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.

Pooled Registered Pension Plans Act

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Mr. Speaker, I would like to thank the independent MP over in the corner. My colleague changed his political stripes.

Once again, it is very clear that the government is not interested in funding pension plans. Earlier, we were told how obvious it is that everyone wants to own stocks.

Sure that is obvious. Of course. Unfortunately, that is how finance is done nowadays, and we saw how that turned out. My colleague was right to point out that, in 2008, those people played with real people's money and savings. I know people who lost 40% of their retirement savings. That means that instead of living for 20 years off their retirement savings, they can live for just 12 years.

[Alexandrine Latendresse, NDP, Louis-Saint-Laurent, QC]

Mr. Speaker, I have a question regarding the last comment by my colleague from Longueuil—Pierre-Boucher.

The Conservatives' changes to employment insurance will create a huge machine to monitor all available jobs in Canada and to ensure that there is not one unemployed person. If there is a job available somewhere, the unemployed person will have to take that job.

This measure will be expensive, but they still want to implement it. And yet, the Conservatives are saying that they do not want to make any changes to the current pension system that will improve it.

I would like him to comment on the apparent contradiction between these two positions.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Mr. Speaker, this is the first time I have risen to thank the member sitting next to me. I thank her for the question.

The problem lies strictly with their intention. Their intention is the problem. The Conservatives decided to go to Davos to tell their big buddies that the Conservatives are doing a good job of governing Canada and to come and invest here because the public does not call the shots.

[Randall Garrison, NDP, Esquimalt—Juan de Fuca, BC]

Mr. Speaker, I rise today to speak to Bill C-25 at third reading. I am very happy to do so. I know that all members in the House share the common goal of making sure that all Canadians have security in their retirement. However, I am rising to speak against the pooled registered pension plan scheme for many reasons.

One of the reasons is that it would not actually guarantee a pension. As many on my side have pointed out, we should not be calling this a pension plan. Instead, it is a savings scheme. The second reason is that it would put the burden solely on employees and would not require any contribution from employers. It would allow employers to say they are doing something for employees' retirement, but they will pay for it. In that sense, the style of the plan is a bit deceptive.

It would not be indexed to inflation. When we combine that with no cap on administrative fees or costs, it means that the risks would be entirely borne by the employees. Therefore, when it came time for employees to retire, there would be no guarantee that they would even get back payments equally valued to the contributions they made.

How do we know that? We have seen the evidence from the Australian plan, which was put in place more than a decade ago, similar to this, called the Australian super fund. In the study of that plan by the Australian government recently, it showed exactly what I said, that the benefits were only equal to the rate of inflation. In fact, the employees who contributed were simply treading water and not really planning for secure retirement.

I have heard members on the other side ask why on earth I would oppose what is another tool in the tool box for retirement savings. I would first say that I am worried it would become another tool in the tool box of investment planners and banks to make more money for their long-term security instead of making more money for the people who actually contribute to those plans. Their tool box is already full, from my point of view, and there is no need to give them another profit source as I think this plan would obviously do.

Is it a real tool for employees to save for their retirement? It would certainly take money out of their cheques. Most families are struggling as it is just to make ends meet by providing housing, putting food on the table and providing for their kids. The vast majority of employees do not have any spare money to risk in a plan like this. Their money would be much better invested in an expanded Canada pension plan. The Canada pension plan is not a theory or ideology but a proven plan that has shown it has lower costs. Why does it have lower costs? Because it spreads out the administrative costs over the entire population. It is a plan that has lower risk. Why does it have lower risk? Because it spreads the risk across the entire population and provides a defined benefit indexed to inflation.

The CPP has a couple of other benefits that we do not often talk about. One of them is that increasing benefits in the CPP would ultimately reduce costs for government because it would reduce the demand for GIS payments. In other words, if people had been allowed to put money into a plan that would provide them a secure retirement and pay for it themselves, they would not be dependent on welfare at the end of their lives in terms of the GIS. That is no criticism of those who collect GIS. Most Canadians have not had the opportunity of having secure jobs with workplace pension plans that pay enough to provide secure income. The easy way to do that is to expand the Canada pension plan.

This has been on the public agenda since 1996 when the NDP government of British Columbia first put an expanded CPP on the table and tried to convince governments at that time. If it had begun with a slow increase in the contributions made by both workers and employers back in 1996, we would be in a place where the CPP would be providing double the benefits it provides now. We would have made a great dent in the problem of seniors poverty. It is still not too late. The NDP campaigned in the last election to do just that: begin with modest increases in the contributions by workers and employers and, over time, double the benefits that are being paid out by the CPP. Again, workers would be paying for their own secure retirement. It is not a welfare program. There would be no cost to government.

The Canada pension plan along with its parallel, the Quebec pension plan, have been major contributors to helping end poverty among seniors. As I said, it is an earned pension with all the dignity and self-esteem that comes with having provided for one's own retirement.

I would point out they are also very good for small business. We are talking about small businesses that are too small, really, to run their own workplace pension plan, that could not bear those administrative costs, that cannot recruit, as the hon. Parliamentary Secretary to the Minister of the Environment talked about, that cannot recruit employees because they cannot offer the same kind of benefits.

Yet, if the benefits under the Canada pension plan were increased, it would level that recruitment playing field for small businesses, because people would be earning an adequate pension in all jobs across the country.

Originally the CPP was designed, along with the QPP, to be supplemented by private pension plans, so the original plan was never meant to provide the full retirement income. It was thought at the time that workplace pension plans and other schemes would fill the gap to bring Canadians up to an adequate retirement income.

What we have learned is that that has not happened for several reasons. One of those, of course, is that more than 12 million Canadians lack any workplace pension plan of any kind. Even those who do have plans are quite often enrolled in plans which are not portable. We all know the days when people go to work for one company and stay there for 30 years are becoming more and more rare. Even if they had a private pension plan, when they are forced to change jobs, people often have to start over in a new private plan or cash out their benefits at that time.

The second problem with workplace pension plans that we have seen in the last years of economic crisis is that they are not secure. When a company goes bankrupt, unfortunately, those with disability pensions and those with workplace pensions are almost last in that line of creditors.

For that reason, the NDP has proposed, as another way of securing retirement incomes, the bankruptcy laws in this country need to be amended to place disability pensions and retirement pensions at the front of the line of creditors in the case of bankruptcy, so that those who have made contributions themselves would have their pension secured before the other creditors of those bankrupt companies. Unfortunately, we are still waiting for action on that very important point.

The Canadian government, under the Liberals, did recognize that retirement savings were inadequate. The government came up with the registered retirement savings plan to allow people to voluntarily put money into a plan to help supplement the CPP in their retirement. That is a good idea in theory, but the problem with that plan is that because of the high cost of living, the high cost of housing and other difficulties in making ends meet, only 31% of those who are eligible to contribute to RRSPs are actually able to do so. That means that this great solution to fill that gap has not been successful.

More recently the federal government came up with the idea of tax-free savings accounts. Once again, there is an implicit recognition that there is a gap in retirement income for Canadians. So the tax-free savings accounts were set up. Only about 41% of Canadians have established a tax-free savings account. Most of those say that they are not using it to save for retirement.

Most interesting to me, over half of those who have tax-free savings accounts earn more than $100,000 a year in income. They are obviously already able to take care of themselves when it comes to retirement. Most Canadians, obviously, do not earn anywhere near this figure and do not have extra money at the end of every month to put into a tax-free savings account.

The vast majority of Canadians are dependent on the CPP for their own retirement income. When we look at the benefit levels of $12,000 per year, it is clearly not enough. As I mentioned, it was not designed to be enough. It was designed to be supplemented by these other programs which have failed over time to do so.

Now it is time to revamp the CPP and QPP to make sure they provide an adequate retirement income, that we share the risk, that we spread this out over everyone in society, and make sure that everyone is secure in their income.

Clearly there are some other measures that are needed to attack the problem of inadequate retirement income. I mentioned amending the bankruptcy legislation in this country, and I think that is very important.

The NDP also promised that when we are government we will increase the GIS to immediately lift every senior out of poverty at a relatively modest cost.

Why not proceed with the CPP? The government says the provinces are not onside. It requires co-operation to change the CPP and the QPP. As far as I can tell, only one province was really opposed. I have seen no real effort from the federal government to bring the provinces onside to expand the CPP.

In conclusion, I would just like to remind members of the House that all Canadians would benefit from an expansion of the CPP, not just the fortunate few.

It would benefit small business. It would benefit workers changing jobs. In particular, it would benefit those who work hard all their lives in low-wage jobs and are not able to save for their retirement.

I urge the House, rather than create this new plan, which would do nothing to solve the problem, to turn instead to an expansion of the CPP-QPP program.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Mr. Speaker, I listened with interest to the speech by my colleague across the way. I have a couple of comments to make and then a couple of questions.

First, the TFSA was not necessarily intended for retirement. It was intended for a whole host of things. I would consider 41% uptake to be pretty extraordinary.

The member talked about expanding CPP and QPP. I assume he realizes that would mean more investment in the stock market for those apparently hated things like banks and resource companies. Does he think that the dividends that Royal Bank, for example, is putting into his QPP are a bad thing, when he seems to want more of them?

Early in his remarks he called PRPPs a bad plan because people would be forced to pay for their own retirement. A little later in his comments he said CPP was a good thing because people are paying for their own retirement, with the pride that brings. I am wondering if he could explain that apparent contradiction to me.

[Randall Garrison, NDP, Esquimalt—Juan de Fuca, BC]

Mr. Speaker, my point was that being forced to contribute to a pooled pension plan, which is risky and would have no defined pension at the end of it, is the problem. When people contribute to the Canada pension plan, they have a defined benefit and the risks are shared out over society.

I have nothing against the stock market except when the risks are borne by individuals who do not have an adequate income to begin with. Then it is not a good solution for saving for their retirement.

The thing that works is just the thing the member is actually suggesting in the pooled plan. When people pool their resources into a larger plan then it spreads the risk. That is why the CPP is a better way to save for retirement than leaving the risk with individuals or very small pooled plans.

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Mr. Speaker, we in the Liberal Party agree in essence with regard to the CPP and its benefits. This program has been in place for generations. It was a Liberal Party initiative many years ago that made people realize how important pension plans are for seniors, and that is the reason we established a CPP program.

We would like to see the government demonstrate more leadership on that particular file. The government needs to meet with the provinces and work out a better agreement so that workers today will be able to retire with more money going forward.

I come from a province where there is an NDP administration. That NDP administration talked about the labour crocus fund as a form for retirees to invest in. It promoted the crocus fund. It is quite different from the pooled pension plan that is being proposed, but the concept of seniors using their private money to invest in a venture capital fund was something it saw as a positive thing even though there were management fees and so forth.

Would the federal NDP have opposed a venture fund with tax incentives for seniors to invest in that type of approach? Does it have to be CPP or broke?

[Randall Garrison, NDP, Esquimalt—Juan de Fuca, BC]

Mr. Speaker, I note that the Liberals have 20/20 hindsight and vision back to the things they accomplished many years ago. I just wish they had the same foresight at this time.

In supporting the pooled retirement savings plan, a big mistake is being made in terms of public policy. We are telling people they are going to get something that is not there, something that is not secure, something that will not deliver in the long run.

The member asked if I would support seniors investing in venture capital. Only wealthy seniors can afford to take those kinds of risks. It is called venture capital for a reason. Average people who have worked hard all their lives in an average job cannot afford to risk their retirement on those higher risk ventures. They need something secure that will provide them with a defined benefit to take care of them in their old age, and that is the genius of CPP and QPP. They have shown us success over time. That is the reason I think they are the solution to this problem.

[Chungsen Leung, Conservative, Parliamentary Secretary for Multiculturalism]

Mr. Speaker, as a former small business owner, I wish to speak in support of the pooled registered pension plan.

In these tough economic times, our Conservative government continues to work hard to create jobs for Canadians. Naturally, one way of doing this is to support job creators. What do I mean by this? I mean supporting small and medium-sized businesses.

I am proud to say that this is one of the great aspects of Bill C-25, an act that would implement the federal framework for pooled registered pension plans.

The bill would remove traditional barriers that might have kept small and medium-sized businesses from offering a pension plan to their employees in the past.

Members may ask what are traditional barriers. One is responsibility. Under the PRPP framework, the fiduciary responsibility related to the management of pension plans would be shifted from the employer to a licensed third-party professional administrator.

The second traditional barrier is the administration of the pension. Under the PRPP framework, the administrative burden of the employer would be reduced. Again, most of this burden would be shifted to a licensed third-party professional administrator.

With these significant barriers removed, employers would be able to offer a workplace pension plan to their employees for the first time. In fact, the business community has already commented on how the reduced administrative burden would be of great benefit. For example, Thomas Lambert, the CEO of Canadian Multicultural Radio said:

The PRPP is just the kind of option we've been searching for. With the savings on the administrative costs we can incentivize our staff towards better retirements savings.

By offering a low-cost and administratively simple pension plan, employers would have a new tool to attract and retain skilled employees. I ask hon. members if they would not like to work for a company that offers a low-cost pension option to its employees, a pension option that aims to leave more money in their pocket when they retire. According to the Canadian Chamber of Commerce, that is exactly what PRPPs would do. It said:

...(PRPPs) would be a great option to attract new talent to our business. A pension plan draws a lot of the skilled people that we need to the larger corporations and this would be a nice edge to add to a great business.

There is even more. The introduction of PRPPs would be of great benefit in the self-employed medical profession. Here is what the Ontario Medical Association had to say:

The creation of pooled registered pension plans (PRPPs) levels the playing field by providing the self-employed, including physicians, with better access to additional savings opportunities that have up until now been unavailable.

Mr. Speaker, I am just reminded that I will be sharing my time with the Parliamentary Secretary to the Minister of Veterans Affairs.

Allow me this opportunity to explain how PRPPs would help these employees and self-employed Canadians achieve their retirement goals.

One of the great features of a PRPP is auto-enrolment. Where an employer offers a PRPP, all employees would be automatically enrolled. Not only would this increase participation, but it would also encourage more Canadians to save for their retirement.

Another great feature is portability. This means that when employees changed jobs, they could take their PRPP with them from job to job.

Another innovative feature of the PRPP is that the contributions by members would be locked in. This would ensure that plan members would have savings when they retired.

I would be remiss if I did not talk about one of the major benefits of the PRPP, and that is its low costs. It is clear that the opposition members do not fully understand this concept. Please allow me a moment to explain its key feature to them.

Essentially, PRPPs would facilitate low cost through their scale and design by achieving certain economies of scale. It does not matter whether a person manages $1 million or $100 million; the effort is the same.

As I mentioned earlier, PRPPs would have a broad-based availability. By pooling all these pension savings, the cost of administering the pension funds would be spread over a larger group of people. This would enable plan members to benefit from the lower investment management costs that are typically associated with the average larger mutual funds.

The low cost feature of PRPPs is something that stakeholders around the country are raving about. I will share with hon. members some of the feedback following our broadly based consultation. According to the Canadian Federation of Independent Business:

A new voluntary, low-cost...retirement savings mechanism will allow more employers, employees, and the self-employed to participate in a pension plan....

The Canadian Taxpayers Federation comments:

Canadians will be able to save more for retirement with this new pension plan. People saving for retirement will enjoy lower costs and more flexibility through their working lives.

Unfortunately, instead of jumping on board with this great incentive, the opposition members would rather expand the Canada pension plan. Clearly, the opposition members are not interested in creating jobs. They are interested in taxing the job creators.

Make no mistake; our Conservative government would never take such a reckless and irresponsible position. Our government understands that the last thing job creators need in a time of global economic uncertainty is another tax hike.

Unlike the opposition, our Conservative government understands it is tax reduction that facilitates the creation of jobs and economic growth. That is why in our economic action plan 2012, our government is committed to extending hiring credits to small and medium-sized businesses for another year.

Do members know what this would mean? This would mean jobs, growth and long-term prosperity. On the economy, our record is clear. Since July 2009, more than 750,000 net new jobs have been created. That is a result Canadians appreciate.

With the passing of Bill C-25, federally regulated workers as well as those in the Northwest Territories, Nunavut and the Yukon would be able to take advantage of PRPPs.

I would hope that every province would pass legislation to implement the PRPP as soon as possible, so that all Canadians would be able to access the low-cost, broad-based pension plan.

The legislation is a win-win for both employers and employees. By introducing the PRPP, we would be strengthening Canada's retirement income system, a system that is viewed around the world with envy.

When it comes to PRPPs, our government is on board, small and medium-sized businesses are on board and, most important, Canadians are on board. The only real question is: Why are the members of the opposition not on board?

I would encourage all members of the House to stand and support the swift passage of Bill C-25. The sooner PRPPs are available, the sooner more Canadians could start saving for their retirement.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Mr. Speaker, I would simply like to consult my colleague on the so-called collective aspect of the pooled registered pension plans.

The only collective aspect I see is a collectivization much like that enforced under Stalin more than 80 years ago, in other words, a general misery shared among those who already have very little means, who have limited wages and who work for small businesses that are not on a very strong footing.

Can my colleague explain the magic formula whereby employees of these small businesses will manage to contribute to this retirement tool the government is proposing without becoming completely impoverished? We know that Canadians currently have $500 billion in unused RRSP contribution room and that this has been the case for a long time. People do not have the means to use these savings vehicles.

Where is the solution? What will this do other than make people poor?

[Chungsen Leung, Conservative, Willowdale, ON]

Mr. Speaker, let me say that in our society we are quite unlike that of Stalin, unlike a communist state where it is a totally planned economy. We do not have a totally planned economy. We have an economy that allows businesspeople to exercise their entrepreneurial spirit, thereby achieving the best they can for their employees and for the economy in general.

What the member opposite should know is that there are many ways for people to achieve retirement. One way is through their principal residence that they would have built and renovated as they contributed to its mortgage.

Another way is if people are lucky enough to have a company pension plan. That is fine, but if they do not have that, like most small and medium-sized businesses, this is what the pooled registered pension plan would do.

The member mentioned that the RRSP is another tool that only the rich can afford. That is not true. I think what we are doing is giving the employees or the individual businesspeople that option to decide how they want to save their money. Certainly the tax-free savings account is another option we have provided.

There is an array of tools people can use to plan for their own pension.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Mr. Speaker, I want to remind my colleague across the way that in his speech, basically, he illustrates that all the opposition are against this type of measure, which is not true at all. I certainly do understand why this is in place. The only thing I would say is that it is just a small tool in the shed that we can use. I suggest we should go a little further, given the situation that society finds itself in and the imperative of trying to find stable income in the retirement years.

However, it does not come without some problems. There are other examples around the world; for example, the Australian example. Here is what was written about the program in Australia from 1997. It said:

...total assets in the system have grown substantially through contributions, but net earnings from investments were relatively low. Despite the presumed role of competition, the investment performance of the system continued to be restrained by high fees and costs.

That is from the similar system in Australia. I wonder if my colleague would comment as to how this program would not do that.

[Chungsen Leung, Conservative, Willowdale, ON]

Mr. Speaker, it seems like the member is only focused on Australia. I would suggest that if he were to look at the provident fund of Singapore and some of the pension funds in Japan and Taiwan, he would find that there is exactly that, where they issue an array of products for employees to participate in.

One of the problems with a centralized mega-fund, as is the case with the CPP, is that one is confined by legislation and, therefore, must invest in very conservative investment instruments. When this is opened up to a more open society that reflects the way our changing world economy and financial system is moving, the individual professional investor who can take advantage of tools like derivatives, commodity investments, options and so on, would be in a better position to buy you better growth in your pension plan.

[The Acting Speaker, Barry Devolin]

Before resuming debate, I would remind all hon. members to direct their comments and questions to the Chair rather than to their colleagues.

Resuming debate. The hon. Parliamentary Secretary to the Minister of Veterans Affairs.

[Eve Adams, Conservative, Parliamentary Secretary to the Minister of Veterans Affairs]

Mr. Speaker, I listened to the hon. colleagues across the aisle and the NDP members just do not seem to get it. They continue to advocate for something that is neither feasible nor has the support perceived.

I am talking about their proposal to double the Canada pension plan. There are several problems with this proposal. I will outline them for the NDP and see if it can be convinced once and for all that doubling the CPP is simply not practical.

Any change to the Canada pension plan is subject to a formula specified in the legislation. In case the NDP did not know, I mean the legislation governing the Canada pension plan. The legislation clearly stipulates that the CPP can only be amended by a consensus of two-thirds of the provinces, representing two-thirds of the population.

At the 2010 finance ministers' meeting, a number of provinces had strong objections to expanding CPP benefits. However, the ministers made a unanimous decision. They unanimously decided to set up a framework for pooled registered pensions plans.

Unlike the NDP's proposal, which does not have the support of the provinces, the decision to move forward with pooled registered pensions plans was unanimous. That is not the only problem with the NDP plan. To expand CPP benefits or, in the NDP's case, to double them, we would have to raise contribution rates.

Higher contribution rates would mean higher payroll costs for small and medium-sized businesses and higher premiums for workers and the self-employed. Unlike the NDP, our government remains focused on the economy. This means focusing on job creation and economic growth and Canada's long-term prosperity. Our government does not believe that now is the time to jeopardize Canada's fragile economic recovery by imposing higher costs on job creators.

The House might be interested to hear that many other groups share our government's philosophy that expanding the CPP in these turbulent economic times is the wrong choice.

For example, according to the Canadian Federation of Independent Business, CFIB, for every 1% increase in CPP premiums beyond the current 9.9% tax rate, it would cost 220,000 person years of employment and force wages down roughly 2.5% in the long run. For those who want to double the CPP, they might be interested to know that, according to CFIB calculations, to double CPP benefits would kill 1.2 million person years of employment in the short term.

All these so-called solutions proposed by the NDP would be detrimental to Canada's economic performance. They would result in lower economic growth and lower job creation. This would mean more unemployed Canadians, a sort of the NDP way.

Members can rest assured that our Conservative government will not engage in such a reckless plan. Our government has a strong record of job creation and job growth. In fact, I am pleased to say that, since July 2009, over 750,000 net new jobs have been created in Canada. That is a result that Canadians appreciate and a result that the residents of Mississauga—Brampton South appreciate.

It is important to remember that Bill C-25 represents the federal portion of the PRPP framework. In order to make this available to all Canadians, the provinces must put in place their own PRPP legislation. Once that happens, PRPPs will be a key element to Canada's retirement income system.

However, my constituents may be denied the opportunity to partake in a PRPP. Unfortunately, the McGuinty government has indicated that it may tie the introduction of PRPPs to an expanded CPP. Simply put, such a decision serves only to deny hard-working Ontarians of a low-cost, broad-based workplace pension plan.

Guess what? Many others feel the same way. This is what the Canadian Chamber of Commerce, the Canadian Federation of Independent Business and the Canadian Life and Health Insurance Association think of Mr. McGuinty's plan. In their words:

We do not support the concept that PRPP implementation should be tied to CPP enhancements. Given the time and processes involved in making any changes to CPP, this would only serve to delay an initiative that, in its own right, is viable, innovative and beneficial to Ontarians.

They go on to say:

It is time for Ontario now to step up to ensure that Ontario residents, particularly those who work for small and medium-sized businesses, can reap the benefits of a low-cost, accessible pension plan.

Why is the McGuinty government denying Ontario residents and my neighbours the ability to save for their retirement? Perhaps it is because, like the NDP, it does not understand how PRPPs work.