Finance Committee on March 1st, 2012

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

Speaking of the Australian super fund one more time, the lessons from that fund you talked about are very real. There is nobody disputing that. And the government has learned some lessons from that super fund. But the one lesson it hasn't learned is about capping fees, because in this legislation there is no cap on fees. There is all kinds of talk about the incentives for the fees to be kept down and competition, but there is no cap on them.

Mr. Jean talked about small business in a very effective way. He talked about how they have to look for vehicles for their people, particularly in the competitive area he's in. To my mind, the Canada Pension Plan, an enhanced Canada Pension Plan, opens the door to just that, because you don't have to worry about administration fees. It's a defined benefit. It's well managed. It's a shared risk. It's all the things we talk about. There are no new administration fees applied to this.

I put out numbers the other day, and I want to repeat, they are very similar numbers. If you had $47,000 in income, and you increased the Canada Pension Plan contributions by $3.50 a week, which is about $185 a year, that is $6,500 over 35 years, and you get a return of $900. Mr. Laporte, where would we find a return like that anywhere else?

[Jean-Pierre Laporte]

It would be difficult to find.

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

That's exactly the point. We have a very well-managed, very serious plan in the Canada Pension Plan, and that's why we as the opposition keep coming back to it. We don't see the PRPP as a significant answer to the problems that are very real. You talk about them on the government side, very sincerely I'm sure, but we don't see the answer in the PRPP. We see a partial answer, yes, for some. If we could find a way to get the people into the Canada Pension Plan who have been excluded over the years—the farmers and the people we're talking about. And if we want to really sit down and look at the pension system of our country, then let's really take a look at the things we can do in a broad sense.

There is no better plan in much of the world, in terms of how it's managed and the returns it gets, than the Canada Pension Plan.

Ms. Byrnes talked about the fact that some 70% of employers would contribute, or some figure close to that.

[Leslie Byrnes]

They would be interested in looking at that.

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

That same 70% could contribute to the Canada Pension Plan and get a return that is on a scale, because of the scale of the investments....

The Liberals talked about the companion CPP. Mr. Roberts, you may want to speak to this. We have talked about increasing the core assets of the CPP so that we wouldn't need the new administration costs that a companion CPP would cause.

Would you like to respond to that?

[Chris Roberts]

There is an element of cost I want to touch on, actually, that hasn't been raised in the discussion. That's the cost of taxpayer-funded programs, such as GIS, which are already on track to increase from about $8 billion today to about $23.5 billion by 2030, when the baby boom cohort peaks.

All of those employers who don't offer good workplace pension plans today, and all of those who may even offer PRPPs with no employer contribution so that employees are carrying the costs and are unable to build decent, adequate retirement savings to live on in retirement, are getting a subsidy, effectively, from taxpayers. We're all paying the cost to support those employers who are not kicking into the retirement savings of their workers. So if the CPP actually does require contributions from employers and from employees, you have doubled it. You could go a long way to bringing down those future GIS costs we are all going to be on the hook for.

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

One of the things we've responded to in the talk about the potential OAS increase—I will say potential, because nothing has been firmly done on that yet—is that when the government talks about going from $36 billion to $109 billion in costs, they leave out the growth in GDP over the same period of time. I think that's where they got into conflict with the Parliamentary Budget Officer on the two different sets of numbers.

I have one minute. Oh, gosh. It's always one minute.

[The Chair, Conservative, James Rajotte]

Now you have 30 seconds.

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

I guess I earned that.

We have to look at retirement security for our seniors as a whole. If we start going piecemeal here and there, we may fix one problem and create another, such as the transfer of DB plans into this. I'm sure that was unintended on the part of the government. I don't think they would seriously go out there to impede good plans.

I am out of time.

[The Chair, Conservative, James Rajotte]

You have about 10 seconds.

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

To me, that's out of time.

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Okay, Mr. Benson, you can answer very briefly, if you want.

[Phil Benson]

I made the comment to Mr. Marston. I qualified it with the word “better”. It's not a reduction from a good plan to a lesser plan; it's to be able to move lesser plans into a better plan.

[The Chair, Conservative, James Rajotte]

Thank you.

I'm going to take the next round as the chair. I want to focus on the issue of cost. There's obviously been a lot of discussion about the cost related to the PRPP. I'll refer all of us to clause 26 of the bill:

An administrator must provide the pooled registered pension plan to its members at a low cost.

Obviously, that's a general statement. Then later on, under clause 76, it talks about the regulations, Governor in Council, and under (j):

establishing criteria for determining whether a pooled registered pension plan is low-cost for the purposes of section 26;

Now, I noticed in your presentation, Mr. Benson, that you're very specific with respect to your proposals, and I appreciate that. But most of your proposals, if I understand it, would be in the regulations.

Perhaps, for the benefit of the committee, you could point out which of these would be in the legislation and which would be in regulations.

[Phil Benson]

I personally think almost all of our suggestions are regulatory. The enactments in the legislation are sufficient. There are issues I would like the committee to turn their mind to and to think about, especially on the discretionary investment, to remove choice. It is critical that people who are saving for their retirement, believe it or not, have as little choice as possible. It's that discretionary investment that I think is critical; in other words, to leave the insurance companies and the experts....

When they talk about choice...if I can, very briefly, when you join a pension plan, you have no choice. Whatever is there, is there. Whoever runs it, runs it. The question is whether or not it's run properly, and that's something the regulations can deal with.

[The Chair, Conservative, James Rajotte]

Okay. I appreciate that.

Ms. Byrnes, I wanted to get your reaction and your association's. I don't know if it's fair to put you on the spot, as Mr. Benson has just presented this to the committee today, but you've heard some of his recommendations in terms of what should be in the regulations. Obviously, your members are hoping to be the administrator or the provider of PRPPs. Can you give us a reaction to some of the recommendations he's made to us?

[Leslie Byrnes]

Okay. On the cost issue—and Mr. Benson suggested that there be very specific thresholds—we worry that if you put a threshold that starts to take away competition and innovation that administrators might use to come in at lower costs than that threshold, that's the point that everyone would rise to. So our view is to set out the low-cost objective, work through the regulatory process on some criteria that can be around that, but don't actually put a threshold in, certainly not at this time, and see what the marketplace does.

As I've mentioned earlier, we're already delivering; we're already in the business of DC plans and delivering them at low cost.

[The Chair, Conservative, James Rajotte]

What about his recommendations with respect to transparency: no benefits to plan sponsors, declaration of all ties between the trust and the sponsor, declaration and report of all fees?

Do you have any problems with those recommendations?

[Leslie Byrnes]

No.

On the discretionary investment and removing all choice, I understand the point you're making there. I think it's going to be really important that there be criteria and that administrators think hard about what is an appropriate default option for those people who don't make choices. But as I understand it, the proposal for the PRPP is that there would not be a lot of choice. There would be, we're hearing, perhaps three, four, or five funds that are offered in addition to the default one, so just enough that there is some variety, but not enough to overwhelm and not enough to make it costly.

[The Chair, Conservative, James Rajotte]

Okay. I appreciate that.

Again, I have about a minute. There will obviously be time to consider regulations, and this will be a fulsome debate.

Mr. Benson and Monsieur Dorval, just briefly, if you want to respond....

[Phil Benson]

Part of a major pension is discretionary investing—let the experts make the decision. When you say “choice”, the person looking after the fund determines where the money should be and how they should be investing it, so the choice is really left to them to make sure that there is....

People coming in may be in different pools inside that plan. They can set that up, but as long as the person running the plan is the one making those decisions.... You shouldn't ask an individual if they want to be in foreign bonds or foreign this or that or something else. It should be left to the experts to determine: because of their age, experience, and savings, this is where their money should be. It's not the choice within the plan; it's the choice of the individual.

[The Chair, Conservative, James Rajotte]

We have an ongoing debate, and unfortunately I'm out of time.

I would like your comments on that between the time the legislation hopefully passes and the regulations. If I can get some further comment from the three or any one of the panels who want to comment on that, I would appreciate that as the chair.

Mr. Benson, I would also appreciate the end of your story to Mr. Van Kesteren. We don't have time to finish it now, with respect to OSFI, but if you want to submit that to me as the chair, I'd appreciate that as well.

I'll go to Mr. Brison.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair.

Mr. Dorval, according to the Canadian Federation of Independent Business and one of its vice-presidents, Dan Kelly, 77% of its members support our proposal to provide them with a plan that would complement the CPP, to be accessed on a voluntary basis. What do you think of that? Will having other choices be an advantage for your members? Once again, I want to point out that this is a completely voluntary option.

[Yves-Thomas Dorval]

Thank you for your question.

The fact is that the Canada Pension Plan already exists, and the government is trying to offer a new type of plan which would not be administered by the CPP. From our perspective, it is very clear that certain costs in a pension plan are lower when the critical mass is immense. Here we are talking about voluntary contributions, but if this plan is imposed on everyone, we are getting into a very different dynamic.

The costs we were talking about for the pension plan will not be the same as those for a voluntary plan to which people may or may not contribute, on a voluntary basis. Moreover, you are putting everything into the same bag. For our part, we really think that there will more flexibility if we let the market make an offer. Earlier, we were talking about costs. You know that in theory, setting a cost can be a good thing, just as it can be a bad one. If the cost is too low, no solid institution will want to make a good offer, and if the cost is too high, no one will be interested in offering a cost that will be lower than the threshold. So there would be no incentive to offer a lower-cost product with innovation, and so on.

For all these reasons, I think that the way in which the pension plan is administered, conceived and thought out is excellent, and that we ought to leave it alone. There are other types of savings plans. RRSPs are a very good way of saving money, just as buying a house can be. What is being proposed here is an additional option, and it is in that sense that we support it.

Moreover, concerning the pension plan, it is certain that governments, at one point or another, have a certain influence on policies that affect investment decisions. In my opinion, that is the worst thing that can happen.

[Scott Brison, Liberal, Kings—Hants, NS]

The CFIB feels that a voluntary supplemental CPP option would help by trying to provide some competition that would clearly be a very low-cost structure—the size and the professional management of the CPP investment fund. It's unlikely that any PRPP is going to match the breadth or depth of management expertise diversification or be able to manage that cost.

Mr. Jean said earlier that the government has introduced legislation to help increase financial literacy in Canada. We all believe that's a motherhood statement. We all want to see better financial literacy. Canadians are pretty busy working, getting their kids to hockey, and trying to survive on a day-to-day basis. Do you think the average Canadian, as a result of the government's legislation on financial literacy, is going to become a Warren Buffet or a Mark Wiseman? In all seriousness, is it likely that a piece of legislation on financial literacy by the federal government will turn Canadians into experts with the same level of expertise as professional pension fund managers?