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.

Motions in Amendment

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

Madam Speaker, there is a two-fold risk to having our money in a vehicle in which we must actually make the decisions about how to invest it and, at the end, about how to take it out of the plan.

We are at a situation right now in Canada where the stock market has not performed the way it did in the 1980s and 1990s. It has certainly not been the pillar that it ought to have been. People did wake up one day and discovered that their portfolios were worth sometimes as much as 50% less. Add to that the fact that interest rates are at historic lows in our country. When we take that money out, we get nothing in return. Now when people go to one of these friendly insurance companies to buy an annuity, they discover that they are lucky if they get $600 a month or $500 a month. Ten or fifteen years ago, when interest rates were at 5% and 6%, for $100,000 they could get $1,200 a month.

Those two things are combining together to make that kind of pension plan a disaster for persons who wish to retire.

[Judy Sgro, Liberal, York West, ON]

Madam Speaker, I am sure the member will have an opportunity to ask some further questions since he seemed dismayed that his colleague's time was up.

When I last spoke to Bill C-25 on this issue, I expressed my concern that this was little more than breadcrumbs to a starving person. I supported it going to committee, as did our party, with the hope that some significant changes would be made to improve some part of what the government had called pension reform.

Bill C-25 is still nothing more than a mechanism for those who have money to save for their retirement and the government trying to pass it off as its answer to pension reform.

While I have no difficulties with creating savings vehicles, in fact we need to do more of that, we must also work to help those who have little means to save. Pension reform should be all about that. Bill C-25 is not pension reform and any claim that it is false, misleading and deceptive.

For the sake of clarity, it is still my intention to vote for Bill C-25 because it is a breadcrumb to a starving person. It is as simple as that and nothing more than that. It will not satisfy the demand, but perhaps it will offer a small portion of temporary relief to some. Therefore, I will cast my vote with deep concern for what this legislation fails to do.

PRPPs are nothing but locked-in RRSPs and Canadians will face a number of problems if they choose to join these plans. Members will bear 100% of the investment risk. A single market stumble could spell the end to any retirement hopes. There is also no ability to make up for the bad years by making additional tax deductible contributions. They will have to become administrators of their own plans and there is no ability to move out of an underperforming PRPP into a performing one or one that will offer better services.

Employers will be forced to create administrative systems to enrol their members. If provinces make them mandatory, then since both employers and members can opt out, they may incur a significant amount of costs for absolutely no reason.

It is still unclear whether any homemakers would be able to contribute or would it have to be from employment income only? Yet again, the so-called Conservative plan excludes those who contribute to society outside of the traditional workforce.

Why not learn from some of the others who have tried plans like the PRPPs that are being proposed today. Australia tried it well over a decade ago, in 1997. It was published in the Rotman International Journal of Pension Management. It found that the only ones who benefited from the plan were those in the financial sector. The study concluded that the Australian superannuation system was founded on the assumption that market competition would deliver economic efficiency in a largely private, defined contribution system. That did not work.

Management fees are a significant problem. PRPPs will be managed by the very same people who manage Canada's mutual funds, and Canadians already pay some of the highest management fees in the world on their mutual funds.

Morningstar released a report grading 22 countries on the management expense ratios levied on their mutual funds. Canada was the only country to receive an F. Why should we be striving for an F? I, like most, think we should be striving for an A. It would make far more sense.

The government already knows all of this. It was specifically raised in January when Bill C-25 was last before the House. The standing committee knew this too, which is why I am shocked it reported back to the House without any suggestions for improvement and without any insights of any kind, in spite of having a variety of individuals go before the finance committee and suggest some amendments and some ways to improve Bill C-25, clearly because Canada needs serious pension reform.

The standing committee was silent, despite witness testimony that said, “in its current form, Bill C-25 is an example of good intentions, creating a legislative response that will have numerous unintended adverse consequences”. Witnesses also stated that as an effective pension plan, pooled plans were unlikely to achieve that goal.

Expert witnesses at committee begged the government to make even minor changes, again because we need to move forward as a country on pension reform. They said:

There is a considerable body of academic work that shows that putting untrained and uninterested individuals in charge of investment selection is foolish.... If investing money was a simple matter, we'd all be rich. The reality is that investing is challenging, even for professionals, and that it remains to be a full-time job.

The world is becoming increasingly complex, financial innovation continually challenges practitioners and to expect Canadians to suddenly have the time required and the skill needed to manage money carefully is unfair and, to be blunt, ill-advised.

Despite all these warnings, the government had ordered its MPs on the finance committee to ignore all of that good advice and to vote down any amendments from the opposition.

We had suggested several amendments. At second reading the Liberal caucus said, and I led that discussion, that we wanted to work with the government to make Bill C-25 more effective. At the committee we introduced an amendment to address some of the problems raised by the witnesses. All of our amendments were defeated along party lines.

Specifically, the Liberal finance critic presented an amendment that would have addressed the issue of high management fees. Why would the government defeat it? The government decided that Canadians should be cast to the markets without any form of protection, despite the warnings coming from experts on the subject. In simple language, this means that investors, average Canadians interested in the PRPPs, would be legally required to pay fees that would guarantee a profit for the bank. That sounds to me like an inefficient way of delivering pensions.

These requirements are the cornerstone of the PRPP plan. With this in mind, I am left to wonder how PRPPs could possibly yield results for Canadians and pensioners. The simple answer is that PRPPs would not help the average Canadian prepare for retirement, just as millions of Canadians have not been able to max out their RRSPs.

Forcing Canadians to work longer and harder to save for retirement on top of asking them to pay for $6 billion in giveaways to the largest corporations, $13 billion for new megaprisons and $40 billion for an untendered stealth fighter jet deal is not a plan for pensions. PRPPs will not work for those who need them the most.

Why are we not learning from some of the mistakes of other countries? Australia adopted its version of PRPPs over a decade ago, in 1997. The recent study that I alluded to earlier, done by the Rotman International Journal of Pension Management, found that the only benefit from that plan went to the financial services industry.

Why not look at other options? Let me tell the House a bit about the Liberal option. A supplemental Canada pension plan, already proposed by the Liberals, would provide the best of both worlds. It would create a new retirement savings vehicle for Canadians who need it, while delivering the low overhead cost structure of the Canada pension plan.

A supplementary Canada pension would be a simple cost-effective solution to the pension question facing our country. It would be a defined benefit pension for everyone, even those who have left the workforce during their lives for child rearing, illness, seasonal employment and educational advancement. It would use proven and existing resources to give every Canadian man, woman and child a reliable and stable investment vehicle for the future. A supplementary Canada pension would be a plan for real pension reform.

The Conservatives could not care less. By ignoring the amendments that we had put forward, by ignoring our good intention of trying to work with the government on making changes to Bill C-25, the government is clearly showing that it has no interest in the idea that Canadians should have anybody help them to save money.

The government's fend-for-yourself attitude that we see every day in the House continues. Bill C-25 is just another example of good intentions but failed legislation.

[Bruce Hyer, Independent, Thunder Bay—Superior North, ON]

Mr. Speaker, that was an impressive and thoughtful analysis. I learned a lot. It is quite clear that the hon. member does not really think much of Bill C-25. She thinks it is a poor substitute for enhancing our current CPP system.

Given the great job that my colleague has done in showing how the bill is not very good, I am wondering why the Liberals intend to vote for it at this time.

[Judy Sgro, Liberal, York West, ON]

Mr. Speaker, we have had many discussions about is it this or is it that. At the end of the day I think it is going to be another piece of failed legislation that was perhaps introduced to derail the discussion about OAS and the rest of it, because this measure is really not going to help anyone save money.

At the end of the day, what does it do? It gives bread crumbs to a starving man. It is a little step forward on the issue of pension reform. It is inadequate, but there will be a few Canadians who will go forward with this plan.

I think it is better than nothing at all. Bill C-25 will provide an opportunity for a few Canadians to start thinking more about putting money away for their retirement. We want to move the issue forward and we know we need pension reform, so we will allow this tiny piece of legislation go forward. I suspect that the government will see that it is not what it thought it would be and hopefully will really start to look at pension reform in Canada in the future.

[Roxanne James, Conservative, Scarborough Centre, ON]

Mr. Speaker, in a follow-up to the last question, I wonder if the member could actually define what “a few Canadians” actually amounts to? Are you talking ten, a thousand, hundreds of thousands? You have left it open to interpretation, and I think you need to be honest with your constituents and the rest of Canadians right across the country.

[The Acting Speaker, Barry Devolin]

Just before I go to the member for York West, I would remind all hon. members to address their comments to the Chair.

The hon. member for York West.

[Judy Sgro, Liberal, York West, ON]

Mr. Speaker, it depends on what one calls success in relation to a piece of legislation. PRPPs will be put out there and advertised by banks and insurance companies as the greatest saviour for Canadians. At the end of the day, success will be gauged on how many Canadians participate in the program, given that both employers and employees realize that high management fees are built into that program and that the banks and insurance companies will be able to get their management fees out of it even if the individual loses.

It will all depend on what one would call “a few Canadians”. Based on all the information I have received, I do not think there will be a huge take-up. It is a flawed piece of legislation, but there will be a few, and the member can figure out what “a few” is. Since the government talks about a billion here and there, I suppose a few could be a few thousand, but I doubt very much that there will be a huge take-up once Canadians realize that they are on the hook for huge management fees.

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

Mr. Speaker, in my colleague's questioning to me, she referred to the notion that the Canada pension plan is a tax or is hurtful to employers. However, we have discovered over the past 60 years of pension system history in Canada that if it is not mandatory for employers and employees to contribute, a large section of our populace does not, or cannot, save for retirement. Given that this plan is voluntary, what does she have to say about mandatory increases to the Canada pension plan?

[Judy Sgro, Liberal, York West, ON]

Madam Speaker, thank goodness we have the Canada pension plan, which was brought in by a Liberal government. Without it I would hate to imagine what would be happening today to the thousands of Canadians who rely on the Canada pension, given the fact that the government is going to make people wait two extra years to get OAS.

Part of what we recommend is a gradual increase in the Canada pension plan. When we are talking about all these changes, it sounds wonderful to simply say that we should double the Canada pension. If we could ultimately get to that on a very slow, gradual basis, it would be wonderful for Canadians. That is why the supplementary plan allows people to do that. However, to turn around and ignore the impact that the changes could potentially have on businesses is also to put our heads in the sand.

[Bruce Hyer, Independent, Thunder Bay—Superior North, ON]

Mr. Speaker, it is my pleasure to rise to speak to the government's bill. It is what I call the proposed private, for profit, pooled pensions plan. That leaves me speechless.

More seriously, few things are more important to Canadians than their retirement security. For decades they work hard to build a good life for themselves and their families. Every paycheque deduction includes a little something tucked away in their pension plan.

When it comes time to retire, people rightfly expect to be able to live in dignity and with some financial security. However, as too many Canadians have found out in recent years, their retirement may not be as secure as they were led to believe and were hoping. RRSPs have taken a beating, and many of those who had been counting on a company pension plan have had a rude shock.

Many found out their plans were underfunded, or they lost everything when their company went bankrupt and took workers' pensions with them. This has been a particular problem in Thunder Bay—Superior North, where a host of creditors, often including the actual owners of the failed subsidiary company, have claims that take precedence over those of pensioners. In a modern industrialized democracy, that just should not be allowed to happen, and my friend representing Thunder Bay—Rainy River has tried to introduce a private member's bill to put pensioners first.

One thing that has been rock-steady throughout turbulent times is the Canada pension plan, to which 93% of Canadians subscribe. Companies come and go and iInvestment vehicles like income trusts may arise and then be snatched back the next year by fickle governments, but people can count on the CPP.

It is the most secure retirement vehicle we have. The CPP remains the single most effective solution to ensure retirement security. It is portable, it is sustainable, and it spreads the risk to minimize risk. It is publicly and cheaply administered at a fraction of the administrative costs of private plans. It is far more sustainable than private plans and it pays predictable benefits that do not fall if markets collapse.

The one drawback is that it is not high enough. The maximum benefit currently is only $986 a month, and the average is only $528 a month. That, as we know, is not adequate to live on.

People are expecting to make up the shortfall by investing in private investment vehicles such as the pooled pension plan the government is advancing, but private savings vehicles cost many times more than saving in public pension plans.

The administration cost of the CPP is about one-quarter of 1%, while the cost of RRSPs and mutual funds ranges from 2.5% to 4% or even more. Private plans are great for brokers and bankers in Bimmers, but not so great for real, sustainable growth in pensioners' hard-earned investments, and there is little indication of any cap on fees for those pooled plans.

That 2.5% to 4% or more every year eats away at people's retirement. It adds up. When it comes time to retire, Canadians will have many, many thousands less, so why not have it adding up and working for pensioners instead of for private investment companies? Allowing Canadians to opt for contributions up to an extra 2.5% to the CPP would double their benefits, and those are defined benefits, secure benefits. They are a retirement benefit that future seniors can actually count on.

The benefits of the CPP over private schemes do not stop there. Unlike public pensions, private savings are rarely indexed for inflation. That could mean a further lost savings of from 1% to 3% per year, a loss that alone cuts people's initial investment in half over a 30-year period.

As well, the CPP is highly portable for everyone throughout Canada. Pooled registered pension plans are much less so.

By far the biggest fault in this whole pooled pension plan scheme is that it fails to address the needs of Canadians who cannot afford to save for retirement. The vast majority of Canadians do not pay into plans like RRSPs because they simply cannot afford it. According to StatsCan, 60% of Canadians currently do not have any formal pension at all. There are already private retirement investments available out there; if Canadians could afford them, we would not have millions who do not have a pension.

Adding another voluntary and speculative investment plan they cannot afford will not significantly help the situation.

There is a lot we can do in this House to improve retirement security for Canadians. We should be seeking to insure Canadians' pensions, like we do their bank deposits. We should protect pensions when companies go bankrupt by putting pensioners first as creditors, ahead of banks, ahead of shell companies that skim the profits and dump the subsidiaries, as has happened in Thunder Bay—Superior North.

After all the ruined retirements these past few years due to corporate bankruptcies, including many in our forest sector in northwestern Ontario, it is absolutely incredible that the government has not taken action on that front. We should be taking action on all these fronts and allowing Canadians to choose to contribute more to the CPP as well.

There is no reason to continue preventing Canadians from saving more through the one vehicle open to all workers, including the self-employed, a vehicle that is low-cost, universal and portable. It is inflation and risk-proof, with defined benefits, guaranteed by the Government of Canada, that is not yet another private investment scheme that most Canadians will not invest in. That is the CPP.

Instead, all we have is a proposal from the Conservative government to help line the pockets of banks and investment companies some more. It may help some well-off Canadians who can already afford to contribute to private investment vehicles, that may be true, but it will not help the people who need it most, the majority of Canadians. Now we have the added insult and injury of Canadians having to wait from 65 until 67 years old for their old age supplements.

The Conservative government does a great job of looking out for the interests of big banks, big oil companies and other global multi-nationals with little commitment to any country or workers or their families. This past spring the Canadian Federation for the Humanities and Social Sciences hosted international pension expert, Keith Ambachtsheer, for our big thinking lecture here on Parliament Hill. For the MPs who got up that early to attend, this pension expert made it very clear that the administrative fees on private pension plans usually eat up any pension fund growth. He made it clear that the best pathway to any truly safe and sustainable pension plan for Canadian families was retaining and expanding CPP.

I realize that this is an ideologically driven party and government that rarely wants its beliefs to be confused by facts, research, statistics, senseless data or science but, hopefully, on this absolutely crucial question of pensions, it will, it should, listen to experts like Mr. Ambachtsheer. Hopefully it will follow his expert and sage advice and build upon the excellent and sustainable Canada pension plan, a safe, predictable, cost-effective and sustainable model admired worldwide. It just needs expanding to meet modern costs of living.

Canadians know and trust the CPP. They do not want to gamble their pensions, their lives and their retirement futures on a lottery run by expensive bankers and investment brokers.

[LaVar Payne, Conservative, Medicine Hat, AB]

Mr. Speaker, I listened intently to our colleague's comments and to how he railed against the investments in stocks and bonds, and yet I know he is really a proponent of the Canada pension plan. It is interesting to note that the Canada pension plan has huge investments in the stock portfolios of many companies. I just wonder why the member is in opposition to investing in the stock market while continuing to extoll the benefits of Canada pension plan.

[Bruce Hyer, Independent, Thunder Bay—Superior North, ON]

Mr. Speaker, I am not opposed to investments at all. Investments should be intelligent and voluntary. It is a form of gambling, let us face it, no matter how good a job we think we are doing. We need to average the risks. We need to average the costs. We need to have skilful people planning and making those investments, and we need to do it at that one-quarter of 1% affordable rate of investment and administrative costs compared to the expensive costs of having brokers do it.

In my province of Ontario, it has become very clear for many years that the security and exchange investment community is badly in need of regulation.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Mr. Speaker, I appreciate the hon. member for Thunder Bay—Superior North raising this critical and pressing issue of pension plans not being protected when corporations go bankrupt. Clearly we need legislation that places corporate pension plans as secured creditors in bankruptcy.

The member mentioned that in his riding, Catalyst Paper's current situation is causing real problems for people in Saanich—Gulf Islands, and people in the Ottawa area know well the disaster that befell so many Nortel workers, particularly those with disability pension plans that they had been counting on.

What does the member think it will take to get government action to protect private pension schemes in bankruptcy?

[Bruce Hyer, Independent, Thunder Bay—Superior North, ON]

Madam Speaker, as I mentioned in my speech, the hon. member for Thunder Bay—Rainy River introduced private member's legislation that was excellent and would put pension plans first ahead of other creditors. I hope he will reintroduce that legislation in this House and I hope all members of Parliament will support it. Just as paycheques should come before creditors, so should their pension plans, which are really paycheques held in arrears.

[The Acting Speaker, Barry Devolin]

Questions and comments? Resuming debate? Is the House ready for the question?