace pension coverage. Rather, they are likely to further undermine defined benefit pension plans that currently exist and distract from what many pension experts already agree is needed: an expanded CPP.

Thank you very much.

[Jean-Pierre Laporte, Pension Lawyer, As an Individual]

Good afternoon. My name is Jean-Pierre Laporte. I'm a pension lawyer with the law firm of Bennett Jones LLP in the city of Toronto.

I welcome the opportunity to provide to the committee some expert testimony on pooled registered pension plans. My sense is that Bill C-25, in its current form, is an example of good intentions creating a legislative response that will have numerous unintended adverse consequences. Let me explain myself.

The stated goal of the legislation is to make it easier for Canadians to save towards their retirement. This is a goal that is shared by most Canadians. The vehicle chosen by Parliament is this pooled registered pension plan, or pooled plans. My remarks will explain why pooled plans are unlikely to achieve this goal.

First, at its core a pooled plan is a locked-in RRSP. As such, it shares all of the flaws of the RRSP, which I will discuss later, and has the added disadvantage that it doesn't have a lot of flexibility.

One of its three main deficiencies is that it locks in money until retirement. In other words, withdrawals are strictly restricted until retirement age. This may make sense in a traditional pension plan for someone who has a good salary and where every penny doesn't need to be used up to balance the family budget, but clearly this isn't the population that is targeted by pooled plans. We're talking about small entrepreneurs and their employees, and the self-employed.

The second is that it doesn't compel any employer contributions. This means that 100% of the funding responsibility rests on the backs of those who already have a hard time saving. At least under a defined contribution plan, the Canada Revenue Agency has imposed a minimum 1% employer contribution. I don't understand why the pooled plans don't have that 1% rule.

The third deficiency is that it doesn't give participants the right to vote with their feet. As I understand the legislation in its current form, it is the employer who selects the pooled plan from private sector providers, not the employees. So as long as the participants are employed, if they're not satisfied with the pooled plan, they're stuck with it. This isn't like an RRSP, where if you find higher returns somewhere else, you can always transfer your money.

Let me return to the RRSP flaws. Because it's a capital accumulation plan, the responsibility for the investments rests on the shoulders of the member. The member often is unsophisticated or doesn't have the time or the inclination to become an investment expert. So it ends up that bad decisions are made, which mean lower returns.

Finally, one of the fundamental flaws with all capital accumulation plans, including RRSPs, is that when there is an economic downturn and the value of the assets under management shrink, and you happen to retire at that time, the losses cannot be made up with additional contributions, the way they are in defined benefit plans, like the benefit plan the federal civil servants participate in. So there are no special payments and no way to make up for bad years. You're playing Russian roulette with the savings of Canadians. To me, this is a lot of taxpayer assistance going down the drain after decades of investing, so I have some real reservations about the current legislation.

Thank you for your attention.

[The Chair, Conservative, James Rajotte]

I call this meeting to order. This is the 45th meeting of the Standing Committee on Finance. I want to welcome all of our guests here today.

Pursuant to the order of reference of Wednesday, February 1, 2012, we're continuing our study of Bill C-25, An Act relating to pooled registered pension plans.

We have before us seven witnesses.

First we will hear from Mr. Jean-Pierre Laporte.

Welcome.

We have, secondly, the Canadian Labour Congress. We also have the Canadian Life and Health Insurance Association. And we have the Canadian Union of Public Employees.

We have a representative from the Quebec Employers' Council.

We have Teamsters Canada. And as an individual, we have Monsieur Michel Lizée via video conference.

Can you hear me, Monsieur Lizée? Is the sound coming through for you? We can't hear him....

[The Chair, Conservative, James Rajotte]

Thank you.

I want to thank all of our witnesses for being here to respond our questions. It was a very lively debate. If you have anything further to submit to the committee, please do so. We will all consider it.

Colleagues, I just wanted to see whether there was agreement to proceed with the proposed operational budgets for Bill C-25, Bill S-5, and Bill C-311. You should all have the numbers in front of you. Is there agreement to these three bills and the witnesses?

[Dr. Jeffrey Turnbull, Past-President, Canadian Medical Association]

Thank you.

Mr. Chair, honourable members, thank you for the opportunity to appear before this committee.

The Canadian Medical Association represents 76,000 physicians from across the country. Over the past 30 years, we have been very proactive in the area of pensions, and have engaged in a wide range of public consultations. In fact, the CMA was advocating for retirement savings plans even before the creation of the RRSPs in the 1950s.

Like the Canadian population at large, physicians represent an aging demographic; 38% of Canada's physicians are 55 years or older, for whom retirement is an important consideration. In addition, the vast majority of CMA members are self-employed physicians, and as such do not participate in workplace registered pension plans. Physicians, therefore, rely heavily on registered retirement savings plans relative to their retirement savings vehicles.

Our research shows that our membership favours plans that would enable the self-employed to participate in pension plans like the PRPPs. Further, physicians employ an estimated 155,000 Canadians, meaning that in fact they operate small businesses. Their employees would also be eligible for and benefit from the PRPP process.

CMA members believe that PRPPs will begin to address the imbalance between retirement savings opportunities for self-employed Canadians and those with workplace pensions. We are, however, concerned about the proposed structure and limitation of the PRPPs in three particular areas, which I'll bring to your attention, if you'll allow me.

To achieve adequate income replacement in retirement, CMA believes that Canadians should be encouraged to save more for their retirement through tax-deferred vehicles. The current percentage of dollar limits on contributions for vehicles such as the PRPPs and the RRSPs are well below the limits in the United States and the United Kingdom. Maximum dollar limits were essentially frozen 25 years ago, and despite a modest increase in 2004, these limits are easily attainable, and could now be easily improved or increased.

CMA therefore encourages this committee to consider amending Bill C-25 to increase the retirement savings capacity for self-employed individuals by raising the combined limit of the RRSPs and the PRPPs.

As for defined benefit and targeted benefit pension plans, the summary report on retirement income adequacy research highlighted that defined benefit pension funds and annuities enable investors to share longevity risks as well as pool risky investments to diversify risk. By pooling risk, defined benefit and targeted benefit pension plans provide more secure saving vehicles than defined contribution plans. The PRPP proposal should thus not be limited to defined contribution pension plans but also include targeted benefit and defined benefit plans. That should be considered and encouraged.

The CMA also believes that the sponsors of PRPPs should not be limited to financial institutions. Large, well-governed professional associations that represent a particular membership should be able to sponsor PRPPs for their own members, including self-employed members. The CMA recommends that clauses 14 to 26 of Bill C-25 be amended to clarify the type of organizations that can qualify for PRPP sponsorship.

As Canadians age, concerns about long-term care are also on the increase. The CMA encourages the government to consider options for pre-funding long-term care, including private insurance and tax-deferred, or tax-prepaid, savings approaches.

In closing, while the CMA supports the proposed PRPP framework in principle, we strongly ask you to consider our recommendations, as in our view they would improve the proposed legislation before us today by ensuring that PRPPs provide value to all self-employed Canadians, including physicians.

We appreciate this committee's work in seeking retirement solutions for all Canadians. We believe that together we can find innovative ways to provide hard-working Canadians with income security and dignity after retirement.

Thank you very much for listening.

[Mitch Frazer, Chair, National Pensions and Benefits Section, Canadian Bar Association]

Mr. Chair and honourable members, good afternoon.

On behalf of the Canadian Bar Association, I would like to thank you for the invitation to appear before the committee today to discuss our submission on Bill C-25 and to answer any of your questions. We are grateful for your parties' interest in securing the pension promise for all Canadians.

The Canadian Bar Association is a national organization representing more than 37,000 legal experts, including lawyers, law students, notaries and law professors throughout Canada. The primary objectives of the association include improvement of the law and the administration of justice. It is with these objectives in mind that I am speaking to you today.

The CBA submission you have received was prepared by members of the pension and benefits law section. This section consists of lawyers who have specialized knowledge and expertise in pension and benefits. They provide advice to a wide range of stakeholders, including pension administrators, employers, unions, employees and employee groups, and trust and insurance companies, to name a few.

The CBA has encouraged the government to adopt legislation permitting PRPPs in Canada as one means of improving the retirement savings system by providing an accessible, straightforward, and administratively low-cost retirement option for Canadians. We provided advice and recommendations to the government on the framework for PRPPs and on related tax issues as Bill C-25 was being developed.

The CBA was pleased with the government's introduction of legislation to allow PRPPs, which should fill a gap in the retirement savings system, particularly for the self-employed and for employees of small to medium-sized businesses that do not currently participate in registered pension plans. However, based on our expertise and knowledge of pension law, we have four general concerns about the bill's proposed framework.

First, PRPPs, as contemplated by the bill, do not appear to be a traditional pension plan, such as a defined benefit plan. Rather, they appear to be a new savings plan vehicle, analogous to group RSPs. As such, PRPPs may not, by themselves, provide adequate retirement income.

Second, PRPPs should strive for provincial harmonization to achieve the government's desired effect of offering simple, low-cost plans. Having to accommodate for different provincial treatments increases costs and could prevent eligible administrators from offering a single PRPP across the country.

Third, the bill should specifically allow associations of professionals to act as plan sponsors. We believe that this would help achieve the government's primary goal of achieving expanded pension coverage.

Fourth, the bill requires PRPP administrators to act as trustees, which will give rise to a fiduciary duty on their part. The CBA section questions how that duty will be reconciled with the administrator's ability to offer a commercial service.

Our written submission to the committee also contains a number of technical recommendations that we believe would help clarify the interpretation of the bill. While I do not have time to go through all of these recommendations in detail, I'd be pleased to answer any questions during the allotted time.

We at the CBA would be pleased to respond to any follow-up questions at a later date.

On behalf of the CBA, thank you again for the opportunity to appear before the committee.

I would like to thank you for the interest and time you have given me.

We commend all of you for your efforts with respect to this extremely worthwhile initiative.

Thank you.

[Susan Eng, Vice-President, Advocacy, Canadian Association of Retired Persons]

Thank you very much.

CARP is a national, non-partisan organization with more than 300,000 members and 50 chapters across the country. We advocate for policy and legislative changes that will improve the quality of life for all Canadians as we age, and retirement security is the issue that brings us here today.

The core goal of any country's pension system is to provide an adequate system that is available to the full breadth of the population, sufficient to prevent poverty in old age, affordable to employers and employees, and robust enough to withstand major shocks, including economic, demographic, and political volatility. Recent events demonstrate that Canada's retirement system is not meeting that goal, in part because of inadequate pension coverage.

The question is whether the pooled registered pension plan envisioned by Bill C-25 fulfills the goal of a robust system.

It is not universal, but is optional. It's at the employer's option.

It's not necessarily low-cost. We have already heard the Minister of State for finance indicating that they may not set fees according to section 26 of the act.

It is a strictly defined contribution plan, which is little different from a group RRSP and not as attractive in some cases, since this plan is going to be locked in. And it is not as portable as it could be, given the challenges of the bureaucratic changes.

So it is respectfully submitted that material improvements are necessary, including proceeding with the promised enhancement of the CPP in order to ensure that the vast majority of Canadians can actually have access to an affordable and reliable pension savings vehicle to save for their own retirement.

To speak specifically first on the issue of universality, the PRPPs are dependent on the voluntary choice of employers to enrol their employees, and once enrolled the employees have an option to opt out. If they are not enrolling in RRSPs now, then what are the improved incentives going to be that will have employees choose to remain within PRPPs? Certainly deductible contributions are welcome, but mandatory employer contributions would be even more welcome. Even the existing DC plans require a 1% payroll contribution by the employer in order to be registered.

We would suggest that some reconsideration be made of the locking-in provision, because at this point, for many people it's a disincentive. It is important to allow some flexibility to employees, because they are now, according to the scheme of the act, not able to change their own administrator once an employer makes that change.

Auto-enrollment is something we have recommended, because it would improve uptake. But it's only beneficial if the plan itself is providing a predictable and adequate pension; it's not necessarily valuable if it is driven into the arms of a private-sector plan.

The second point that's important is that any new plan should enhance the adequacy of any retirement income, in terms of both sufficiency and predictability. The pooling and professional management envisioned by the PRPPs will of course improve adequacy, but high fees can still erode the earnings, as evidenced by the Australian experience with its superannuation fund. We are concerned with the reported comments that the government will not use section 26 to regulate the fees but will rather let it go to competition among relatively few players.

Finally, defined contribution plans leave the risk with the employees.

We are also a little bit concerned about the governance and fiduciary responsibilities, which at first seem to impose a fiduciary obligation, but we find that as soon as an employee makes a choice, this is going to be relieved.

I want to make a final comment on the CPP enhancement.

I left with the clerk, Mr. Chair, a copy of a chart that I think the members might find useful and, if it's acceptable to you, I'd ask that it be circulated.

The point I want to make about CPP enhancements simply is that it is an opportunity to provide for a mandatory contributory plan. CARP members were very encouraged in June 2010 when the finance ministers offered both a CPP enhancement and the PRPPs. Now that the CPP enhancement is off the table, that is a concern.

Our point to you simply is that even a modest improvement in the CPP—say, a 10% improvement to the benefit—would be a very cost-effective method to improve on people's retirement security. The cost is no more than $45 a month for employer and employee at the maximum levels, and for a low-income person—for whom this matters the most—at, say, a $20,000 income, the cost is an additional $18 a month for employer and employee.

We believe that Bill C-25 is mostly an important first step in addressing the retirement savings gap among Canadians, but we believe more can be done.

[The Chair, Conservative, James Rajotte]

I call to order this 44th meeting of the Standing Committee on Finance. Pursuant to the order of reference of Wednesday, February 1, 2012, the committee is continuing its study of Bill C-25, an act relating to pooled registered pension plans and making related amendments to other acts.

We have with us here today six organizations: the Canadian Association of Retired Persons; the Canadian Bankers Association; the Canadian Bar Association; the Canadian Federation of Independent Business; the Canadian Medical Association; and the Regroupement des jeunes chambres de commerce du Québec.

You have five minutes to make your presentation.

Ms. Eng, we'll begin with your presentation, for five minutes, please.

[Ted Menzies, Conservative, Minister of State (Finance)]

Thank you, Mr. Chair.

It is indeed an honour to be sitting directly in front of you, instead of beside you, and cheering you on in your balanced decisions, to which we listened many days and many nights at this committee. I enjoyed it all.

Welcome to the new members here.

It is great to be back, and great to be back to speak to what I think is a well overdue option for our pension or income retirement system in Canada.

I should mention that I'm here with some very learned people, some from our Department of Finance—Diane Lafleur, Leah Anderson, Lynn Hemmings, and Yasir Syed—and as well from OSFI, or the Office of the Superintendent of Financial Institutions, a couple of experts, Carol Taraschuk and John Grace. John Grace and I and Lynn covered a lot of miles developing this new concept. They have been a tremendous help. Bill C-25, the Pooled Registered Pension Plans Act, is the reason we are here.

Mr. Chair, Canada's retirement system is recognized around the world by such experts as the OECD as a model that succeeds in reducing poverty among Canadian seniors and in providing generous levels of replacement income to retired workers. Simply put, our system is the envy of the world. The introduction of the pooled registered pension plan, or, as it has come to be known, the PRPP, will only build on this well-earned reputation.

The success of this model rests on the strength of the three pillars. The first pillar is made up of the old age security, or OAS, as well as the guaranteed income supplement, often referred to as the GIS. These programs provide a basic minimum income guarantee for seniors and are funded primarily through taxes on working Canadians. Our government has a responsibility to ensure that programs such as these are available for the next generation of Canadians as well. That's why our government will take a prudent, balanced, and responsible approach to making sure that OAS remains sustainable.

The second pillar is the Canada Pension Plan as well as the Quebec Pension Plan. These are mandatory public target benefit pension plans that provide a basic level of income to Canadian workers when they retire. There are currently 16.5 million workers contributing to either CPP or QPP. With these programs paying $44 billion in benefits per year to now more than 6.5 million Canadians, the CPP is the centrepiece of Canada's pension system. I'm proud to say that it is fully funded, it is actuarially sound, and it is sustainable for the long term.

The third pillar is composed of tax-assisted private savings opportunities to help encourage Canadians to accumulate additional savings for retirement. It includes registered pension plans and registered retirement savings plans. In total, the cost of tax assistance provided on retirement savings is currently estimated at $25 billion per year.

How do the PRPPs fit into what, as I say, is a good system already?

In 2009 a joint federal-provincial research working group conducted an in-depth examination of retirement income adequacy in Canada. While the working group concluded that Canada's retirement system is performing well, it also found that some modest- and middle-income households may not be saving enough for retirement.

Of particular concern were the following findings. Participation in employer-sponsored registered pension plans was declining. The proportion of working Canadians with such plans has declined from 41% in 1991 to 34% in 2007. Also, Canadians are not taking full advantage of other retirement savings options, such as the RRSP. Currently there is over $600 billion of unused room in RRSPs.

Through you, Mr. Chair, let me reassure the committee that our government recognizes the importance of ensuring that all Canadians have adequate income for their retirement. The report by the working group sent a clear signal that a gap exists on the voluntary side of Canada's retirement system.

With this information in hand, our government took immediate action to fill that gap. Over the past two years, our government's commitment to strengthen Canada's retirement system has taken me to every province and territory and countless communities across this country. In my travels, I've consulted with many Canadians, met with our provincial and territorial counterparts, and held discussions with small and medium-sized business owners as well as self-employed Canadians.

At our federal-provincial-territorial finance ministers meeting in December of 2010, after examining the various proposals that came out of the consultations, the federal, provincial, and territorial governments unanimously decided to pursue the pooled registered pension plan framework. This decision was taken because the PRPP was considered an effective and appropriate way to target those modest- and middle-income individuals who may not be saving enough, and in particular those who currently do not have access to an employer-sponsored registered pension plan.

What then are the PRPPs? They are in fact a large-scale, broad-based pension arrangement. They will be available to employees with or without a participating employer. As well, they will be available to the self-employed. This is particularly important as, incredibly, over 60% of Canadians do not now have access to a workplace pension plan. In short, PRPPs will provide these Canadians with access to a low-cost pension arrangement for the very first time.

By pooling pension savings, PRPPs will offer Canadians greater purchasing power. Basically, Canadians will be able to buy in bulk. This means more money would be left in their pockets for their retirement. The introduction of PRPPs also marks a significant advancement for small and medium-sized businesses. Small and medium-sized businesses have, until now, experienced a significant barrier in being able to offer a pension plan to their employees. Under a PRPP, most of the administrative and legal burdens associated with a pension plan will be borne by a qualified, licensed, third-party administrator.

We all understand that Canadians want their governments to work together to deliver results for them, and the PRPP is a prime example of what we can accomplish for Canadians when we do just that. Bill C-25 represents the federal portion of the PRPP framework and is a major step forward in implementing PRPPs. Once the provinces put in place their PRPP legislation, the legislative and regulatory framework for PRPPs will be operational. This will allow PRPP administrators to develop and offer plans to Canadians and to their employers.

Working together, I am confident we can get this important new retirement savings option up and running for Canadians as soon as possible. Let me quote Dan Kelly, the vice-president of the Canadian Federation of Independent Business:

This can't come soon enough from our perspective. We think this has great potential.

Before I take questions from committee members, I cannot stress enough how the introduction of the PRPP is just the most recent example of this government's continuing commitment to ensuring that Canadians have a dignified retirement.

I would like to take some time before you today to highlight some of the actions our government has taken to secure retirement income for Canadians. Financial literacy, for example, is an area where we are working to improve retirement income outcomes. Obviously, a strong system depends on the ability of its users to make informed decisions. That is why our government launched the task force on financial literacy to make recommendations on a cohesive, national strategy to improve financial literacy across Canada.

Since 2006, our government has increased the age credit amount by $1,000 in 2006 and then another $1,000 in 2009. We've doubled the maximum amount of income eligible for pension income credit, up to $2,000.

We introduced pension income splitting. We increased the age limit for maturing pensions and RRSPs to 71, up from 69 years of age before.

All told, we have provided about $2.3 billion in annual targeted tax relief to seniors and pensioners.

In addition, Budget 2008 introduced the tax-free savings account, which is particularly beneficial to seniors, as it helps them meet their ongoing savings needs on a tax-efficient basis after they no longer are able to contribute to an RRSP.

Our record also includes important improvements to several specific retirement income supports. In Budget 2008, we increased the amount that can be earned before the GIS is actually reduced. We raised that to $3,500 so that GIS recipients will be able to keep more of their hard-earned money without any reduction in their GIS benefits. Also, Budget 2008 increased flexibility for seniors and older workers with federally regulated pension assets that are held in life income funds.

In May 2009, Bill C-51 reformed aspects of the CPP to increase flexibility and fairness in the plan and allow it to better reflect the way Canadians live, work, and retire.

In Budget 2011, we announced a new GIS top-up benefit for the most vulnerable seniors. Seniors with little or no income will receive an additional annual benefit of up to $600 for seniors and $840 for couples.

The next phase of Canada's economic action plan provides an additional $10 million over two years to enhance the New Horizons for Seniors program. This additional funding is enabling more seniors to participate in social events, pursue an active life, and contribute to their community. The program provides funding for projects to expand awareness of elder abuse, promote volunteering and mentoring, as well as encourage social participation of seniors.

Clearly, Mr. Chair, our records show our government is committed to the financial well-being of Canada's seniors, a commitment we've demonstrated since our first budget.

The PRPP is only the latest example of our government's continued commitment to helping Canadians realize their retirement dreams. The introduction of the PRPP not only fills a gap in Canada's retirement system but makes a system that is the envy of the world even stronger.

Thank you, Mr. Chair. I'd be happy to take questions.

[The Chair, Conservative, James Rajotte]

I call to order the 43rd meeting of the Standing Committee on Finance. Our order of the day, pursuant to the order of reference of Wednesday, February 1, 2012, is study of Bill C-25, An Act relating to pooled registered pension plans and making related amendments to other Acts.

We want to welcome our guests here today from the Department of Finance, the Department of Justice, and the Office of the Superintendent of Financial Institutions, and particularly the Hon. Ted Menzies, Minister of State for Finance, in his first appearance before the committee on which he used to sit as a very valuable member.

Welcome, Minister Menzies, to the committee. It's a pleasure to have you here today.

I'll note that we have Mike Wallace back at the committee as well. He came just to say hello to you—as well as Mr. Marston.

Minister Menzies, I understand you have an opening statement to present to the committee, and then we'll have questions from all the members.

Report Stage

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Mr. Speaker, I am pleased to rise today to debate Bill C-19.

Once again, the Conservatives are showing their narrow ideology in trying to eliminate the Canadian firearms registry. This registry is strongly defended by our police forces and by the majority of Canadians, but this government is choosing once again to ignore reality. It continues to reject all the recommendations by the opposition parties and the provinces, showing utter contempt.

The arguments in favour of this bill are not very convincing, while there are many arguments against the bill that are backed by data and by groups that work in protecting Canadians. The Conservatives' three main arguments—that the registry is expensive and ineffective and it violates the rights of hunters—do not hold water.

Yes, the initial cost of the registry was exorbitant, but it has already been paid for by Canadian taxpayers. Abolishing the registry will not bring back the money that has already been spent. In addition, today, the government is refusing to even give the provinces the data when they are the ones that paid for it. The provinces will therefore have to once again spend taxpayers' money to recreate a registry that already existed. In short, the Conservatives are once again making the provinces pay, just as they are doing with Bill C-10 and Bill C-25 and just as we saw recently with the proposed changes to increase the age of eligibility for old age security benefits.

Also, according to the RCMP, abolishing the registry would result in direct savings of only $1 million to $3.6 million. That is what the lives of the thousands of people saved by this registry are worth to the Conservatives. This government claims to want to destroy the registry to save money. To the government, then, a life is worth nothing.This so-called savings is nothing compared to the increased cost of police investigations that will inevitably result from abolishing this registry.

In other words, the Conservatives' main argument for wanting to abolish the registry is simply a ridiculous lie. The annual cost of the registry is negligible and the government could easily cover this low cost if it stopped wasting taxpayers' money on exorbitantly priced military aircraft and the ridiculous promotion of royalty.

The other argument frequently used by the Conservatives to justify destroying the registry is that it is supposedly ineffective. This argument is no more convincing than the others. Police forces consult the registry more than 17,000 times a day and want the registry to be maintained. It allows police officers to plan their operations better when they have to intervene with individuals, which contributes to the safety of our police forces. The registry also helps reduce the cost of police investigations. When a long gun is used in a crime, police officers can easily track the firearm and its user.

The registry has also helped save many lives. Even though the majority of murders are committed with handguns, long guns are used in the majority of spousal murders and suicides in which firearms are involved. Various women's advocacy associations want the registry to be maintained. Year after year, long guns are used in two out of every three murders involving firearms. The registry has helped greatly diminish the number of spousal murders. For example, only a third as many spousal murders were committed with long guns in 2007 as in 1996, despite population growth, which shows the usefulness of the registry.

These long guns wreak even more havoc on Canadian society when we consider suicide. Year after year, close to 60% of firearms suicides are committed with long guns. The registry makes it possible to quickly determine if, for example, a depressed person owns a firearm, which allows authorities to save many lives. The number of firearms suicides dropped from 569 in 2001 to 475 in 2004, proving once again that the registry works.

Since we know that most homicides committed with firearms are suicides, it is of the utmost importance for the government to take action. However, this government is irresponsible and would rather ignore the facts and introduce a bill that will lead to the death of hundreds of Canadians.

The survivors of the various massacres that have occurred in Canada also want the registry to be maintained. The Conservatives say that they are on the side of victims of crime, but they ignore and turn their backs on those victims when they take a stand that does not match the Conservative ideology. These same Conservatives accuse the opposition parties of being against victims.

If, as they claim, the Conservatives are on the side of victims, why are they not listening to them? Why are they making their retrograde Conservative ideology a priority rather than addressing the concerns of victims? This government is illogical: it says that it wants to make our streets safer by imposing repressive bills, but it wants to allow the free circulation of firearms. This clearly shows that there is something fundamentally wrong with the Conservative ideology.

In addition, one of the main reasons that there are problems with the registry is that the Conservatives did not enforce the legislation. Instead of fining or, depending on the seriousness of the case, prosecuting those who did not register their guns, the Conservatives gave offenders amnesty. Since 2006, this government has been sending the message that the laws pertaining to the registry are not important and that the Conservative government supports offenders. As a result, millions of firearms are still not registered. What credibility does this irresponsible government have when it states that the registry is ineffective, given that it is directly responsible for the problems with the registry? The Conservatives have done nothing but sabotage the registry since 2006. This government claims to want to enforce the laws but, instead, it is sending the message that only the laws that are consistent with the Conservative ideology have to be respected.

Another argument put forward by the Conservatives to justify destroying this registry is that it violates the freedom of firearms users by imposing red tape. That does not stand up either. Only 2 million people have to deal with the registry's red tape out of a total population of almost 35 million Canadians. Why destroy this registry and sacrifice the majority of Canadians to save a very small minority from the administrative irritants of the registry? Should we stop registering vehicles? Now there is a question. Yet there are far more users of vehicles than of firearms. Obviously, vehicle registration does not go against the Conservative ideology, which is modelled on the mentality in the United States.

It is pathetic that this irresponsible government is again trying to destroy the registry. Once again, this government is lying to Canadians in order to justify its actions. Once again, this government is allowing the United States—in this case the powerful gun lobbies—to dictate our country's policies. It is time that this government started to listen to reason and the facts: abolishing this registry will lead to more suicides and spousal murders. Abolishing the registry will complicate the work of our police officers and make it more dangerous.

I could go on for hours, but I know that the Conservatives do not listen to anyone. They refuse to listen to the recommendations put forward by the opposition parties and the provinces. They do not have enough respect for the loved ones of those who take their own lives, the victims of killings and abused women to consider, at a bare minimum, providing the provinces with the data from the registry.

They do not even have enough respect for our police forces to listen to them when they say that they need the registry. In short, these Conservatives, who always claim that they are tough on crime, are promoting crime by allowing weapons to circulate freely. They are completely forsaking victims by ignoring them. This bill clearly demonstrates the extent of the Conservative's contempt for our constituents. I will continue to stand up for all those Canadians who have been abandoned by this Conservative government.

Opposition Motion--Old Age Security

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I thank my colleague from Terrebonne—Blainville for sharing her time with me and for an excellent speech. There were good points, it was well argued and it was an important message from our new generation of NDP MPs.

It is useful, as we enter into a debate on the old age security regime in this country, to pause and reflect on some of the steps that got us to the position we are in. I am very proud, as an NDP member of Parliament, to take up the cause of defending the integrity of our old age security system, as has been our function and role throughout much of the last century.

I represent the riding of Winnipeg Centre, which is home to two of the greatest champions of social justice, I might say, that this country has ever known. In 1921, the Government of Canada wanted to send J.S. Woodsworth to prison for his role as the leader of the 1919 general strike but the good people of Winnipeg Centre sent him to Parliament in Ottawa instead and he stayed there until his untimely death in 1942.

I raise that subject because, only three years after J.S. Woodsworth arrived in Parliament, the prime minister of the day, William Lyon Mackenzie King, was in trouble. He was going to lose his government and needed the coalition support of what J.S. Woodsworth called the ginger group at the time, the Independent Labour Party. Woodsworth negotiated with Mackenzie King a deal, a condition, a compact, a coalition so to speak. The very art of politics is forming compacts, coalitions and agreements. Woodsworth went to Mackenzie King and said, “If you agree to introduce an old age security regime, I will support your government”. That was the birth of the Canadian old age security system. We have that letter on file at NDP headquarters. It took Mackenzie King a long time to live up to his promise but he indeed did introduce old age security.

When J.S. Woodsworth passed away, he was replaced by the man who is known as the father of the Canadian pension plan, Stanley Knowles. Stanley Knowles represented my riding from 1942 until his stroke in 1984 made it impossible for him to continue. He served continuously, except for the Diefenbaker sweep of 1957. During that time, he was not only the undisputed champion of the Canadian pension plan but he fought and fought to introduce it and the old age security system. There are famous speeches on record that people published in their entirety and circulated across the country as this movement gained momentum. He did not stop fighting until he managed to have the old age security pension indexed to inflation as a secondary objective. This took his entire career but it was his proudest achievement and perhaps one of the most proud achievements of the NDP.

It always seems to fall to us to defend the integrity of the pension system, which has been under continuous assault by successive Conservative governments that do not fundamentally believe in this type of universality of old age security systems.

We can trace what is going on today with the terrible notion that the Prime Minister of Canada would announce fundamental social policy changes in a speech in a foreign country. We can trace it back, or I do at least, to the musings of the unofficial prime minister of Canada at the time, Thomas d'Aquino, the chief executive officer of the Canadian Council of Chief Executives. Mr. d'Aquino had a checklist of things he thought Canada needed to do that consisted of 10 or 15 items. One by one he was checking them all off and one of them was, which he announced quite publicly, that Canada had to get out from under the crippling legacy costs.

Nobody really paid too much attention because the term “legacy costs” did not ring any bells. What he meant was pensions. Sure enough, the right wing think tanks started to fall in line and also blame pensions for all of our economic woes. There was no mention of the fact that corporate tax cuts had taken over $100 billion worth of fiscal capacity in the two last governments, the Martin regime and this one.

Even when General Motors and the big auto companies ran into trouble, nobody said that maybe people were not buying their cars because they were making models nobody wanted. Immediately they said that the reason they could not function was because their legacy costs were too great, that they had to get out from under their pensions.

With this notion of never let a good crisis go to waste, they started to segue from the real root cause of their industrial woes and blamed it on this notion that we deserved to retire in some dignity and that we could take seniors out of poverty.

We have three pillars to our old age security system. One is personal savings, whatever one can save and invest during one's working life. Second, hopefully one has a pension through one's workplace, although that is becoming a rarity because of this full frontal assault by the right on the very notion that workplace pensions are possible. Third, is a robust universal government-sponsored pension plan.

The government would have us believe that there is something luxurious and comfortable about the pension system as we know it, the OAS and GIS. In actual fact, when compared with other countries, the replacement of earnings in retirement does not come anywhere close to a lot of western developed nations. It is really quite a modest system.

We have seen this assault on pensions and on the notion of pensions gaining validators and momentum, or currency. In fact, some experts in the field challenge whether it is an emergency at all. Yes, there is a demographic blip, but we would have had the fiscal capacity to provide were it not for the choices made by successive Liberal and Conservative governments to hollow out that fiscal capacity. However, we seem to be able to find money to spend in corporate tax cuts. Let us not kid ourselves. When $6 billion in corporate tax cuts is granted, that is spending money. We argue that is wasteful spending of money, and we believe that has been validated.

The logic was that if we gave those tax cuts to corporations, they would spend that money in the economy, create more jobs and a virtuous cycle would begin. In actual fact, they have been hoarding that money away. Our worst fears are realized. They are stacking it up and stockpiling it like Scrooge McDuck in the comic books, rolling around in their piles of dough but they are not reinvesting. There is no empirical evidence to prove it.

Not a single study in the world has ever proven that a tax cut equals more jobs. The only predictable and verifiable outcome of a tax cut given to companies is that they will have more money and greater profits. That is what was done. It was a transfer of wealth.

In the richest and most powerful civilization in the history of the world, the government cannot tell me that we cannot afford to lift every senior citizen out of poverty.

Our former leader, Jack Layton, costed this out and we ran on that as a platform. Instead of the $6 billion for corporate tax cuts, we could spend $1 billion of that and all 250,000 seniors, who are currently below the poverty line, would at least get to the poverty line. They would not be wealthy, rich or even comfortable. They would still be poor, but out of the depths of abject poverty. That is the cost and it is achievable, yet we go in the opposite direction.

Again, in the spirit of never let a good crisis go to waste, the Conservatives are cutting, hacking and slashing upon ideological lines just as we predicted they would. They are coming up with these dummy saving accounts to offset it. Bill C-25, the bill we were forced to vote on yesterday, is nothing but a 401(k). The only ones who will get rich on that are the stock brokers who will charge a commission every time that money is moved around. It is a 401(k), the Americanization of our pension regime.

We are here to defend the integrity of the old age security in the spirit of Woodsworth and Stanley Knowles. The NDP is proud to present this motion today to flush out the enemies of the public pension system, to denounce them and hold them to account so they will not get away with this. There will be a blue rinse revolution in this land if they proceed in this way.

Business of the House

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Mr. Speaker, today is February 2. It is fitting that it is Groundhog Day, as I rise again to ask when the government will once again bring in measures to shut down debate in the House.

Just this past Monday we witnessed the deplorable spectacle of the Conservative government for the 13th time using the guillotine to shut down democratic debate in the House. It is like a nightmare: it happens again and again and again. That is right; this week, after less than one single day of debate on a brand new bill the government had just introduced, the government House leader moved tyranny of their majority on Canada's elected representatives by moving to shut down debate.

It has become routine for this government, which apparently knows no limits, to shut down debate. This is a blatant attack on House of Commons tradition and an attempt to gag Canada's elected representatives, and it is unacceptable. I am not just talking about opposition members. Conservative backbenchers, too, should insist that their political boss give them the right to speak on behalf of the citizens they represent.

On the schedule for this place going forward, I note that the government seems to be wrapping up what I would call attacking seniors and their retirement security week after passing second reading of Bill C-25, a bill that will clearly undermine the public pension regime on which all Canadians rely in order to retire with dignity.

Next week I wonder, will it be failing artists and users in favour of corporate rights holders week with Bill C-11, the wrong-headed copyright bill, or will the government perhaps be tabling the 2012 version of its undermining Canadians to further enrich banks and oil companies executive budget plan? Which one will it be? I ask the government House leader to let us know.