Finance Committee on Feb. 16th, 2012

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Very quickly, how many different banks can offer the services? Is there a limit, or do you open it up to whoever?

[Ted Menzies, Conservative, Macleod, AB]

There will be a—

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Banks or companies.

[Ted Menzies, Conservative, Macleod, AB]

Yes, it could be financial institutions, credit unions, or existing pension funds as well. The Office of the Superintendent of Financial Institutions will set up criteria. They will be required to meet specific criteria to be able to be accepted to offer these to employers, as well as to the self-employed.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I expect they will be scrutinized very closely as well.

[Ted Menzies, Conservative, Macleod, AB]

Very closely. That's why I have OSFI on both sides of me.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

Mr. Chisholm, please.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Thank you very much, Mr. Chair.

Minister Menzies, thank you for being here with your staff and your family. Welcome to you and to them.

I have to tell you that I'm disappointed we weren't able to do more in terms of the CPP. I had the opportunity in a previous life to visit an awful lot of employers throughout Nova Scotia and Newfoundland and Labrador, where the workplaces had defined contribution plans or group RRSPs. I saw workers with 35 years in getting ready to retire, and as a result of the downturn in the economy, they lost hundreds of thousands of dollars in their pensions over six or eight months. I watched these grown men and women cry because of the insecurity of that form of investment.

I think we can do better. I talked to one of the provincial finance ministers during some of these negotiations. I understand there was one province that was a holdout. I wish the federal government could do more on this. I don't see this as anything more than having private plans out there that are completely subject to the market. Increased competition will mean more plans, more administration, and more costs. Ultimately it's not going to do what you state we're trying to do.

I want to again say that on the whole question of the CPP and what makes it work, it seems like a health benefit plan. It's mandatory, people have to participate, it's guaranteed that way, it's properly funded, and it's well administered. It's just like a health benefit plan, cafeteria style. It gives people choice. That's how it's sold. All of the healthy people pick a few items in that lineup, and the people who end up needing it don't have the coverage. The costs are increased for the people who do need the plan.

I really have a number of concerns with this. I don't think we're doing anything to try to deal with the whole question of retirement income security. We have the CPP fully funded for 75 years. I just think we could have done a whole lot more as a country and a government that's being lauded for the work it has done with the CPP.

I urge you and your colleagues to go back to the drawing board and try to pull something together on the CPP. I think there's a will out there among provincial governments.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chisholm, for your question.

I take exception to your term “holdout”. There were certain provinces that said they would like us to continue looking at the option of CPP, but there was unanimous support for the framework for the pooled registered pension plan. There was no holdout. You can go back and read the press releases when both of those meetings broke up. That signalled to us that there was enough support to develop a framework, so we set to work doing that. What we have here is exactly what you said: it's choice.

You talked about the number of people you've spoken to who haven't saved enough. I go back to what our analysis showed us: 60% of people in the workforce in Canada right now don't have access to any workplace pension plan at all. It wouldn't have been very prudent of either a federal, provincial, or territorial government to set aside an option for 60% of the workforce in Canada. That's why we're pursuing this. We think we've developed a viable option that is just that. We're not going to force people to use it.

[The Chair, Conservative, James Rajotte]

Thank you. Thank you, Mr. Chisholm.

Mr. Adler, please.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Chair.

And thank you, Minister, for being here this afternoon.

It's clear that Canadians want, and expect, their government to focus on ensuring that the government has a long-term plan to safeguard the retirement income system.

Having said that, I hold round tables every Friday morning in my riding for an hour with small business people, and what's clearly apparent with a lot of small businesses is that the people who work for them are not just employees; they're like family in a lot of cases. A lot of these small business owners would like to offer them an option of a pension or security to retire with some kind of dignity.

To a person, to a business, and I've probably heard from about 75 small businesses in my riding in the last six months, every single one of them has praised the PRPP proposal.

For those who aren't enlightened, could you please expand on how this is so beneficial for small business, and some of the advantages?

I know we've heard the Canadian Federation of Independent Business speak about it, but for small businesses out there who don't have a voice—whom you heard from when you were crossing the country and who I hear from when I hold my business round tables every Friday morning—could you please talk about that and how beneficial this would be to a lot of those businesses?

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Adler.

That is exactly what we heard when we first started looking at the challenges we were facing in the fall of 2008 with the federally regulated defined benefit pension plan, and we subsequently made improvements to that.

We heard loud and clear from many people who came to our pension consultations on exactly that. They told us they didn't have anything to offer their employees. They came pleading for us to develop something that is easy, not onerous, for them to use.

So part of the concept is to provide this. It's a simple process, and we've seen some concepts of how simple this may be for an employer to enrol his or her entire staff electronically. There are some options out there that may be electronic: a simple online enrollment to line this up for your employee.

That's what businesses need. They need something simple. We've been working at getting rid of red tape. We don't want to add more red tape or take them away from their focus of business. But the responsibility is on the plan administrator and not on the small business person.

It won't just be for small businesses, but we think it will be a great option for exactly who you were referring to.

[Mark Adler, Conservative, York Centre, ON]

And they've all praised this plan, to a person.

I also want to pursue the 60% of Canadians you mentioned who do not have retirement pension income plans.

With that light at the end of the demographic tunnel racing toward us, could you talk about the dangers of that 60% bubble working its way through the system and what that bodes for our income security for retirement years?

[The Chair, Conservative, James Rajotte]

There is about one minute.

[Ted Menzies, Conservative, Macleod, AB]

I certainly don't want to alarm people, but as I referred to in answering an earlier question, this is an important discussion that everyone should have with their spouse and family at the kitchen table: “Do we have enough to retire on, and if we don't, then what can we do to make sure we do?”

The Canada Pension Plan is there. OAS and GIS are there. But we need to make sure that if you want to have a happy life—maybe a set of Pings in the back of your car to play some golf—you need to plan for that.

This is one option where you'll be able to plan, through this large pool of funds. Your returns will be increased because the cost is low. That's the main benefit of this over many of the other pension plans. The costs will be very, very low so there will be more money in your pocket.

[The Chair, Conservative, James Rajotte]

Okay. Thank you.

Mr. Mai, you have the floor.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Mr. Chair, I'm going to share my time with Mr. Marston.

The direct objective of this bill is to save money, but by going through the private sector. This is one of our concerns. As for the Canada and Quebec pension plans, the administration costs are going to be lower. In this case, we're talking about low costs and regulation. Can you really guarantee that the administration costs will be lower than the costs under the Canada pension plan?

[Ted Menzies, Conservative, Macleod, AB]

You're right that the regulations will define how that is.... We're not going to regulate it, if that's where your question is going. If I choose a management expense ratio, I might choose one too high and everyone would gravitate to that. Competition will make sure it is low, and the supervisory authority will require that the costs are low. There will be a regular analysis of what the fees are. But the competition through many plan sponsors will keep the costs much lower than what we're seeing today.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

I wanted to say that these costs would surely be higher than the costs associated with the Canada pension plan.

I'll now give Mr. Marston the floor.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Thank you, Mr. Chair.

[Ted Menzies, Conservative, Macleod, AB]

Actually, no, if I can jump in, they will not be.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Minister, you spoke a moment ago about the consensus around the CPP, and that you had full consensus on this. I don't dispute that point at all. But technically speaking, two-thirds of the provinces are required to pass something, so it doesn't require a full 100% consensus. If you look at the Australian super fund, for example, after 10 years it was reviewed and hadn't even kept up with the pace of inflation. That's why we have concerns.

As far as the cost of CPP, an increase has been proposed. On $10,000 it's 76¢ a week. On $40,000 it's $3.10 per week. On the comment about enrollment and the cost of enrollment and setting up the PRPP, people are already enrolled in the Canada Pension Plan. We certainly see some advantages to that. The proposition we put forward would be enacted in three years with a seven-year phase-in period. So the impact on business would be spread out over a full seven years. When you juxtapose that against the super fund in Australia and the lack of what that was able to produce for those people, I am still drawn back to the CPP.

[Ted Menzies, Conservative, Macleod, AB]

I sense that in your questions, Mr. Marston. But thank you for continuing your effort.

The Canada Pension Plan is in good shape, but we would be asking them to fundamentally change their entire process to do this. There's a suggestion out there to double the Canada Pension Plan. The analysis has shown that it would take 40 years to actually be of benefit. Some of us remember when the Canada Pension Plan was started, and it took some time before it was actuarially sound. We think we have an urgent need. We saw that in the summer of 2008 when the stock market started going south. So we need to provide another option for these people to start saving as soon as they possibly can, and this is the option that's not mandatory.

The challenge with the Canada Pension Plan is that not everybody has only the Canada Pension Plan. Many people save in another method, so you'll be demanding that they have another deduction taken off their paycheque.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

The point of CPP is that in doubling it you go to $1,800.00, which is a foundation for people. At that point the money is defined benefit and something they can count on, but they can't count on the market with the PRPP. So obviously we have a disagreement here.