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

[Gord Brown, Conservative, Leeds—Grenville, ON]

Mr. Speaker, Kingston and the Islands is the riding next to mine, and I know that the member is working hard for the people in Kingston. His question has to do with ensuring that we have a low-cost plan. That is what this PRPP would be.

There are many different ways that people can save. We all know that there are other vehicles to save for retirement, such as the tax-free savings account. The PRPP, by pooling funds in a pooled registered plan, would allow low costs. People would be able to participate with others and that would cut down on the costs.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Mr. Speaker, it was interesting to listen to the member's remarks about this being a way to provide security for people. In the RRSP experience over the last couple of years, people who had invested for their retirement saw their savings eroded, sometimes by up to 30% or 40%.

Could the member address the fact that the PRPP would still put people at risk, as they would be investing their hard-earned dollars in something that may or may not provide them with money when they retire?

[Gord Brown, Conservative, Leeds—Grenville, ON]

Mr. Speaker, we all are working for a better, more positive economy. That is why this government has been focusing on the economy and jobs. That is what is going to drive up the value of investments. Many people have lost some value in their RRSPs over the last number of years. However, many people have not cashed them out. With this government focusing on a positive economy and moving forward with economic growth and jobs, the value should come back to some of those RRSPs. I know this government is working hard on that.

[Anne Minh-Thu Quach, NDP, Beauharnois—Salaberry, QC]

Mr. Speaker, it is always an honour for me to rise in this House as a member of Parliament to speak on behalf of the people of Beauharnois—Salaberry. I would like to take this opportunity to wish all my colleagues and everyone in Beauharnois—Salaberry a happy new year. I especially want to thank my assistants, who work hard and do an excellent job.

I am very proud to be here to represent Canada, a country that to me and to many of my constituents represents not only a peaceful and welcoming land and a land of opportunity, but also a society that respects individual differences, that takes into account individual social realities and protects the least fortunate. In these tough economic times, it is very important to remember this country's basic values, the values of solidarity and justice that are the envy of countries the world over.

It is in that spirit that I rise today to speak to the fundamental issue of the retirement of Canada's seniors. What the Conservative government is proposing here in its Bill C-25 is a legal framework for the establishment of pooled registered pension plans. These plans are designed for self-employed workers and workers in small and medium-sized businesses who do not have access to the pension plans of large companies or the public service. The goal is commendable, but my colleagues and I fear that this bill will do nothing to resolve the problem retirees are facing.

Bill C-25 would create a new kind of savings plan, the pooled registered pension plan, enabling plan members to pool their funds. Employees would contribute a portion of their earnings to a retirement fund, and that money would be invested in stocks, bonds and investment funds, which are very volatile. The plan would be administered by the banking sector—once again, the private sector—and employers would be able to contribute if they wanted to. As for any other defined contribution plan, the amount of money available upon retirement is not guaranteed. I repeat: no guarantees. That is very risky. In 2008, we saw the bottom fall out of the stock market, eating away at people's savings in the process. We all suffered as a result. Given the subprime mortgage scandal that dragged financial institutions worldwide into a huge mess, we have reason to be skeptical about the future of our savings.

The Minister of Industry says that the plans provided for in Bill C-25 would give workers “an innovative new, privately administered, low-cost and accessible pension vehicle”. Let us take a closer look at that.

The government makes many claims in this bill, but does not back those claims up with fact. We already have optional savings plans, such as registered retirement savings plans, or RRSPs. These programs work well for the middle class, but there are still over 12 million Canadians who do not contribute to optional plans because they do not have any money to save.

I should not have to point out that one in four Canadians works at a low-paying job and has trouble making ends meet as it is. In my riding alone, 12% of residents are seniors. More than one in ten of my constituents lives on very little income.

Bill C-25 would entrust responsibility for the proposed retirement funds to the private sector because, according to the government, the private sector will save us money. Yet Bill C-25 does not cap the management costs or fees that fund managers can charge. Small-scale management will increase management fees, and once again, workers will foot the bill.

Entrusting these plans to the public system would ensure far greater economies of scale and the burden would not be on the workers. We should not forget that we are talking about self-employed workers and employees of small and medium-sized businesses. I do not believe that they would like to have their savings eroded by management fees or inflation. Yes, I did say by inflation because the plan proposed by the Conservatives will not be indexed to the cost of living. Once again, it is fairly risky.

The government claims that the proposed pension plans will be accessible. If we consider that more than 60% of Canadians do not contribute to a pension plan at work, it is naive to believe that another plan, similar to what is already available on the market, will spur people to save, especially if there is no guarantee that their employer will contribute to the fund.

The Australian example clearly illustrates the limitations of such a savings plan. An analysis of the Australian super fund, a similar program, shows that even though people saved, the return on investment was not much higher than inflation, a disappointing result due mainly—and I will say it slowly—to the high management costs in the private sector.

The pooled registered pension plan does not resolve the basic issue that we are currently facing: how to ensure all Canadians can retire with dignity, no matter their financial situation. What the government is not saying is that it intends to slash the whole Canada pension plan. The statements made by the Prime Minister in Davos, Switzerland, provide insight into this government's real intentions. The Conservatives want to make changes to the Canadian retirement income system. But what are they? We have every reason to believe that they will slash public programs that Canadians value.

We should not forget that old age security is the last defence against poverty and isolation, and it is vital to those who have lived and continue to live on low income and who have not been able to save for their old age. Many women are in this situation, because they hold the majority of part-time or precarious jobs. If programs such as old age security are cut, that will have a direct impact on the physical and psychological health of the most vulnerable in our society.

Well, I would remind the Prime Minister and the members of the government that they have an obligation to govern for all Canadians, including seniors, regardless of their earnings or their financial status. If the Conservatives really want to make reforms that will ensure the continuity of the Canadian pension system, we in the opposition have four alternatives to propose.

First, we must increase Canada pension plan and Quebec pension plan benefits. Both plans are working perfectly well and simply need investments. Some 93% of the population already contributes to those plans, which is very effective. Second, we need to work with the provinces to make it easier for people to contribute to an individual pension plan. Third, we need to amend federal legislation to ensure that when businesses go bankrupt, they do not take off with all of the workers' savings. Fourth—so there are several choices—we must increase the guaranteed income supplement to lift seniors out of poverty and help them live in dignity.

How will we achieve all of this? Where will we get the money? That is what the Conservatives always ask. Well, we make political choices, social choices. Instead of handing billions of dollars in tax breaks to large corporations that are already earning huge profits, we could redistribute that revenue equitably and fairly among the population.

Must I remind the House that over a million Canadian seniors live below the poverty line? That is serious. Thus, the federal government has a responsibility towards our seniors. It should be investing in areas where it could make a real difference in public pension plans, instead of letting financial institutions and insurance companies line their pockets.

[Deepak Obhrai, Conservative, Parliamentary Secretary to the Minister of Foreign Affairs]

Mr. Speaker, let me wish a happy new year to the hon. member, her family and her constituents.

She raised some very important questions. One of them was the volatility of the stock market. She then talked about the Canada pension plan. The Canada pension plan is administered on the basis of what is happening in the market. When we talk about the volatility of the stock market, we are also looking at how the Canada pension plan would be affected. Of course, it is guaranteed by the federal government, but we cannot keep on guaranteeing something that needs to be fixed.

The Canada pension plan is doing very well. The OAS is what we are talking about, but this government has a very clear policy. There will be no shortchanging of any seniors in this country. As a matter of fact, this government has worked very hard for the seniors.

I want to tell the hon. member that she should go back and look at the record before she came into this House to see how much this government did for seniors to get them out of poverty, through pension income splitting and other initiatives. Perhaps she would then understand. Let me remind her that her party voted against all those measures.

[Anne Minh-Thu Quach, NDP, Beauharnois—Salaberry, QC]

Mr. Speaker, I would like to thank the member opposite for his question. I will concentrate on what we are discussing, namely, Bill C-25. When we talk about contributing to a public plan and helping people, we must take into account the economic times. Right now, we are in a situation where we must help people, not further jeopardize their future. It is said that we are in a precarious situation and that we must be careful with our money. If we must be careful with our money, we have to be careful with the money of Canadians in general. If we allow people to contribute to a stable system like the CPP or the QPP, we are showing them that we are fiscally responsible and that we respect them. We cannot play Russian roulette with their savings. In addition, people who want to save for their retirement already have access to RRSPs and TFSAs. According to the statistics I have here, 70% of people do not contribute to RRSPs or TFSAs because they do not—

[The Acting Speaker, Conservative, Bruce Stanton]

Order, please. The hon. member for Rosemont—La Petite-Patrie for questions and comments.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Mr. Speaker, again we see that the Conservatives have learned nothing from the 2008-09 financial collapse and that they are going back to their bad neo-liberal habits. I would like to commend the hon. member for her excellent speech, which painted a very clear picture of the situation and of the different options that are available.

I would like her to talk a little bit more about how the FTQ and the Canadian Labour Congress are calling for improvements to the most effective, most solid, most robust plan—our public plan, the Canada pension plan or Quebec pension plan. I would also like her to tell us why it is dangerous to encourage people, with this bill, to bet all their savings and close their eyes and hope that there will be money left in the fund when they retire. This is gambling; it is not taking care of people.

[Anne Minh-Thu Quach, NDP, Beauharnois—Salaberry, QC]

Mr. Speaker, I would like to thank the member for Rosemont—La Petite-Patrie. He referred to all of the problems with the stock market in 2008. The government had to intervene because the rules governing the market failed. Governments reinvested in banking systems. This suggests that Bill C-25 is very dangerous and risky for the people, who would take on all of that risk. Many union leaders and economists have said that we would be better off enhancing the Quebec pension plan and the Canada pension plan, which would cost no more than going ahead with the proposal in Bill C-25. Let us choose stability and security for retirees and seniors.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Mr. Speaker, I am pleased to have the opportunity to speak today about the importance of a secure and dignified retirement for people who have spent and will spend their lives building a better and more prosperous Canada for us all.

We have devoted considerable effort on the retirement security issue in order to get it right. Over the past two years our government's commitment to a stronger retirement income system has taken my colleague, the Minister of State for Finance, to communities across this country. He has been a very busy man making sure that Canadian voices are heard.

While travelling across the country, the minister has engaged and challenged opposition parties in constructive dialogue, met with his provincial and territorial counterparts, discussed key considerations with business and labour groups, and received valuable input from some of the most respected experts in the retirement income field. Most important, he has consulted with day-to-day Canadians in all of our communities. We have made significant progress as a result of these efforts. I would like to thank the minister for his incredible effort to reach out to Canadians.

As a result of these meetings and round tables, the pooled registered pension plan, PRPP, was created. The PRPP will mark a significant step forward in advancing our retirement income agenda. It will be a vital improvement to Canada's retirement income system. PRPPs will be a large-scale, broad-based pension arrangement available to employees with or without a participating employer, as well as the self-employed.

As a former self-employed small businessman myself, I know first-hand how difficult it is to save for retirement. When one is running a business and is the head of operations, the president of human resources, the director of purchasing, the supervisor of maintenance, and the marketing expert, sometimes just ensuring the sidewalks are shovelled or all staff are in place is more important and takes priority over thinking of retirement or how to save for it. In small business one less thing to think about is one more chance to give better customer service and one more way to ensure survival in the world of free enterprise.

PRPPs will fill a gap on the voluntary side of our retirement income system by providing millions of Canadians with access to a low cost pension arrangement for the very first time.

The introduction of PRPPs marks a particularly significant advancement in supporting the retirement needs of small businesses and their employees who until now have had no access to large-scale, low cost pension options.

To quote the Canadian Chamber of Commerce, “The legislation introduced...has the potential to benefit an estimated 60% of Canadians who have either no, or insufficient, retirement savings”.

Dan Kelly, vice-president of the Canadian Federation of Independent Businesses said that the pooled pension plans are desperately needed because only about 15% of small- or medium-size businesses that the CFIB represents offer some form of retirement savings plans for their employees”.

As members can see, there is great excitement and enthusiasm for this plan.

PRPPs will also complement and support the Government of Canada's over-arching objective of creating and sustaining jobs, leveraging business investment, securing our economic recovery and sustainable private sector driven growth.

Some of the retirement income system proposals that were presented in the consultations the minister had would have significantly raised costs for employers and employees. Introducing them would have been unacceptable during the very tentative economic recovery that we are currently going through.

PRPPs on the other hand will be efficiently managed, privately administered pension arrangements that will provide greater choice to employers and individuals, thereby promoting pension coverage and retirement savings, people saving for their retirement.

This legislation is to put in place the federal requirements supporting the framework for PRPPs. It would improve the range of retirement saving options for Canadians by: providing a new accessible, straightforward and administratively low cost retirement option for employers to offer to their employees; allowing individuals who currently may not participate in a pension plan, such as the self-employed and employees of companies that do not offer a pension plan, to make use of this new type of pension plan; enabling more people to benefit from the lower investment management costs that result from membership in large pooled pension plans; allowing for the portability of benefits that will facilitate an easy transfer between plans; and ensuring that funds are invested in the best interests of plan members.

In addition, my colleague, the Minister of State for Finance, met with the provinces to assist them in making the necessary changes from their side. All provinces are on board with the idea of providing small and medium businesses with pooled registered pension plans. My own provincial finance minister has stated that the McGuinty government supports the federal Conservatives' PRPP proposal. Working together, I am confident we can get these important retirement vehicles up and running for Canadians in a timely manner.

Our record of support for seniors remains strong and has been since our very first budget. One only has to look at the facts. I will give some examples of things that our government has done since 2006, many of which have been mentioned today.

In budget 2011 we announced the guaranteed income supplement top-up benefit for the most vulnerable seniors. Seniors with little or no income other than the old age security and the GIS received an additional amount through the GIS this year.

Our government increased the age credit twice, with $1,000 in 2006 and another $1,000 in 2009. We doubled the maximum amount eligible for the pension income credit to $2,000. We introduced pension income splitting, something that is really talked about back home. We increased the age limit for maturing pensions and registered retirement savings plans. Boy we have done a lot. We increased the age credit amount and doubled the maximum amount of income eligible for the pension income credit.

In addition, in budget 2008, we introduced the tax-free savings account. This is particularly beneficial to seniors as it helps them meet their ongoing savings needs on a tax-efficient basis after they can no longer contribute to their RRSPs.

In closing, the formula is nearly perfect. We want to make it work and it will accomplish having Canadians save for their retirement. We want to make it simple and seamless. As I stated before, most small businesses, employees of those businesses, and the self-employed really do want to save for their retirement to put away for their future, but we failed to act.

For example, each Canadian has about $18,000 of unused RRSP room, some because they have not got around to it. A plan like this would help to correct that. Making the option of PRPPs available relieves the already very busy small and medium businesses of the burden of administering a pension plan while creating an easy and simpler process for employees to enrol and save.

As an entrepreneur, like many Canadian small business owners, I am not an expert in all areas of business, admittedly even in some of the areas of my own business. To have the opportunity to use the PRPP to provide a professional plan for retirement savings administered by experts in that field allows me to offer something to my employees that is currently not possible.

We all win if we make it easier to plan for our future. PRPPs would remove the barriers that made it impossible for my business and other small businesses like it to offer the ability to be part of a pension plan for their employees. This is a significant and timely solution. I am proud of our government for taking the steps to provide this opportunity for Canadians.

I will support this legislation. Canadian families will benefit because of this legislation.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Mr. Speaker, I thank my colleague for his speech.

One point stood out: plans, plans and more plans. We already have a public pension plan, as well as RRSPs and registered retirement income funds. We have TFSAs, which some people use as a retirement fund. We have all of these things, and we know that not everyone contributes. And now here we have another plan.

Does my colleague think that ordinary Canadians are soon going to have to take a university-level financial literacy course to figure out what their best option is? Should we not just improve what we already have, simplify things and make the existing tools more accessible?

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Mr. Speaker, that is exactly what the PRPP does. It creates large pools of retirement pension ability for businesses that otherwise do not have that expertise.

Many small businesses, like my own and many across Ontario and Canada, employ two, three, five or ten people. The owners of those businesses are hard-working men and women who go to work every day and know their business very well, but do not know something like administering pension plans. The PRPP would give an opportunity for those businesses to use the expertise that is already out there to take advantage of a very large pool of pension funds in order to help themselves and their employees plan for their retirement.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Mr. Speaker, it was very interesting listening to my hon. colleague. He seemed close to the point of rapture with his satisfaction with Bill C-25. I am very glad that he is very happy about it.

. Bill C-25 is the PRPP and then, apart from that, we have the social safety net programs: the Canada pension plan, the GIS and the OAS. Yesterday on television, the House leader said that the CPP and the GIS would not be touched. I will take the government's word for it but it seems that the OAS may be touched at some point in the future.

Does the member feel that with the PRPP, this legislation, plus those other programs, the pension needs of Canadians will be addressed for the foreseeable future?

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Mr. Speaker, I sat here today listening to the debate. I understand the role of opposition and I understand the negative side that often needs to be taken. However, it reminds me of a cartoon character from my youth who walks around with a little cloud over his head and it is always raining just on him.

I, on the other hand, as he says, do tend to look positively and favourably at things. I like to find what is good and agree with it. His question just reinforces that there is no one right answer. There can be a number of right answers. This is the place where we come to talk and find that out. However, does it always have to be how bad my country is from the other side rather than, “Hey, Joe, that's a great idea. Let's vote for that.”?

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Mr. Speaker, I would tend to say that, rather than ecstatic, my friend was a little out of puff as he was going through all the things that we have done for seniors.

As a small business owner, talking about the pooled registered pension plan, how does he see this as an advantage to attract and retain employees from the standpoint of the pension option and also the possibility of employers using matching contributions to attract and retain people?