Bill C-25 (Historical)

Pooled Registered Pension Plans Act

An Act relating to pooled registered pension plans and making related amendments to other Acts

This enactment provides a legal framework for the establishment and administration of pooled registered pension plans that will be accessible to employees and self-employed persons and that will pool the funds in members’ accounts to achieve lower costs in relation to investment management and plan administration.

Second Reading

[Kevin Lamoureux, Liberal, 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?

[Cathy McLeod, Conservative, 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.

[Guy Caron, NDP, 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?

[Cathy McLeod, Conservative, 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.

[Pierre Poilievre, Conservative, 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.

[Cathy McLeod, Conservative, 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.

[Guy Caron, NDP, 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.

[Kirsty Duncan, Liberal, 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?

[Guy Caron, NDP, 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.

[Rosane Doré Lefebvre, NDP, 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.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, I want to thank the hon. member for giving me the opportunity to speak to this issue.

The NDP plan is quite simple. It aims to double Canada pension plan benefits with minimal increases to the contributions. We are generally talking about an increase of 0.43% in employer contributions and 0.43% in employee contributions over seven years. A former chief actuary of the Canada pension plan said that from an actuarial point of view, it was a good solution and it could double the benefits with minimum impact on the private sector and employees.

I have heard the arguments that the Canadian Federation of Independent Business has made repeatedly. The arguments are quite interesting, but not very logical. We are talking about an increase for the employee of 9 cents an hour a year for seven years. That is not a lot. That amounts to a $3.47 increase a week for seven years. Even for a small business, that is not a lot.

The Canadian Federation of Independent Business fails to mention the economic spinoffs of this measure. If Canada pension plan and Quebec pension plan benefits were doubled, the money would be reinvested in the economy. The little money the businesses would pay to improve the benefits would be reinvested in those same businesses. There could be economic growth that would strengthen the businesses, including small and medium-sized businesses. In that sense, it is the best solution for the economy and for retirees.

[Mike Wallace, Conservative, Burlington, ON]

Mr. Speaker, it is my honour to speak to Bill C-25. I welcome everyone back in the new year and I welcome those who are watching at home. It is hard to believe that people do watch the debates at home but I have two grandmothers who actually watch so I want to say hello to my grandmothers and wish them a happy new year if they happen to be watching today.

I want to talk a bit about how we got here today and why Bill C-25, the pooled registered pension plan, is important. I had the opportunity, as a Conservative member on the finance committee over the last five years in the previous Parliaments, to be part of finance and we did an extensive study on pensions. It took a number of months and, out of that study, came a number of issues, one of which was a pooled registered pension plan. Business, labour and individual business owners were coming to our committee and asking us to look at the possibility of being part of that group of those who were eligible for pensions. As has been previously mentioned, about 60% of people do not have access to pensions. They were looking for an opportunity to have access to a pension plan.

Out of that, we recognized the issue that pensions play, not just currently but in the future. The Prime Minister had the foresight to take the parliamentary secretary at the time and make him a Minister of State for Finance with a focus on pensions. We are the only government in Canada's history that has a focused ministry on that particular item. We care about our seniors, our future seniors and where this country is going in terms of the demographic. We need to be on top of the pension plans and retirement issues that are facing this country, which is why the Prime Minister has dedicated a ministry to that effect. So that is how we got here today.

Who asked for it? Members have heard over and over again from my colleagues on this side of the House about the small business organizations that have come to see us to talk about why they need access to a pension plan. One reason is that it is good for their employees. There is no doubt that having access to a pension plan and having some planning in terms of eventual retirement are important. However, as the Parliamentary Secretary to the Minister of National Revenue previously said, it is also important for retention and attraction of employees. It is very difficult for small and medium size businesses to compete with large businesses that have pension plans and other benefit programs to attract high-quality employees. One of the things small business representatives told us at committee was that they needed a pension plan that would help them, not only retain their great employees but to help them attract new employees to their industry or business. A pooled registered pension plan would allow that to happen.

I want to remind members of the House and those watching that we are at second reading. What we are trying to do today is move this from the House to committee. With the three days that we have allocated for second reading, we have 42 speakers in 42 time slots. The bill then goes to committee so we can discuss the individual issues. We can have witnesses come to talk to us about what components are working, what needs to be changed and what can be improved. That is what we are doing today.

However, let us look at the components. One is the low cost. I have heard my colleagues across the way ask how we can guarantee it would be low cost. I am a member of OMERS as I used to be a municipal employee. OMERS now has the ability to allow me to have my own independent investments through RRSP managed by it. Why does it tell me it is a good idea? First, it is a good investor. It has a good group of people managing it as a third party and they are smarter than me on the investment piece.

Second, because of the numbers OMERS has, there are lower costs than for me to invest individually in RRSPs. It is a pooled system that OMERS is offering to members for other investments that it will manage at a lower cost. This is exactly what the pooled registered pension plans would do. It is large pools of revenue that it is able to invest at a lower cost because it has a larger pool to deal from. it knows that is coming.

Another piece that is vitally important here and that people seem to be missing the point on is this. They are saying that it is just another RRSP. However, people voluntarily put money into an RRSP, whereas if a company has a pooled retirement pension plan, people are automatically enrolled in it. They would have to withdraw from that plan. It is just like the CPP, in which people are automatically enrolled. Someone has to make a personal investment decision as an individual employee to withdraw, otherwise that person is in the plan.

Frankly, I think it is a better way to go to have people automatically enrolled in the program. Then they at least have to look at their investment plan and make a decision on their own. For lots of people, my neighbours and I included, making investment plans and decisions can be difficult. It is often much more practical, efficient and appropriate to leave it to a third party to do. People will be enrolled in this plan and will be saving for their retirement. Someone would have to decide not to save for their retirement to get out of a pooled retirement pension plan. That is a fundamental difference with an RRSP, which we have heard lots about.

Portability is another important issue I want to talk about. In a pooled retirement pension plan, if someone leaves a company to go to another one, that person can continue to have those retirement benefits in the pooled plan.

Let us be honest, if they leave one company to go another and do not contribute to the plan as a new employee, the company will lose that employee's contribution. That is true, and that is a choice people will make when they change jobs. They will have to look at the benefits they are going to get, including the opportunity for retirement, all of which will be part of that pension plan decision and the reasons they might move. At least it is portable and people will not lose those benefits, as they can move from one company to another.

The final thing I want to talk about is that it would effectively be available to everyone. Right now large corporations have some sort of contribution plan. Some have a defined pension plan, which I know is becoming increasingly rare. However, larger firms seem to be able to have contribution plans, as they can afford the management costs and they have HR departments to look after those types of things.

The largest employer in my riding of Burlington employs 600 people. The vast majority of the thousands of people who work in my riding work in small- and medium-sized businesses or sole proprietorships. All three will now have the ability to join a pooled registered pension plan, an option not available now.

Finally, I want to say this. We have heard lots about the government not boosting the CPP. The parliamentary secretary who spoke before me talked about it. Let us deal with the facts: the facts are that we need the agreement of two-thirds of the provinces, with two-thirds of the population, to actually make a change. We cannot disrespect the provinces and premiers. If they do not want to move on the CPP issue, we do not have the right or legislative ability to override their decision.

However, we do have agreement to move forward with a pooled registered pension plan program. All the provinces, at different levels, will have to have their own legislation. We have been clear about that. We will have to have legislation here, and the provinces will have to have legislation. We have commitments for that to happen. That is why we are moving forward.

We can talk about CPP, as we have as a government with our counterparts at the provincial level, until we are blue in the face, and I do not mean Tory blue, but mean regular blue. However, it will not happen without the provinces' agreement. We will continue those discussions because CPP is an important pillar, an important tool, for the retirement of everyone who is working.

Nonetheless, we need to find other tools. This is one that we have agreement on, and this is one that the business community is interested in. I even had 50 people at my house on Friday night discussing pooled retirement pension plans. These people were asking if they would qualify.

This is something we need to do. We have 42 time slots for discussion. Let us get the bill to committee. If members have problems with this legislation, they can bring their issues forward there. Let us move forward and do something for Canadians, as our NDP friends claim they like to do but never do. We are doing it.

[Mike Sullivan, NDP, York South—Weston, ON]

Mr. Speaker, having 50 people talking about pooled registered retirement savings plans seems strange for that party.

Has the member opposite been listening to the debate and the comments of the Parliamentary Secretary to the Minister of Transport, who said several times that reducing tax cuts to already profitable corporations will hurt already profitable businesses by reducing their profits? Yet the Minister of Finance has told us that these tax cuts for already profitable corporations were to create jobs. The government cannot have it both ways. The money cannot be used to create jobs and to raise profits. Which one is it? Why are we harping on this?

[Mike Wallace, Conservative, Burlington, ON]

Mr. Speaker, I have been listening to the Parliamentary Secretary to the Minister of Transport here and in my office.

My colleague is absolutely right. We do not understand why the NDP does not understand that pensions, including the CPP, are funded by investments in the marketplace. In fact there is a board that looks after the public service retirement plan and invests in the marketplace.

If we hurt businesses trying to do well in the marketplace by adding to their tax burden, they will be less profitable, less able to contribute, and it will hurt pensioners.

I do not know why those members are afraid to understand that the marketplace will help create value in pensions, which will eventually be returned to those who collect those pensions.

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

Mr. Speaker, there is one thing I do not understand about this plan. If a company has excess resources to offer its employees via a pension plan to which it would contribute, why would it not just call in a company like London Life and have it create a group plan?