House of Commons Hansard #70 of the 41st Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was plan.

Topics

Second Reading
Pooled Registered Pension Plans Act
Government Orders

January 31st, 2012 / 1:05 p.m.

Nepean—Carleton
Ontario

Conservative

Pierre Poilievre Parliamentary Secretary to the Minister of Transport

Mr. Speaker, once again, we have a member of the NDP saying that we cannot trust the caprice of the stock market with the savings of the Canadian people who would use it for their retirement. Instead, those members argue that we should increase the CPP. Unfortunately for the NDP, there is an inconvenient fact that $18 billion worth of the CPP's holdings are invested in the Canadian stock market. About half of the entire portfolio is invested in equities both in Canada and around the world. Therefore, when the member disparages the stock market, she is disparaging the CPP.

I should also point out that those Canadian companies owned by the Canada pension plan can only pay returns to the Canada pension plan after tax. When the NDP proposes to raise taxes on Canadian businesses, it would reduce the after-tax payout that those businesses could pay into the CPP and other pension plans that hold them. For example, the CPP owns an oil sands company, Canadian Natural Resources; a bank, the TD Bank; Devon Energy, another oil sands company; Cameco, a uranium company, which the NDP would shut down.

How can the NDP support the CPP when it wants to shut down the industries on that index and raise taxes on the businesses that pay dividends to the Canada pension plan?

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:05 p.m.

NDP

Jinny Sims Newton—North Delta, BC

Mr. Speaker, once again, what my colleague fails to comment on is that there is a huge difference between defined contributions and a defined benefits plan.

The CPP, during some of our most volatile periods in the stock market, lost ground by 1%, whereas the stock market outside of the CPP lost ground by 11%. There is a buffer in the CPP that does not exist when money is put into a pooled plan, which is just another RRSP.

Once again, I would urge my colleague to do his homework and study the difference between a defined contribution plan and a defined benefits plan. The CPP is a defined benefits plan that actually is indexed for inflation as well.

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:05 p.m.

Liberal

Sean Casey Charlottetown, PE

Mr. Speaker, I appreciated my colleague's comments and the passion with which she spoke about people in poverty.

During this debate, we have heard members opposite say that 60% of Canadians have no plan. The day after this bill is passed, what is in it that will make it more affordable for employees or employers to save for their retirement? If we start from the basis that there are so many people without a plan that they cannot afford, what is in the bill that will make it more affordable for employers or employees?

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:05 p.m.

NDP

Jinny Sims Newton—North Delta, BC

Mr. Speaker, absolutely nothing. When we look at it, it is like saying to people who are working two or three jobs, still living on the edges of poverty or in poverty that tomorrow they can go shopping. If they go shopping, they will get a bit of a tax break on it. Folks would need to have money in their hands first to go shopping before they could earn the tax break.

A young woman phoned me this week and said that she had been duped by the government. I asked what she meant. She said that there was a tax credit she could get if her children were registered in sports and things. She said that she had three kids who she had registered in sports, and now she was being told it was a tax credit. She will not get anything because she does not make enough money. However, she does want her children to participate.

In many ways, this is something similar. There is nothing in the bill that improves salaries or incomes to families that are struggling. When there is $500 billion worth of contributions that are not being utilized, and those are tax breaks, that should send a strong message to my colleagues across the way. Let us address poverty for seniors today instead of trying to pretend we are doing something.

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:10 p.m.

Kamloops—Thompson—Cariboo
B.C.

Conservative

Cathy McLeod Parliamentary Secretary to the Minister of National Revenue

Mr. Speaker, it is certainly my pleasure to rise in the House today to speak to Bill C-25, Pooled Registered Pension Plans Act. This legislation is the result of some three years of careful preparation and consultation on the part of our government in partnership with the provinces, territories and other stakeholders. As a result, we are now in a position to pass legislation that will help millions of Canadians, who do not have access to a pension plan, to prepare for their retirement.

I would like to begin by taking a moment to reflect on why the legislation is so important and what prompted its creation.

First, governments have known for a number of years that a demographic shift is taking place in Canada. In spite of immigration and the growth of certain sectors of the Canadian population such as among first nations, the overall demographic trend is toward the growing number of Canadians reaching retirement age. This is due not only to the retirement of the baby boomer generation, but also to the fact that more Canadian seniors are living longer.

The challenge this creates for us as the government and for Canada as a society is how we can contribute to a basic quality of life for our aging population in the face of increased strain on our retirement income system. This challenge is made all the more poignant by the immense contributions that our retirees have made to the growth and prosperity of our country. Our seniors deserve dignified retirement. That is why in recent years our government has taken action through a range of measures to support elements of our retirement income system that have a proven record of success.

For example, we built on the framework for federally regulated registered pension plans and took steps to ensure that employers fully funded benefits if the pension plan was terminated. Working with the provinces, we also modernized the CPP making it more flexible for those transitioning out of the workforce.

In budget 2011 we introduced a new guaranteed supplement top-up benefit for Canada's most vulnerable seniors. I would like to note that the opposition voted against that important increase in GIS for seniors. As a result, more than 680,000 low-income seniors now receive additional benefits of up to $600 for a single and $680 for a couple. In addition, we have provided some $2.3 billion in additional annual targeted tax relief to seniors and pensioners through measures such as pension income splitting, increases in the age credit amount and the doubling of the maximum amount of income eligible for the pension income credit.

Although all of these measures are intended to provide greater flexibility and security to our retirement income system, additional measures are required to safeguard Canadians as they reach retirement age. That is why in May 2009, as the world reacted to the global financial crisis, the federal-provincial-territorial finance ministers met and agreed to form the working group on retirement income adequacy.

After months of consultation, the working group concluded that while our Canadian retirement system was on the whole performing well, some Canadian households were at risk of not saving enough for retirement. A gap identified by the working group was the large number of Canadians, 60% in fact, who had no access to a workplace pension plan.

In December 2010 the finance ministers from across the country agreed that a defined contribution pension plan could be made available to 60% of Canadians and they agreed to pursue a framework for pooled registered pension plans.

Members of the opposition have repeatedly stood in this place during the debate on the bill and have argued against the position of our finance ministers from across the country. They suggest that the key to retirement security is simply to expand Canada pension plan benefits. We know that changes to the CPP would require the agreement of at least two-thirds of the provinces with at least two-thirds of the population. The federal-provincial-territorial ministers of finance have discussed this very notion of a CPP expansion, but there has been no agreement.

Beyond that, if the CPP were to be expanded, Canadians could count on increases to their CPP contributions as a result. Surely a fragile economic recovery is not the right time to increase the amount Canadians have to pay on their CPP contributions.

That being said, moving forward on a PRPP does not preclude some future change to the CPP. The opposition needs to understand that this government is not closing the door on CPP. Rather we are opening the door to a new low-cost and accessible option that will help Canadians meet their retirement goals.

This is especially important for those working for small businesses and the self-employed. Currently, owners of small businesses who might want to create a pension plan for their employees but lack the resources and expertise to do so, or for those in companies that do not have pension plans or are self-employed and want to have access, they are not able to under our current system.

PRPPs would be administered by a financially regulated institution thereby decreasing the cost and complexity for small business owners in setting up such a plan. PRPPs would be accessible to those without an employer-employee relationship, allowing the self-employed to benefit from the advantages of PRPPs, including the lower costs that would result from the pooled funds.

Currently some Canadians may be failing to take advantage of the saving opportunities offered to them through individual structures like RRSPs. In fact, on average, each Canadian has over $18,000 in unused RSP room. Even among those who do make a concerted effort to maximized their retirement income through voluntary contribution structures, a PRPP could provide avid stability.

For example, I will touch on a story of one self-employed Canadian's retirement savings experience. This gentleman worked as a self-employed stone mason prior to retirement and his main form of retirement savings was through RRSPs. Particularly in the last years of his career, he increasingly worked toward maximizing his RRSP contributions and ensured that they were invested reasonably securely, but nevertheless provided some return on investment. Today he is able to live on the retirement income he was able to provide for himself, but only after a lot of hard work on his part to educate himself on RRSPs and investment. In his own words: “It takes years to develop a way of investing that is wise”.

While it is a stated goal of our government to improve financial literacy, we are also aware that many Canadians may not have the time, opportunity or the desire to study investing and not everyone has access to a broker or financial adviser. This is where PRPPs would provide a great benefit because the responsibility for implementing the pension plan would be taken on by the third-party administrator.

The administrator will be responsible for the management of the pension fund and the day-to-day administration of the pension plan. This will include ensuring that the money being contributed into the plan is being managed prudently, that appropriate investments and options are offered and that plan members are informed with up-to-date plan information. Additionally, because PRPP investments are pooled, it is expected that members will be able to benefit from greater economies of scale and lower costs compared to RRSPs.

Another major benefit of the PRPP is its universality and portability. In my own riding of Kamloops—Thompson—Cariboo many people rely on seasonal work for employment, which is a fact of life for many rural Canadians across the country.

For example, let us say that a constituent of mine named John works at the ski resort of Sun Peaks during the winter, but during the summer must find work at a local ranch. Under our current system, John would be left to his own initiative to invest in RRSPs or contribute to his tax-free savings account. Now, thanks to the portability of the PRPP, John can contribute to the same pension plan, regardless of which employer he happens to be working for.

Providing a new, accessible, straightforward and administratively low-cost retirement saving option will allow more Canadians to benefit from secure retirement savings. I am therefore proud to support the government's move to implement PRPPs and hope, with the support of the provinces and territories, that we may speedily implement this important reform for our retirement system.

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:20 p.m.

Liberal

Kevin Lamoureux Winnipeg North, MB

Mr. Speaker, the member has made reference to the fact that the provinces are onside, and I am encouraged to hear that. Could she give any kind of clear indication of the commitment she has received from the provinces in terms of implementation? Are we to anticipate that more than half of Canada's provinces would be bringing in provincial legislation over the next 12 months? Does the government have any indication of that whatsoever? I think it would be helpful to know that before the bill actually goes to committee.

It is also important to ask the member why her government has made the decision to limit debate in the House of Commons on this very important issue. Does she not see the valuable role that the House of Commons plays in this? The government has sat for eight-plus months on this idea, brings it to the House and then expects the House to pass it in four days.

Could the member address those two issues?

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:20 p.m.

Conservative

Cathy McLeod Kamloops—Thompson—Cariboo, BC

Mr. Speaker, I would note that with regard to CPP there was not agreement with the provinces and the finance ministers from across the country. However, there was great agreement to move forward with PRPPs. We have had this out for a number of months. We talked about it with people during the election. I actually discussed this at round tables recently when we were looking at the budget. I can say that it was enthusiastically greeted as an additional tool in terms of a retirement savings program.

Again we need to recognize that there are many pillars to our program and this creates another great tool. I know that constituents are looking forward to having this option. it is important to move it forward quickly so the committee has the opportunity to look at the details.

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:20 p.m.

NDP

Guy Caron Rimouski-Neigette—Témiscouata—Les Basques, QC

Mr. Speaker, I listened carefully to my colleague's speech, and the member for Kamloops—Thompson—Cariboo repeated something that I had heard in previous speeches. I have already asked this question, but I have not yet received an answer, so I will try again.

The member mentioned in her speech that the economies of scale offered by pooled registered pension plans will lower management costs, but I have yet to see proof of that.

Can the member tell me where she got her numbers, given that the largest private sector mutual funds in Canada, which have many, many contributors, still have management costs on the order of 2% to 2.5%, which is much higher than the CPP's management costs at 0.5%? Instead of just telling us that the management costs are expected to be lower, can the member point to any studies clearly showing that such costs for this program will really be lower?

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:20 p.m.

Conservative

Cathy McLeod Kamloops—Thompson—Cariboo, BC

Mr. Speaker, we know that when we create economies of scale and people pool their retirement programs together, there is an opportunity. This would be a large-scale competitive environment and certainly very different than the RRSP option. It is a great opportunity for a lower fee option.

The other important thing is that many employers have told me that they would actually use this, especially the ones having difficulty with recruitment. Having an opportunity to offer this as a benefit to their employees they see as a real positive and a benefit that will not be a headache for small business owners. I think of the Canadian Federation of Independent Business which very solidly supported us moving forward. It is a great additional option for employers and employees.

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:25 p.m.

Nepean—Carleton
Ontario

Conservative

Pierre Poilievre Parliamentary Secretary to the Minister of Transport

Mr. Speaker, I am looking over the Canada Pension Plan Investment Board. The NDP has risen again and again to claim support of CPP. I am looking at the holdings within CPP and I find that the CPP Investment Board has invested the savings of Canadians in the company TransCanada Pipelines. That is the same company that was going to build the Keystone pipeline that the NDP opposes. It is just one more example of how the NDP's attack on business is actually an attack on the CPP, which holds so many of these businesses in its portfolio.

I wonder if the hon. member would be prepared to comment on that.

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:25 p.m.

Conservative

Cathy McLeod Kamloops—Thompson—Cariboo, BC

Mr. Speaker, that is a very important part on which I need to expand. Not only is it the CPP but it is the many pension plans across this country. Whether it is the teachers' pension plan or the municipal pension plans, they all rely on investments in the banks, oil companies and companies that generate profit and pay dividends. Having a low tax plan actually adds to the profits companies make, the dividends they pay out and the retirement security of all our seniors.

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:25 p.m.

NDP

Guy Caron Rimouski-Neigette—Témiscouata—Les Basques, QC

Mr. Speaker, I am pleased to rise in the House today to debate Bill C-25, which, as we know, is about setting up a pooled registered pension plan. This is an important issue today for the future economic security of retirees. Many members have talked about the 12 million Canadians who do not have a workplace pension plan. We have to deal with this issue.

However, the NDP—myself included—believes that the government's proposed solution is a very bad idea. It will distract us from good solutions, and we will end up with a program that does not meet its stated objectives. Let me explain why.

So far, many members have talked about how the economic crisis highlighted the weakness and vulnerability of private pension plans. I am well aware of this because, in my previous life, before becoming an MP, I dealt with very sensitive situations where pensions were at stake, such as the AbitibiBowater employees' pension. Now other companies, such as White Birch, are having problems. In those workplaces, pensions are typically defined benefit plans, not defined contribution plans. These are real pensions that provide economic security, but the present economic climate is undermining that security.

That is what is happening to the Canada pension plan, a defined benefit plan that provides people with economic security because they know how much they will get once they stop working. With defined contribution plans, people do not know how much they will get. That is up to market fluctuations, and it is one of the weaknesses of the government's proposal.

The government often says things to suggest that it accepts the argument that the public pension plans are solid and secure programs; these include the Canada pension plan, old age security and the guaranteed income supplement. It is essential to provide Canadians and Quebeckers with economic security, but the pooled registered pension plan proposed by the government does not do that.

Before getting into the major shortcomings of the proposed pooled pension plan, I would like to address one of the arguments that has been raised many times since the beginning of the debate: that we have no choice but to move in this direction because the provinces have refused—the necessary consent was not given by two-thirds of the provinces. That argument is a fallacy.

I followed the issue when I was in my previous position and I also followed the Kananaskis meeting where this was discussed. I would like my colleagues to refer to an article from the Globe and Mail that was written on the eve of the Kananaskis meeting. I will read it in English because the article is in English.

Provinces are planning to fight for enhancements to the Canada Pension Plan at a key meeting on Monday, setting up a showdown with the [federal] government over how Canadians will fund their retirements.

Just days before federal and provincial finance ministers meet in Kananaskis, Ottawa made a surprise move to reject CPP enhancements for now in favour of a new privately run savings vehicle.

Ontario's finance minister, who is quoted in this Globe and Mail article, said he did not think the provinces would oppose it. In the same article, the only province to oppose improving the Canada pension plan was Alberta. It was possible to get approval from nine provinces at that time. Since the government announced that the option of improving the Canada pension plan was not on the table, the provinces wanted to try to make the meeting worthwhile by proposing any option that might seem like progress. That is what is being proposed right now. To say that we have no choice but to take this direction because the provinces have said no is a fallacy. It is not true. It is baloney.

The Canada pension plan has several major flaws. Now we are talking about another voluntary plan. It will be introduced in a workplace and it will be optional. People will be able to opt out if they want. In other words, it will be a voluntary program. Tons of voluntary programs already exist, including group RRSPs and the more recent TFSAs. Both of these plans offer tax incentives to encourage Canadians to invest. Yet only 30% of Canadians invest in RRSPs, despite the significant financial incentives. It costs the federal government a fortune in tax expenditures. So why do only 30% of Canadians invest in RRSPs? Why do 70% of Canadians not invest? Because they do not have enough disposable income to do so.

I can also talk about TFSAs. Some 40% of Canadians invested in TFSAs last year. Half of that 40% earn $100,000 or more a year. For them, this program in another tax loophole. In the end, over 60% of Canadians are not investing in TFSAs, despite the advantages of the program, because they do not have the disposable income needed to invest. So, there is a good chance that low-income employees will not have enough incentive to participate in the proposed program because they need all of their income to meet their basic needs. Many of the employees who have the program available to them will opt out for that reason. The reason many voluntary programs do not work, despite tax incentives, is because people need to have enough money to invest.

We compared the management fees of the program proposed by the government to those of the Canada pension plan. Management fees associated with the CPP are less than 0.5%. Private plans, such as mutual funds, are also a form of pooled investment, since everyone has a share of the overall envelope in a mutual fund. The largest mutual funds do not benefit from any economy of scale. Management fees range from 2% to 2.5%. This may not seem like much but when a mutual fund generates a return of 3% to 3.5%, the 2% to 2.5% in management fees must be deducted from it. If the Canada pension plan delivers the same return as a mutual fund, only 0.5% must be deducted. Thus, the Canada pension plan already provides a return that is 2% greater than private plans like the one the Conservative government wants to implement.

As a side note, the Canada pension plan delivered a return of 15% in 2010 and 12% in 2011. On average, private plans in Canada delivered a return of 10.5% in 2010—from which 2% to 2.5% must be deducted—and 0.5% in 2011. We are talking about a total cumulative return of 27% over the past two years for the Canada pension plan and a return of only 11% for private plans. If there are any doubts about the effectiveness of the Canada pension plan as compared to private plans in the past two years, a time of economic uncertainty, this fact should dispel them.

With respect to economies of scale and management fees, Australia has a super fund very similar to what the government is proposing. About 10 years after setting up the super fund, Australians discovered that there were no economies of scale and that management fees were the same as for private funds, such as mutual funds.

I have already briefly addressed the third element, defined contributions.

Fourth, this distracts us from the real solution that the NDP has proposed: enhancing the Canada pension plan. Gradual premium increases would make it possible to double benefits, thereby ensuring a secure retirement for Canadians. That would be a true financial security program.

I do not have enough time to point out all the advantages of this solution. I hope that someone will ask me a question about that in the next five minutes. This is the right solution. This solution would also provide economic stability because beneficiaries would spend their bigger pension cheques. After all, they no longer need to save. The money would be reinvested in the economy to play a major role in battling economic uncertainty and fuelling the economy.

That makes our solution far better than the vague one the Conservatives have proposed.

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:35 p.m.

Liberal

Kirsty Duncan Etobicoke North, ON

Mr. Speaker, I would like to thank the member for his speech. It was nice to hear his history and his expertise.

PRPPs are all about pensions, so I would like to talk about the broader issue.

Thomas Klassen is a York University political scientist and a leading Canadian on pension reform. He says that the OAS will not cause the federal budget to crash.

Ed Whitehouse, who researches pension policy for the World Bank and who was asked by Ottawa to study and report on how Canada stacks up, said:

--Canada does not face major challenges of financial sustainability with its public pension schemes...there is no pressing financial or fiscal need to increase pension ages in the foreseeable future.

Does the hon. member think that people should be able to expect the rules under which they made their retirement plans will still be in place when they retire?

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:35 p.m.

NDP

Guy Caron Rimouski-Neigette—Témiscouata—Les Basques, QC

Mr. Speaker, I thank my colleague for the very pertinent question.

The examples she has provided are pertinent and corroborated by the findings of the Chief Actuary of Canada. There is no public pension crisis in Canada: the Canada pension plan, old age security and the guaranteed income supplement are not in jeopardy. In fact, if there is a crisis, it is that old age security, in particular the guaranteed income supplement, does not meet the needs of our seniors who are currently having trouble making ends meet.

My colleague is right to say that there is no crisis. The examples she has provided in this regard are all factual. When we talk about old age pensions, as mentioned by the Prime Minister in Davos, we are talking about an increase equivalent to 1.7% to 2.4% of gross domestic product at the height of the demographic crisis that is looming. Consequently, no change is needed and the Chief Actuary of Canada is in agreement. If we must review these programs, we should do so not as a budget exercise to reduce the deficit built up by this government, but in order to help the most disadvantaged retirees.

Second Reading
Pooled Registered Pension Plans Act
Government Orders

1:35 p.m.

NDP

Rosane Doré Lefebvre Alfred-Pellan, QC

Mr. Speaker, I thank my hon. colleague for his magnificent speech. It was very interesting.

He ended his speech by talking about some of the advantages of the Canada pension plan and the Quebec pension plan, and the benefits of investing in such plans. He did not have time to speak further about this. I would like to hear more about this matter. It seems very interesting.