Status of Women Committee on Nov. 17th, 2009

[Terence Yuen]

Employee contributions, in general, depend on whether you have a DC plan or a DB plan. So for some of the DB plans, basically, the employers take care of all the contributions. Some ask the employees to make a small contribution. So it really depends on the arrangement. It's very difficult. Even if I give you an average, it doesn't have any meaning because it has a lot of variations and ranges.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

Would you suggest that the average person in Canada is putting $5,000 a year into a pension plan of some sort?

[Martine Sohier]

Perhaps I may answer this.

Right now if you have a defined contribution plan in Canada, the average employee contribution would be around probably 5% employer, 5% employee. That's what we see right now, but again, this means you already have a defined contribution plan, and we know that many do not.

[Terence Yuen]

For DC, the contribution rates are usually lower. So for DC plans--Martine is talking about DB plans--it's probably low as well. So the contributions could be less than 6%.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

To build on what Ms. Wong was asking earlier, there is now a tax-free savings account that has a $5,000 per person contribution, so a family, a couple, could put $10,000 into what would be essentially their own pension plan.

I'm going to make a suggestion and I'd like your thoughts on this.

We were talking earlier about a period in a woman's life when she would often be home caregiving for children or caregiving for an infirm aged parent. We recognize that those times happen in people's lives. Would it be beneficial to look at income-splitting for that period of time, when the income earner could transfer a portion of income to the caregiver, thereby lowering the income tax payable by both of them, and yet they could still take advantage of RRSPs or of the tax-free savings account? Is that another approach to how this could be accomplished?

[Terence Yuen]

Let me get back to your first question.

When we look at the current system, the entire pension plan system, what we are talking about by adding a second layer to the CPP is that we are targeting the mid-income individuals or families who do not usually contribute the full amount of their RRSPs due to various reasons. Maybe they don't have the money or they are spending too much. There are many reasons for that. What we observe is that we actually need to somehow help that group of people to save more for their retirement.

In other words, yes, you are correct, for small and medium-sized firms it could add a little bit of cost to them, but at the same time we are trying to shift the saving pattern, helping them to save a little bit more, and later on they may get the benefit when they retire.

This is the group we are trying to target. We know from statistics that we need help from the employer side, because even if you give the employees a little bit more money, instead of putting it into saving accounts they would probably spend the money and not save for their retirement. That is the reason we have to set up a system to encourage the employees to save. That's the whole idea.

[The Vice-Chair (Ms. Candice Hoeppner), Conservative, Candice Bergen]

Thank you very much.

Madame Demers, please.

[Nicole Demers, Bloc, Laval, QC]

Thank you very much, Madam Chair.

Thank you all for being here.

A constituent brought a problem to my attention last week. Currently, retirees who decide to return to the labour market, either because their pension plan has a significant drop or because they need to do so, can earn up to $5,000 a year without being penalized under the Guaranteed Income Supplement or the Canada Pension Plan.

However, if that person saves money and reaches the age of 71, they must flip their RRSP into a RRIF. Consequently, that person has to withdraw from that fund a set amount of money every year. The constituent who came to meet with me had to take $5,000 out of her RIFF. She had to pay taxes on that amount. That is fine, because she hadn't paid any in the first place. However, that $5,000 was added to her income, so she lost all the benefits she previously had received.

As a result, because she had put aside savings, she was penalized compared to someone who had not set aside any savings, who returns to the labour market and earns $5,000. I must say that this situation disturbs me somewhat.

Ms. Sohier, you said that your group took part in consultations with the Department of Finance on the issue of pensions.

Ms. Rose-Lizée, did your group also take part in consultations with the Department of Finance?

Mr. Laporte, I would like to know whether you are also able to take part in that exercise?

[Jean-Pierre Laporte]

I did not take part in those consultations, but I can give you my opinion on it.

[Nicole Demers, Bloc, Laval, QC]

I would very much like to hear it.

[Jean-Pierre Laporte]

In the complementary system to the Canada Pension Plan, or in the parallel plan in Quebec under the Régime des rentes du Québec, the perverse effects need to be avoided, meaning penalizing individuals who set aside savings for their retirement. When someone contributes to a TFSA—or CELI in French—it doesn't count as pension income, guaranteed minimum income. There is nothing stopping us from saying that, up to a certain amount, income from the supplementary Canada or Quebec Pension Plan is subject to the same treatment. We can use that innovation and avoid penalizing those who made the decision to save for their retirement.

[Nicole Demers, Bloc, Laval, QC]

I can't write as fast as you are speaking.

[Jean-Pierre Laporte]

I would be pleased to send you my notes on this matter.

[Nicole Demers, Bloc, Laval, QC]

Please do, because I believe this is important.

Ms. Sohier, you told us that you took part in consultations. Were a number of your proposals retained?

[Martine Sohier]

I don't really know what has happened with that file because I was not part of the committee as such that took part in the consultations. So, unfortunately, I am unable to provide you with an answer.

[Nicole Demers, Bloc, Laval, QC]

Thank you.

Ms. Rose-Lizée, you took part in consultations on pensions with the federal Department of Finance.

[Ruth Rose-Lizée]

Ms. Alexa Conradi, President of the Fédération des femmes du Québec, appeared before the parliamentary committee on Bill C-51. I don't know whether that is what you are talking about.

[Nicole Demers, Bloc, Laval, QC]

Yes.

[Ruth Rose-Lizée]

She made a presentation last week. The Standing Committee on Finance only met for two days.

[Nicole Demers, Bloc, Laval, QC]

The Standing Committee on Finance only met for two days!

[Ruth Rose-Lizée]

I am talking about meetings on Bill C-51.

[Nicole Demers, Bloc, Laval, QC]

What do you think about the situation I spoke out against, meaning the constituent who had to withdraw $5,000 from her RRIF?

[Ruth Rose-Lizée]

Tax exemptions are quite complex. The income of an individual who works is considered taxable income. So this income is taxed. The biggest problem is not taxing retirement income, but the fact that the Guaranteed Income Supplement is cut by 50% of the amount from the RRSP, the CPP or interest from other income. This can be in addition to a kind of taxation. This means that, for rather small amounts of income, people are subject to an 80% tax rate. They lose 50% of their Guaranteed Income Supplement and they also pay about 30% in income tax.

The TFSA is for people who are already quite wealthy. That is why I think that we don't need to try to reinvent the wheel. The decision was made to have a public plan because it's mandatory and it's for everyone. Furthermore, this is a way of recognizing, directly and indirectly, the work done by women at home. I think that if we want to improve the situation of men and women, but above all that of women, we need to do so through our public plan.

The premium rates are 9.9% or 10% for the Canada Pension Plan. If we compare this figure to what we see in the United States or Europe, it is not excessive.

[The Vice-Chair (Ms. Candice Hoeppner), Conservative, Candice Bergen]

Thank you very much.

We'll go now to Ms. Mathyssen, please.

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Thank you, Madam Chair.

I'd like to ask Madame Rose-Lizée a question in regard to something we heard in the committee. Witnesses told us that they would recommend that pension contributions be made on behalf of those who are providing unpaid caregiving work. In fact, in one brief, a women's group encouraged the government to take its lead from countries like France, Germany, Sweden, and Austria. They actually make a pension contribution on behalf of women or men who are out of the labour force, and that contribution equals 60% of the maximum insurable earnings of those caring for children or the elderly.

Do you know much about this particular system, and is it something you would recommend we consider in our recommendations to government?