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.