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

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Mr. Speaker, members on that side of the House do not want healthy debate to look at the pitfalls of any legislation they may put forward. We have debate in the House to ensure that, if there are any pitfalls or problematic areas, we can look at fixing those.

This registered pension plan is another tool but, at the end of the day, is it really what we need? Do we not need a pension that would be indexed to inflation with which we would be extremely sure that at the end of the day people would be able to retire?

One of the pitfalls in this bill is that there is no cap on administration fees or costs and merely assumes that lowers costs will emerge through competition in the marketplace.

Would the member tell those people who would look at investing in the pooled registered plan whether they would be at the mercy of the market? A lot of our constituents and Canadians across Canada could lose their money at the end of the day because investing in the market is not a secure thing to do.

[Kevin Sorenson, Conservative, Crowfoot, AB]

Mr. Speaker, I will just back up a little bit. The status quo is not good enough. Currently, 60% of people in the workforce in Canada have no pension plan. They have nothing. Would they be at the mercy of the market? Jobs are at the mercy of the market. Everyone, in some respect, is at the mercy of someone or something. This is another one of those things that takes the risk out of the market.

The member is nodding her head, but a job is dependent on being able to sell the product that is being made. Certainly, when we try to diminish risk, we want to be able to set things aside in a secure way. That is why all provinces are stepping up to this and saying that we need to work together on this. In NDP provinces, Liberal provinces and Conservative provinces, finance ministers are working together and saying that we need to build something here that will help the 60% of employees who have nothing.

That is what we are intending to do, working in unity with everyone. Unfortunately, it does not look like we are working with the NDP members but we want them to come along and work with us.

[Sean Casey, Liberal, Charlottetown, PE]

Mr. Speaker, I listened to my colleague from Crowfoot talk about support from the finance ministers across the country. I talked to one of the finance ministers in this country this morning. What the member for Crowfoot did not say was that this option was not the first choice of the majority of finance ministers and their support for this option was conditional on the enhancement to the Canada pension plan or to some other scheme.

My question is for the member for Crowfoot who attempted to leave the impression with the House that there was unanimous and unqualified support from the finance ministers. What other pension reforms will be brought in to meet the consensus, to meet the demands and to win the acceptance of the provincial finance ministers?

[Kevin Sorenson, Conservative, Crowfoot, AB]

Mr. Speaker, I know the new member understands that when all finance ministers come together, there is always negotiation. They do not just sit down at the table, with everyone initially accepting everything exactly as it is laid out.

Everyone recognizes the need for this type of option. Everyone recognizes the need to work together. That is commitment the government has given to other provincial governments, that we are willing to sit down and work together with them.

Right now we have a very good avenue called the RRSP. It has been there for many years. Back in 1991, 41% of the workforce bought into the idea of RRSPs. We still know how important it is to have the RRSPs, but we recognize that it will not solve all the problems. In 2007 the average of buy-in to RRSPs was about 39% of Canadians, yet we know from the demographic of our country that we have an aging population. We need to be aware and have that right in our face, that we all need to be saving for our future. We need to be saving for those retirement years.

CPP is strong in our country. However, when we see this changing demographic, we need to understand that there will be problems 10 years down the road. There has to be problems 15 years down the road. This government has the foresight to look ahead and say that we need to fix it now before it is completely broken, that we need to put in a remedy to maintain what we have now, so that in 10, 15 years, when we really see the pitch, we are not all left here scratching our heads saying, “would of, could of, should of”.

[Manon Perreault, NDP, Montcalm, QC]

Mr. Speaker, I will share my time with the member for Newton—North Delta.

Today, we are talking about a bill that 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.

In short, we are talking about a new savings tool and not a plan that would secure retirement pensions. In fact, rather than addressing pension security, the government is proposing a new savings tool that will depend on the state of the stock market. This is another way the Conservatives have found to gamble with our retirement funds. The government recognized that there is a pensions crisis when it adopted the NDP opposition's motion. Members will no doubt recall that the motion outlined the need for a national pension insurance plan to protect workers' deferred wages or pension plans in the event of employer bankruptcy. At the same time, we initiated a discussion regarding the gradual increase of Canada pension plan contributions in order to increase benefits. Yet, although the government recognized that there is a problem, it is turning its back on seniors who are simply seeking to secure their futures.

Let us talk a little about what these pooled registered pension plans would do.

The measures proposed in Bill C-25 do not even guarantee a pension. This is more of a savings vehicle than a stable, reliable pension plan. While this savings plan would pool funds from participants to reduce the costs associated with managing the plan and investments, this bill does not cap the fees charged by the fund managers. Experiences in other countries show that these costs often chip away at pension savings to the point that the rate of growth in savings does not even match inflation. This bill is supposed to help self-employed workers and employees of small and medium-sized businesses, which often do not have the means to offer a private sector pension plan. A similar system was set up in Australia 12 years ago and has not yet proven worthwhile. Because of high fees and costs, returns on investment have not been much higher than inflation.

There is another big problem with pooled registered pension plans: they do not seem to offer anything new. They look just like a regular RRSP. This option would be just another defined contribution pension plan. Employees would deposit a portion of their salary in the retirement fund, and that money would be invested in stocks, bonds and mutual funds. Well-intentioned companies that care about their employees' well-being can match contributions, but they are not required to do so. However, considering the current climate in the business world, I think that companies will try to cut costs wherever they can.

Even more worrisome, this defined contribution plan in no way guarantees the amount of money that would be available upon retirement. The money employees set aside while working hard their entire lives would not be protected from the risks associated with fluctuating markets. As is the case with registered retirement savings plans, the individual or employee in question would completely and exclusively assume all market risks. Regulated financial institutions like banks, insurance companies and trust companies would manage the PRPPs for a fee. Canadians also need to consider the fact that PRPP benefits would not be indexed to inflation, unlike Canada pension plan benefits. The provinces and territories would determine whether the employers or employees of businesses of a certain size will be required to contribute to a PRPP.

Pooled registered pension plans, as they are defined in Bill C-25, do not provide any retirement security because they encourage families to invest even more of their retirement savings in a declining stock market. When the stock market is rising, savings increase of course, but conversely, savings take a nosedive when the market declines.

Anyone whose RRSPs took a hit last year knows very well how risky it is to invest one's savings in any products linked to the stock market.

By encouraging families to invest in the same system that is already failing them, the Conservatives are showing just how out of touch they are with the reality facing Canadians and Quebeckers.

Over the pas three years, the NDP has suggested a number of proposals to ensure retirement income security. As we have indicated, the NDP first proposed increasing Canada pension plan benefits for a given period. Benefits would increase to $1,920 a month. Of all the possible solutions for pension reform, increasing Canada pension plan benefits is quite simply the most effective and affordable solution.

The NDP believes that retirement income security for seniors cannot be built on just one plan or one option. We believe that pensions need to be discussed in a more general way. We think that Canadians want us to examine all pensions as a whole. Our goal is not to reduce them, but rather to ensure their continued existence in order to protect our seniors for many years to come.

Our plans for retirement security were laid out in our election platform. The New Democrats were clear in last May's election campaign: we want a substantial increase in the guaranteed income supplement to help seniors who qualify for these benefits escape poverty. This measure targets 250,000 Canadians, most of them women.

As for the Conservatives, there was no indication in their election platform that, once elected, they would change the eligibility criteria for old age security and raise the eligibility age from 65 to 67. However, that has been the talk recently.

In recent weeks, in my riding of Montcalm, I have spoken to people who are worried about their future and their retirement. Someone wrote to me this week and told me that he had worked until he was 69 and was forced to get food aid at the age of 70. I find this unacceptable.

A couple from Saint-Roch-de-l'Achigan told me that the population is aging and no one deserves to lose their life savings, especially after working hard all their life.

Michel Janyk, from Mascouche, is also worried about Bill C-25. He believes that we should guarantee and protect our retirement funds.

My constituents are not the only ones who are worried. Jason Heath, a certified financial planner at E.E.S. Financial Services Ltd., has said that pooled registered pension plans are, generally speaking, no different from RRSPs. Contributions are tax deductible and allow tax-deferred growth. Taxes are paid after retirement and the contributions are often invested in mutual funds. According to a 2006 report entitled “Mutual Funds Fees Around the World”, mutual fund fees are higher in Canada than anywhere else. It is not surprising that investment and insurance companies are applauding the arrival of pooled registered pension plans.

You can see how Bill C-25 to establish pooled registered pension plans does nothing to make the pensions of thousands of Canadians more secure.

The Conservatives' pooled registered pension plan does nothing to help the families who are being crushed under debt, and it is bound to fail since it is a voluntary plan—I repeat, “voluntary”—a defined contribution plan administered by wealthy financial institutions that sometimes invest in collapsing markets.

This uncertainty and volatility leave families with no guarantee that their savings will still be there when it comes time to retire.

At a time when the economy is so precarious, families do not need additional risks. They need the stability of the CPP or the Quebec pension plan. Economists and provincial leaders have been saying that for years, but this government, disconnected as it is from reality, is once again turning its back on families.

[Jinny Sims, NDP, Newton—North Delta, BC]

Mr. Speaker, what kind of actions could the government take to ensure that Canadians in their retirement would have the necessary income to live a life of dignity?

[Manon Perreault, NDP, Montcalm, QC]

Mr. Speaker, it is very easy to understand. Canada's pooled registered pension plan is simply one of many retirement products, including RRSPs, group RRSPs, pension plans and TFSAs, which may be good options for those who are already able to contribute. The new plan, therefore, is a good option for those who already have money to invest in RRSPs. However, the NDP will not support this savings plan because the Conservatives want to offer this system instead of taking concrete measures to protect existing pensions and enhance the retirement security of those who do not have a workplace pension plan.

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Mr. Speaker, I am sure the member is aware that yesterday the government stated its intention to bring in time allocation. Today it moved the motion and then, with its majority government, passed the motion which is not going to allow for a healthy debate inside the House of Commons.

I have found that Canadians are very much concerned about the pension issue, about the fact that the Prime Minister and his government want to increase the retirement age from 65 to 67, and about the government's commitment to the CPP and the guaranteed income supplement.

I wonder if the member might comment on how she feels about the government's decision to force this legislation through without allowing for adequate debate.

[Manon Perreault, NDP, Montcalm, QC]

Mr. Speaker, I would like to thank the hon. member. It is true that Canadians are very concerned about this issue. That is what I heard people talking about the most when I was in my riding of Montcalm recently. It is important to note that, at present, 12 million Canadians do not have a workplace pension plan. Bill C-25 will not help meet that objective. Canadians do not need a new, private, voluntary savings plan. They need concrete measures that will allow them to retire in dignity.

I hope that I am answering the hon. member's question. Why give workers a new, less reliable savings plan—the PRPP—when we could simply improve the reliable pension plan that is already in place, the Canada pension plan or the Quebec pension plan? CPP or QPP contributions are mandatory. It thus stands to reason that improvements to this plan would help more workers than the plan proposed in Bill C-25. This would be a way of ensuring that workers have a decent retirement.

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

Mr. Speaker, I heard in my hon. colleague's speech reference to registered retirement savings plans as an existing option. Yet, if we look at the history of RRSPs we find that a minority of Canadians participate and by far the largest number of those who have any substantial savings in RRSPs tend to be higher income Canadians.

Does she not agree that expanding the Canada pension plan would be far more likely to provide coverage for those who currently are not covered by any pension plan and who do not contribute to RRSPs?

[Manon Perreault, NDP, Montcalm, QC]

Mr. Speaker, I would like to thank the hon. member. I did indeed say that people who have money to invest in RRSPs will have money to invest in the PRPP. But, will people who do not have money to invest in RRSPs have money to invest in a pooled registered pension plan? We need to look at this logically. By improving the QPP and the CPP, we would ensure that workers have a pension plan and a decent standard of living during their retirement.

[Jinny Sims, NDP, Newton—North Delta, BC]

Mr. Speaker, I was delighted a few minutes ago when a colleague of mine across the aisle said that it is time for us to have a fulsome debate. Unfortunately, a motion that was passed this morning does exactly the opposite. We have limited time to discuss something that will have a fundamental impact on Canadians as they look forward to their retirement.

When I look at the title of the bill, the pooled registered pension plans act, I cannot see too many elements in it that look like a pension. It reminds me of the visa system that used to exist. We now have super visas. In many ways, this is more like a super RRSP. I would argue that once someone puts money into this pooled idea, that individual will lose the kind of control that he or she has over investments in a personal RRSP that can be managed through a banking institution.

The government is being reckless. There is nothing in the bill that requires an employer to make any guaranteed contributions. That would be optional. With many small businesses struggling, I cannot see employers making voluntary contributions to a pension plan for their employees. That is a major flaw in this legislation.

There is another major flaw in the bill. We seem to have turned a blind eye to what we have experienced over the last few years. We just need to look south of the border and hear the heart-rending stories of people who lost their pension plans totally as a result of the market going down. People who thought they were about to retire suddenly found themselves having to work longer. Even then, they will not make up the money they lost. Here in Canada, those of us who invested in mutual funds held in RRSPs also watched our savings disappear.

This pooled plan is only a defined contribution plan. Savings can disappear at the whim of the stock market. The situation in Europe and around the world is very volatile. If I had a limited income, would I choose to put my money into this plan? Would I gamble with my hard-earned money and put it into a pooled fund?

This is an open chequebook for banks. There is nothing in this legislation that says a cap will be set on management fees. This would really be a lose-lose situation for the person who puts money into this pooled fund. For those people who could afford to put money aside, they would be worse off putting money into this fund than if they put it into their own RRSPs.

I come from the riding of Newton--North Delta. I have had the privilege over the last month of meeting hundreds of my constituents. Most of them told me that they have to work two or three jobs to make ends meet. Many of them do not have a pension plan and they do not have money to put into RRSPs.

The Canadian Centre for Policy Alternatives released a study that says that over $500 billion in RRSP contributions was not utilized by Canadians. All of the people who could have had this great tax break did not make use of it. I would argue that some of them were scared because they saw what happened to the market and they saw their RRSPs shrinking. The vast majority of them do not have the wherewithal to put money into this pooled fund.

If the government wants to address the pension issue, this is a critical time for us to be taking a look at old age security. Senior after senior came to my office and I visited them in the seniors' centres. They told me the same story over and over again. They are having to go to food banks. They are hand stitching their torn clothes. They are telling me that the old age security pension is not enough. I actually had an 83-year-old who told me that she applied at Wendy's and three other locations to get a part-time job, but nobody would hire her.

Is this the life of dignity we talk about for our seniors? Is this the reward given to the people who built this country while we enjoy the fruits of their labour?

I have had the privilege of visiting a lot of high schools and elementary schools in my district. I was so touched by the concern of so many students for those living in poverty, especially seniors.

When I spoke at North Delta Secondary School, students asked me, “What do you do? Who comes to see you in your MP office?” I told them the story of three people who had been to see me that morning. I told them of a senior who came to see me who lives in a garage that he rents for $300 a month. He only cooks twice a week because that saves on energy costs. He has to time when he can have his heat on. He only has one outlet in that garage, so he can either have the computer or the lights on. He showed me the state of his clothing. He told me how embarrassing it was for him to have to go to the food bank. This is one of the veterans we purport to treat with such dignity and respect.

When I told that story to the grade 10, 11 and 12 assembly, the vast majority of those young people had tears in their eyes. Over and over again, they said that they did not realize that in Canada our seniors, who are like their grandparents, are having to live in such poverty.

If the Conservative government brought a bill forward that would lift our seniors out of poverty immediately, I and every NDP member would stand up and speak for it. Let us not come up with a bill that does nothing to address the poverty our seniors live in, that puts into jeopardy Canadians' hard-earned money as it lures them with a false pension scheme. That is what it is.

I will read from an editorial in the Calgary Herald, which is located in a very progressive city. It states:

The CPP already covers almost all Canadian workers and thus spreads the risk and management fees. It is fully portable, offers guaranteed income to all retirees, and is the only risk-free investment broadly available to workers. Private RRSPs and employer pension plans have proven much riskier than initially billed. Those who are in company pension plans are likely in a defined contribution scheme, where the amount that goes in is predetermined, but the payout is based on how well the fund is invested and ultimately performs. Nortel workers know only too well how that worked.

I plead with my colleagues across the aisle not to gamble with our citizens' hard-earned money in a scheme that is so volatile and has no protection. Let us not do that.

[Pierre Poilievre, Conservative, 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?

[Jinny Sims, NDP, 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.

[Sean Casey, Liberal, 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?