Finance Committee on March 1st, 2012

[Shelly Glover, Conservative, Saint Boniface, MB]

I have 10 seconds.

Well, I'll come back for another round.

I would like to take this opportunity to put a question to the representatives of the Quebec Employers' Council.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Giguère, you have five minutes.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

I want to try to avoid the math of the member for Saint-Boniface, who talked about 600,000 jobs. For my part, I consider that 150,000 jobs a year over four years is not extraordinary.

My first question is for the representative of the Canadian Life and Health Insurance Association Inc.

Your survey worries me. In fact, the representative of the Canadian Federation of Independent Business we heard here said exactly the opposite of what you said. It wasn't just somewhat different, it was exactly the opposite. Ninety-five per cent of small employers do not want to contribute to a pension system, nor can they; 70% of them are not interested in taking on its management. It is completely the opposite of the figure you arrived at.

How can you claim that this system will be viable when the crucial decision-makers concerned, the employers, say that the plan may be useful, but they aren't interested and they don't want to contribute to it?

[Leslie Byrnes]

I've circulated the results of the survey to all members of the committee. This survey was undertaken by Leger Marketing on our behalf and involved just over 800 small and mid-size employers. There was definite interest.

Perhaps I misunderstood, but you indicated you heard that small employers were not interested in administering a plan.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

No, no, madam, it is not something I heard: we were told that. The Canadian Federation of Independent Business tabled its brief and submitted its survey. Their results were diametrically opposed to what you are telling us. They considered that this plan could be helpful, but that it was not the ideal solution and they did not want to finance it.

You are telling us that 72.5% of employers will participate. If the employers are so enthusiastic at the idea of participating financially in the plan, they may as well go directly to the Canada Pension Plan; they don't need you.

[Leslie Byrnes]

As far as them not being interested in administering them, I think we're all in agreement on that. They're looking for an option where the complexities are taken away from them. The PRPP provides that opportunity for them. A high percentage of them are looking at ways to retain and attract employees, and it provides a way for them to do that. Even if at the moment they're not able to afford to contribute, they can nonetheless offer that. The easiest way for an individual to save for retirement is through the workplace.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

I would like to ask another question, Mr. Chairman.

[The Chair, Conservative, James Rajotte]

You have one minute.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

My question is for Mr. Laporte.

You've indicated that this plan presents a greater financial risk and that it might even be dangerous to invest in it. Can you give us further details on that?

[Jean-Pierre Laporte]

It's the same principle as for the group RRSPs, that is to say that all of the responsibility rests on the shoulders of the participants. If the market collapses when they retire, what is left is all that will be available to them. If there isn't much, that means they will have a tiny pension.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

My next question is for Mr. Lizée.

The problem is that 66% of Canadian workers do not contribute to an RRSP. Paradoxically, they are the same ones who do not contribute to registered pension plans. How will these people have the means to contribute to such a fund, if they can't manage to save any money and are not contributing to the other plans?

[Michel Lizée]

I can talk to you about my experience in Quebec with community group employees whose salaries were in the $30,000 to $35,000 range, and to whom we offered a multi-employer plan. I was struck by the fact that these people, who arrived at the meeting feeling that because of the poor performance of public plans, they did not have the means to contribute to a plan, had changed their opinion by the end of the meeting. Rather, they said that they could not afford not to contribute to their retirement. The fact that their employer would also be contributing made the plan more attractive to them.

In my opinion, if employers do not have to contribute to the plan, the employees will not be inclined to do so either. In countries where automatic participation mechanisms have been put in place, employers' contributions in many cases completed employees' contributions, and this is why the participation rate was high.

[The Chair, Conservative, James Rajotte]

Very well. Thank you.

Thank you, Mr. Giguère.

Mr. Jean, please.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you, Mr. Chair. I apologize for being late.

Thank you for coming today. I want to talk about a couple things that happened to me. One is that I had a teacher named Evan Douglas during my MBA who taught me economics. The first day of economics, he took a dart board, placed it against a wall, took about 10 darts, and threw them. Most hit the board. Then he said, “You take all of the investment funds and go through them, and you will get the same return that I just did by throwing at the dart board.”

He has written a couple of books on economics. I was quite impressed with that. He said the major reason the darts would have the same return was because of the risk, and making sure that you spread the risk around. Mr. Skerrett and Mr. Benson, is that correct? Well, that's the reason that increasing CPP, to me, does not make the most sense. All the eggs in one basket comes to mind, and I think that's the major reason I say this.

The one thing about the Australian super funds is that the returns quoted in the APRA report are for the total assets of a super fund, rather than the different investment options. It might be interesting for you to know that between 2004 and 2008, 33% of those super funds received 9% return, and over 10% returned double-digit returns. That was, of course, before the global economic collapse. It's interesting to see that, because those returns are satisfactory indeed.

I'm proud to say I'm from Fort McMurray, and I think we have more union members there than anywhere else in the country. One of the major problems in Fort McMurray was the ability to compete with the union companies up there—the large companies. I worked as a lawyer there. I did divorces for many people. Usually people's pensions were the last thing they had. In fact, they were unable to save any other way. Employers made contributions, as the employee did. They were proud of that and quite savvy about what they had in pensions, because of the reporting requirements.

I also operated about 10 businesses there: a Quiznos, a car wash, a printing shop. I could not keep employees. The reason was that I couldn't compete on the pensions. I could compete on the wages, but I could not compete on the pensions. I looked for a Chamber of Commerce fund. I enrolled in there for two years, but it became too difficult to have pensions collected.

I have to tell you that as a small businessman who employs many middle- and lower-income people in the service industry and the retail sector, this is very welcome to me.

Mr. Benson, whom do you see this possibility benefiting the most?

[Phil Benson]

When we talk about the CPP, it relates to workers. There is a whole group of people out there who are not in the CPP—everyone from farmers to small business people to family run enterprises. For them to have access to a low-cost, low-risk plan is an important feature. They're part of the economy, and they deserve it. We shouldn't kick them to the curb because we like to see one thing more than the other.

There's also a second group of people. I'm talking about the Teamsters and others in the private sector. These are workers that we try our best to get pension plans for but can't. We have matching RRSPs, and we have DCs. It would be wonderful if we had a way of rolling them into a larger plan so we could lower the cost and the risk for them. There's a large group of people who could benefit from a PRPP.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Excellent. That's what I feel too.

Mr. Roberts, you were nodding your head before. I hope it's in agreement, because I'd hate to think you disagreed with my comments.

[Chris Roberts]

I don't want to take your time. I just want to point out that virtually all Canadians, employees or self-employed, belong to the CPP. It's around 95%.

With respect to putting all of your eggs in one basket, it's important to remember that in the OECD, Canada is way below the average in pre-retirement earnings replaced by the basic pension, namely, CPP, QPP, OAS, and GIS. The average wage and salary and above, 1.5% and 2%, are two times the average wage and salary. Canada's basic state pension actually replaces below the average. So we don't have all of our eggs in the CPP basket, comparatively. We have most of our eggs in the voluntary savings, the third pillar—

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

That's why the government's doing a financial literacy bill right now.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Jean.

We'll go to Ms. Glover again, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you.

I would like to put a question to the president of the Quebec Employers' Council.

As you know, the Province of Quebec is very much in favour of the passage of this bill on PRPPs. In fact, your organization has already indicated that it is in favour of the adoption of the bill. You said the following:

The flexibility and adaptability envisaged by the PRPP will allow federally regulated businesses that do not already have a pension plan to provide a simplified one for their employees. Employers, notably those in the small and medium business sector, will thus have the opportunity to offer a plan that ensures financial security to their employees when they retire [...]

I also note that on your website, you state that your organization wants to ensure that businesses benefit from the best possible conditions in Quebec.

Do you think that the PRPPs will offer favourable conditions to Quebec businesses?

[Yves-Thomas Dorval]

The answer is yes, but there is already a simplified plan in Quebec. I am thinking of federally regulated organizations. However, this is true for all of Canada.

It could be beneficial for Quebec if we reach the necessary critical mass. That is why when we staked out our position, we also talked about harmonization between the provinces.

Financial institutions may offer PRPPs. Financial institutions, if they can offer them throughout Canada, will be able to reach a critical mass, which will lower their costs and allow them to offer a product that will be more interesting not only for the financial institution, but also for the employer and employee. In our opinion, this is an excellent opportunity.

All of this discussion has to come to an end. Canada's system is a good one. Not everyone has problems. One group is experiencing problems: that is the group whose salary falls between low wages and average ones. Those with very low salaries are well protected in Canada. People with average salaries and more are also very well protected. Whenever I hear a debate on the CPP or the Quebec Pension Plan, I always get the shivers. I feel that the intent is to impose a contribution on everyone to solve a particular problem that only affects one group. I think we have a very good system, one which can still be improved upon.

We are proposing to allow those who cannot provide pension plans—because they are too complicated, too costly or too complex—to have access to a new plan with the necessary critical mass to make it more affordable. Basically, we will be able to offer an option that will help people to put aside some of the savings that they need.

Wanting to impose that on everyone seems problematic to me. Let's take the example of a young couple who has small children and wants to obtain a mortgage. It is as though we were telling them that it is not important to pay their mortgage or their tuition fees, and that we want them to start to pay more into their pension fund right now. There has to be flexibility. Each household, each person must be able to make the investments they need to make according to their lifestyle and needs. People need to be educated on this topic.

The important thing is that the more access there is through employers—such as with this product—the more possibilities there are that are affordable, and the more people are made aware of savings opportunities, the better it will be. Moreover, the fact that people will be automatically registered and must opt out if they do not want to belong to the plan is excellent. It has been shown that with that system, a large percentage of people will decide to remain in the plan. To my mind, this is an excellent solution. It does not meet all of the needs out there, but it is one solution, and it is well targeted.

[Shelly Glover, Conservative, Saint Boniface, MB]

Since I only have 15 seconds left, I would like to point out that I am very happy that you mentioned simplified retirement plans. Mr. Lizée had raised that question. Indeed, simplified retirement plans are not available to self-employed workers, but the PRPPs will be. It is thus a better choice for all self-employed workers.

[Yves-Thomas Dorval]

Moreover, we will be able to reduce costs if we manage to bring in a Canada-wide harmonization. This will allow financial institutions to offer products that will be easily accessible.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Glover.

Go ahead, Mr. Marston, please.