Status of Women Committee on Nov. 19th, 2009

[Nathalie Joncas]

I would just like to add that it is fine to look at the costs of that protection, but what must also be considered are the social costs of not providing that protection. If people reach retirement age with very little retirement income—or none at all—there will be social costs associated with poverty among seniors and those costs must also be assessed. They are not mentioned often enough.

[Marie-Josée Naud]

We would just like to add--

[Alice Wong, Conservative, Richmond, BC]

If it's cross-sectional, everybody gets it. For those who are now receiving 25%, all of a sudden it would double, regardless of income.

Isn't it fair? I'm referring to the same model right now. They're suggesting that we double the CPP benefits. Whether you need the money or not, you still get it. Would you think that's a fair system?

[Monica Townson]

Yes. The point is that it's a percentage of your earnings. It's not simply doubling a flat-rate benefit. What you get at the end is a percentage of the earnings that you've contributed over the years that you were in the plan. So instead of getting 25% of your average annual earnings, you would get 50%. Not everybody would get the same, because it would depend on what they contributed to the plan and what their earnings were over time.

[The Acting Chair, Conservative, Dave Van Kesteren]

Thank you.

Madame Demers.

[Nicole Demers, Bloc, Laval, QC]

Thank you, Mr. Chairman.

Thank you very much for being here this afternoon. I am a woman with a big heart, and I have listened very carefully to your comments. There are a couple of things that bother me.

Ms. Townson, a little earlier, you talked about women staying at home with their children for seven years and not being penalized by their retirement plan. You said that caregivers sometimes have to leave the labour market earlier to look after someone and that, unfortunately, the fact they have to stop working to care for another person is not taken into consideration. As a result, they are penalized.

Do you believe they should be given the same amount of time—in other words, seven years—when they care for someone, which would mean that they would not be penalized under the pension plan?

Also, you said that 82% of women aged 24 to 35 work outside the home. I come back to the concern expressed by Ms. Carbonneau, who talked about intergenerational fairness and the fact that the pension plan would be paying out 50% of income, rather than 25%.

Given that more people are working, do you think that the problems associated with intergenerational unfairness would iron themselves out fairly quickly? The reason I am somewhat bothered by this is that, when my mother began working outside the home, the Quebec Pension Plan did not exist. My mother is now 81 years of age and she is poor; but she raised six children. I think she deserves a decent income.

What would be a decent income, in your opinion?

[Monica Townson]

It would be impossible to give you a dollar figure, but I think it should be at least up to the poverty level. At the moment, your mother—to use the example you gave—who didn't work outside the home and didn't earn a CPP pension, would still be entitled to old age security in her own name, without reference to her labour force participation, plus GIS. But as I mentioned in my presentation, the total she could get from OAS and GIS if she were a single person is less than the poverty level. It's only about $14,000. So I think that needs to be addressed.

Secondly, to jump a little bit to your point about the caregivers—and this is happening increasingly because of our aging population—let's say a woman at the age of 55 has to withdraw from the paid workforce to care for her elderly husband or a family member who has disabilities. When she claims her retirement pension, she can't claim it before age 60 in any case, but let's say she claims it at 60; she has five years from age 55 to 60 that will have to be included in her average earnings, at zero, which means it's going to bring down the average and she'll get a lower pension.

What I argued in the report, and maybe it wasn't entirely clear, is that she should get the same kind of dropout that is entitled to those who have children under the age of seven. In other words, she would be allowed to exclude those years from the calculation of average earnings on which her pension would be based. That would be a caregiver dropout. I think we need to look at that. It's a recommendation that has been around for a number of years.

As to the question of those who are in the paid workforce—and I said 82% of those in the child-bearing years are now in the paid workforce—we have to recognize that on average they have one and possibly two children, usually not more because of what has changed in the last 30 to 40 years. Plus, generally speaking, they take their full maternity leave, funded by maternity benefits, and they're back at work within two years. So they're not dropping out of the paid workforce for many, many years and not having any pension. They can leave out the years when they had a child under the age of seven, even if they went back to work and had to work part-time. By allowing them to exclude those years, it means that their average earnings are not pulled down when it comes to calculating their pension. So it's a consideration given to women who take time out of the workforce when they have young children. I was arguing that the same consideration should be given to those women who have to come out--

[Nicole Demers, Bloc, Laval, QC]

Thank you. I am sorry to interrupt you, Ms. Townson, but I have another question.

Earlier, you talked about the money people can take out of an RRSP and the fact that they end up with less than if they hadn't saved any money at all. As I recall, a senior is allowed to earn $5,000 without any penalty.

[Danielle Casara]

It's $500.

[Nicole Demers, Bloc, Laval, QC]

I believe the Minister raised that to $5,000. Am I wrong?

[The Acting Chair, Conservative, Dave Van Kesteren]

Very quickly.

[Nicole Demers, Bloc, Laval, QC]

An individual can withdraw $5,000 from his or her RRSP. Having to pay tax on that amount would be perfectly normal, but she could also withdraw that amount without it being added to her income, without having to pay taxes again and without being penalized because all the programs are being cut. Is that something that would be feasible?

[Marie-Josée Naud]

That is one of the proposals the FTQ brought forward today. Based on our figures, the amount is $3,500. It has been raised from $500 to $3,500, but that is for employment income. That is all that is allowed.

We think this should also include RRSPs. Canadians are being encouraged to save money and put it in an RRSP, but when they are already living close to the poverty line—we're talking about an income bracket of between $17,000 and $21,000—and want to withdraw that money, they are taxed on it at a rate of 80%. That is discouraging for workers.

[The Acting Chair, Conservative, Dave Van Kesteren]

Thank you.

Colleagues, we have some committee business. However, the last time we went through this exercise, those who had the motion withdrew it. Is it the same this time? I'm asking for the cooperation of the committee. Do you want to move this motion at this time?

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

No.

[The Acting Chair, Conservative, Dave Van Kesteren]

If our witnesses would indulge us a little bit longer, should we continue on? I'm sure you all have some more questions.

[Some hon. members]

Agreed.

[The Acting Chair, Conservative, Dave Van Kesteren]

That's good.

Ms. Ashton, you're up again.

[Niki Ashton, NDP, Churchill, MB]

Obviously, in terms of the economic recession we've just gone through, one piece of research after another has indicated that women are always affected more in terms of the economic impact and the economic challenges they face as a result. In this case it is pensions, which are already smaller and more precarious for women. We've seen many of those regimes affected by the economic recession.

Certainly there are examples of pension plans that have worked out a lot better, but I'd be interested to hear your thoughts on what we can do as we move ahead, having learned what we have from the difficult economic time we have gone through and are still going through. Are there models that need to be looked at? What can we do to strengthen the system so that we don't find ourselves in a mess, and so that women workers who have lost a great deal don't have to go through the same...?

[Marie-Josée Naud]

In my opinion, one of the avenues that should be explored--

[Nathalie Joncas]

I can answer that. May I speak?

[Niki Ashton, NDP, Churchill, MB]

Yes.

[Nathalie Joncas]

We have looked at new pension plan models. We really have to give this some thought.

In terms of defined benefit plans, as we know them, many women currently contribute to such plans. Yet, as you mentioned, returns under those plans were very low during the economic crisis. As a result, the funds accumulated by women workers have dropped considerably. The large defined benefit plans have also seen some pretty tough times during the crisis, particularly in companies verging on bankruptcy or experiencing financial difficulties.

We are currently analyzing new models. These plans fall somewhere in the middle, in the sense that they are a little less risky. Risk management is tighter, but it is still possible for risks to be shared by both workers and employers. We may want to look at less risky plans that have better risk management and better governance. One option would be hybrid models that fall somewhere in between defined contribution and defined benefit plans.

We are also of the view that small company plans will be much more at risk if the company has financial problems. It would be better to bring in a plan that covers a large number of companies working in the same business or industry. That way, the risks could be shared by a larger number of companies. Those are some of the avenues we have been exploring in seeking new tools.

[Marie-Josée Naud]

As regards risk management, I fully agree with Nathalie Joncas. Everything depends on that, in fact. It is the cushion you build up through your pension plan that allows you to deal with the fluctuations that affect defined benefit plans. We need to rethink the structure of our defined benefit plans in order to be able to handle the kinds of crises that we have experienced.

We really have no choice. Some steps have been taken. For example, I know that under the Université du Québec's pension plan, risk management and risk sharing between workers and the employer have been redefined to a certain extent. Some companies have introduced the concept of indexation. That is the case for the Régime de retraite par financement salarial. If things are going well and there is a good capital reserve, retiree benefits can be indexed. In terms of risk management, that is really quite an attractive option. For the time being, it's working.

[Monica Townson]

There are a couple of other things. In Ontario, there's a Pension Benefits Guarantee Fund. If an employer goes bankrupt, the fund guarantees the pensions of workers up to an amount of $1,000 a month. A recent commission in Ontario recommended that that be increased to $2,500 a month, but the Pension Benefits Guarantee Fund doesn't have much money in it. In fact, it has nothing in it at the moment.

Ontario is the only province to have such a fund. The CLC has recommended that there should be a fund like that at the national level that provinces and employers could opt into. This fund is funded by levies on employers who sponsor pension plans and it doesn't have government money in it, so something like that might be a possibility.

The other one, which I think somebody here recommended, was to change the bankruptcy laws so that employees who have pensions owing to them are given more priority in bankruptcy proceedings.