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.

Third Reading

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Mr. Speaker, I would like to thank the hon. member for the neighbouring riding of Hochelaga. Our ridings are facing similar challenges. In fact, some areas of Hochelaga—Maisonneuve and Saint-Léonard—Saint-Michel are very poor.

The hon. member raised some very important points. According to the Liberal Party, we should start with a voluntary program. Are we going to ask people who work part-time and earn $100 a week—like my son who has just started working— to contribute 20% of their salary to a retirement plan? That is unacceptable.

For that reason, we believe that we must start by deducting the amounts already set out in the law. Later, we could increase these deductions by establishing criteria that we will have discussed beforehand. This is not something we should impose today. The government should not be imposing a gag order on a bill that should be debated.

I do not understand this government's attitude. There are a number of things that are more important than retirement plans for people who are already rich and are already making significant contributions to their RRSPs. In my opinion, the issues this country must address today are pensions, students and young people.

[Mike Wallace, Conservative, Burlington, ON]

Mr. Speaker, I want to follow up on the response from the member. I want it to be clear and on the record that it was the current government that brought in the process that contributions to CPP cannot be raided of any surpluses by any government in the future. That was our doing, our policy.

Based on the member's comments, I assume the member is in support of and congratulates the government in making sure that future governments cannot raid surpluses, as previous governments have done in the past.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Mr. Speaker, the only thing this government has done in terms of raiding was to set up an independent unemployment board and dedicate $1 billion to it. It already has a deficit of $3 billion or $4 billion after three years. This government has only been in power for six years and has done nothing but tax Canadians and put them in the situation they are today.

[John Carmichael, Conservative, Don Valley West, ON]

Mr. Speaker, I am delighted to be sharing my time with the member for Brandon—Souris.

Our government understands that hard-working Canadians and seniors want an effective and sustainable retirement income system that will help them achieve their retirement goals. That is why I am pleased to have this opportunity to speak to Bill C-25, an act that would implement the federal framework for pooled registered plans, or PRPPs.

PRPPs would mark a significant step forward in improving Canada's retirement income system by providing a new pension option to Canadians. Currently, 60% of Canadians do not even have access to a workplace pension plan. Most of these Canadians work for small and medium-sized businesses or are self-employed. Clearly, this represents a gap in Canada's retirement income system, a gap that PRPPs would fill.

PRPPs would allow these Canadians to access a pension plan for the very first time. In short, PRPPs would be a broad-based, low-cost, privately administered pension plan option. We may think of it this way: pooling pension savings would spread the cost of administering the pension funds over a large group of people. This would allow plan members to benefit from lower investment management costs, lower than those typically associated with the average mutual fund. Do members know what this would mean? It would mean that more Canadians would have more money left in their pockets for when they retire.

Simply put, the PRPP is the most effective and targeted way to address the gap in Canada's retirement income system. How will it do that, one might ask? PRPPs would address this gap 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 or employees of companies that do not offer pension plans, to make use of this new option; enabling more people to benefit from lower investment management costs that result from membership in a large pooled pension plan; allowing for the portability of benefits, facilitating an easy transfer between plans; and, finally, ensuring that funds would be invested in the best interests of plan members.

Clearly, PRPPs are what Canada's retirement income system has been waiting for. This is why it is so important that the provinces follow the lead of our government and implement PRPPs as quickly as possible. Doing so would enable Canadians from coast to coast to coast to take advantage of this great new pension option.

Unfortunately, not everyone feels the same way. While our government is trying to implement PRPPs, the NDP would rather take the irresponsible and reckless route. It wants to double CPP. Do people know what that would do? It would result in higher CPP contribution rates for employers, employees and the self-employed. In the case of small and medium-sized business owners, it would act as a payroll tax, and that is a tax on job creators.

Members need not take my word for it. Let us hear what the Canadian Federation of Independent Business had to say. According to its research, “to double CPP benefits would kill 1.2 million person-years of employment in the short term”. Only the NDP would propose something so reckless. That is the difference between our Conservative government and the irresponsible NDP.

While our government is committed to generating economic growth and long-term prosperity, the NDP has no problem jeopardizing Canada's fragile economic recovery by imposing higher taxes on job creators. That, to me, is unbelievable.

It should be clear that doubling the CPP is the wrong decision for Canada and our economy. Unlike the NDP, our government believes that lower taxes help to generate economic growth and create jobs for Canadians.

Let us just look at the facts. Since July 2009, more than 750,000 net new jobs have been created. What is more, Forbes magazine ranks Canada as the best place for businesses to grow and create jobs. When it comes to the economy, there is no doubt why Canadians trust this government. This government gets results. That is why Canadians trust this government to keep Canada's retirement income system strong.

I will take a moment to tell the House just how much our government has done to ensure that Canada's retirement income system will continue to be the envy of the world.

Since 2006, our government has increased the age credit amount by $1,000 in 2006 and by another $1,000 in 2009. Next, we doubled the maximum amount of income eligible for the pension income credit to $2,000. Our government introduced pension income splitting, and we increased the age limit for maturing pensions and registered retirement savings plans, RRSPs, to 71 from 69 years of age.

What is more, budget 2008 introduced the tax-free savings account, which is particularly beneficial to seniors as it helps them to meet their ongoing savings needs on a tax-efficient basis. Our record also includes important improvements to several specific retirement income supports. Budget 2008 increased to $3,500 the amount that can be earned before the GIS is reduced. This means GIS recipients will be able to keep more of their hard-earned money without any reduction in GIS benefits. Budget 2008 also increased flexibility for seniors and older workers with federally regulated pension assets that are held in life income funds.

Budget 2011, the next phase of Canada's economic action plan, announced new measures to improve seniors' financial security and ensure they can benefit from and contribute to the quality of life in their communities. The plan includes a new GIS top-up benefit targeted to the most vulnerable seniors. Since July 1, 2011, seniors with little or no income have been receiving additional annual benefits of up to $600 for single seniors and $840 for couples.

The plan also provides an additional $10 million over two years to enhance the new horizons for seniors program. This additional funding will enable more seniors to participate in social activities, pursue an active life and contribute to their community. It will also provide funding for projects that will increase awareness of elder abuse and promote volunteering, mentoring and improved social participation of seniors.

Canadians just have to look at our record to know that this Conservative government is on their side, and the proposed PRPP is just the latest example. However, members need not take my word for it. The Canadian Chamber of Commerce states:

PRPPs—with simple and straightforward rules and processes—will give many businesses the flexibility and tools they need to help their employees save for retirement.

Greg Thomas, the federal and Ontario director of the Canadian Taxpayers Federation, says:

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 throughout their working lives.

It seems clear to me and to Canadians that PRPPs are the way to go.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

Mr. Speaker, I would like to thank the hon. member for his speech.

We know that the tax-free savings account is one way of saving available to Canadians and that it is often the wealthiest people who can take advantage of these accounts. In general, it is rich people who can take advantage of these accounts or people who are at a point in their lives where they are transferring their pension funds into tax-free savings accounts to save on taxes and ensure that they have more money for their retirement.

I would like to ask a question about pension funds because we have spoken about them a number of times since this morning. Since when is a pension fund considered to be a withholding tax for employers? Why are we requiring workers, but not employers, to contribute to this pension fund?

[John Carmichael, Conservative, Don Valley West, ON]

Mr. Speaker, as a small and medium-sized business person in my previous career path, I can tell members that my business struggled with options to provide security to our employees. We used, for example, group RRSPs in our business as one means of providing an option to our staff, our team.

To me, this plan is the perfect opportunity to provide a low-cost, flexible product or option with a greater ability of employees to get in. It will give our staff the opportunity to participate in something that they simply never had before.

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Mr. Speaker, the member himself would no doubt acknowledge that the number of individuals who will benefit from this particular legislation is somewhat limited.

There are a large number of Canadians, and there is some value in terms of establishing this fund. It can be used as a tool to facilitate additional retirement funds for many seniors going forward. However, the vast majority of Canadians are quite concerned about the future of CPP. They are looking for the Government of Canada to sit down with the provinces and look at ways to enhance the quality of life for future retirees by making a more sincere, genuine investment in CPP.

Can the member can provide his perspective on CPP versus this particular pooled pension plan, and whether it would be worth the government's time and effort to work with the provinces to improve the CPP?

[John Carmichael, Conservative, Don Valley West, ON]

Mr. Speaker, my colleague has asked a good question that is obviously at the root of the decision process that evolved the PRPP.

First, two years ago the government met with finance ministers across the country and tried to arrive at a solution for reviewing CPP. There was no unanimity. The finance ministers unanimously agreed that PRPP would provide a new and more flexible tool that would bring more Canadians into the net of those who would like to participate in such a program.

The hon. member asked about CPP versus PRPP. Clearly, when I look at CPP and some of the comments that have been made today and in previous debates about doubling CPP, the extra cost to employees and employers and the tax costs to employers make it untenable and tremendously expensive for an employer in a small or medium-sized business or someone who is self-employed to participate, whereas the PRPP truly gives the benefit of that flexibility and a new opportunity.

[Merv Tweed, Conservative, Brandon—Souris, MB]

Mr. Speaker, I am pleased to stand and speak to Bill C-25.

I would think that all members of the House would see this as a benefit to all Canadians, particularly, as previously stated, the self-employed, small and medium-sized businesses and organizations that are probably too small to have their own plan but would like to offer another form of investment in the people they employ and an opportunity for people to grow within that company and stay with it based on the fact that they would have a plan at the end of the day that provides for their retirement.

As many are aware, our government understands the importance of a secure and dignified retirement for people who spent their entire lives building a better and more prosperous Canada and for their families themselves. This legislation would take Canada's retirement income system one step further by helping more Canadians realize their retirement goals.

A lot of work was put into developing this proposal. Canada's retirement system is strong, but that does not mean it cannot be improved, that we cannot offer enhancements to pick up those individuals outside of the circle and offer them something better and an opportunity to invest for their retirement. This legislation addresses exactly that.

We all have memories of the crisis of 2008 and how it brought out concerns with regard to retirement. We all asked ourselves if our pension would be adequate, if we would be able to retire in the style we choose. I suspect upon reflection many people found they would not be able to. Things changed dramatically after 2008. If people were in the stock market or in RRSPs or in any type of investment, they took a hit. There is no question about it. The proposal we are putting forward would address that.

We did not do this blindly. We did it through co-operation and discussion with provinces and finance ministers across Canada, with people in our communities and, as the previous speaker mentioned, small business people. I was a small business person too. We always looked for opportunities to provide our employees with better security and better programs. Quite often we had to make the decision that we could not afford it.

This would address many of those issues. As I said, we did not do this blindly. We did it with a lot of consultation. We are trying to provide Canadians with an adequate standard of living upon retirement, and that is what everyone wants.

During the consultation period we found out that modest and middle income Canadians risked facing retirement with insufficient savings. Of particular concern was the declining participation in employer-sponsored RPPs. The proportion of working Canadians with such plans declined from 41% in 1991. Canadians are not taking full advantage of other retirement saving tools, like the RRSP.

I have been told that there is $600 billion in unused RRSP room. That is a clear indication that Canadians have priorities, and their families are their priorities. Sometimes we make those decisions and forget about the future. We need to always be aware of that and have that in our view.

With these findings, our government went to work on behalf of Canadians. We consulted, we met with provincial and territorial counterparts and held discussions with many businesses and we came to today's legislation.

In short, PRPPs are a new, innovative, privately administered, low-cost and accessible pension option to help Canadians meet their retirement goals.

PRPPs are particularly important and significant for small and medium-sized businesses. It is quite often unaffordable for business owners to provide these types of benefits. The bill would give them that opportunity, because it would enable owners and employees alike to have access to a large-scale, low-cost private pension plan for the first time. We basically would piggyback on larger corporations. We would get a better buy-in and we would get a better return because of the pooled funds.

Professional administrators would be subject to a fiduciary standard of care to ensure that funds were invested in the best interests of the plan. That is obviously a given, but I think it needs to be said.

By pooling pension savings, PRPPs would offer Canadians greater purchasing power. Basically, we would be buying in bulk. We would be getting a bigger, better deal for less money. By achieving lower prices than would otherwise be available to Canadians, it would mean more money left in the pockets of those same Canadians when they retire.

The design of the plan would also be straightforward to allow for simple enrolment and management. People in small and medium-sized businesses, the self-employed, I suspect, and the employees themselves will like the simplified form.

Finally, they are intended to be largely harmonized from province to province, which further lowers administrative costs and makes the transferability a lot easier to deal with.

Overall, these design features would remove any of the traditional barriers that might have kept some employers from offering pension plans to their employees.

It is my belief that this would lead to a greater willingness for small and medium-sized businesses to offer PRPPs. That is crucial. It is crucial because, incredibly, more than 60% of Canadians do not have a workplace pension plan. That is a huge number. When the members opposite look at it and talk to their friends, they will see it would include a lot of the people who support them and work with them in their day-to-day lives, and it is important that we try to include them in the discussion.

With PRPPs, participation would be encouraged by automatic enrolment of employees into a PRPP where an employer offered one. The automatic enrolment would encourage regular savings by making participation the default choice of employees who do not actively make a decision to opt out.

I remember the best advice I ever received as a young person entering the workforce in a family business was from a financial advisor who told me to just take a little bit off my cheque every month as I would never miss it. Then, as I grew older and my needs changed and my income earnings changed, I could increase it. It is the best advice I have ever received and the best advice I have ever given my children or their friends.

Canada's finance ministers decided to proceed with the PRPP framework precisely because it was considered an effective and appropriate way to target the modest and middle-income individuals who may not be saving enough for retirement, particularly those who currently do not have access to an employer-sponsored pension plan. These PRPPs would strike the right balance.

I know that if the NDP members had their way they would double CPP benefits and increase payroll taxes on small and medium-sized businesses, but that is not the way this government operates. At a time when Canada's economic recovery is still fragile, imposing a job-killing tax on the creators of those very jobs would be simply irresponsible.

PRPPs would be an efficiently managed privately administered pension plan that would provide greater choice to employers and individuals and promote pension coverage and retirement saving.

Once the provinces put in place their PRPP legislation, the legislative and regulatory framework would be operational. This would allow administrators to develop and offer plans to Canadians and their employers. Working together with the provinces, I know and I am confident that we can get these important new retirement vehicles up and running for Canadians in a timely manner.

It is important to remember that PRPPs would not just stand by themselves. They would be part of a bigger picture, part of Canada's retirement income system. We must always remember that. This bill is designed to help the many who do not qualify or are unable to have a pension plan within the confines of where they work. I know the Minister of State for Finance has gone to great lengths to listen to Canadians and to hear what they asked for and what they need. I believe this bill responds to their needs in a very positive way.

I encourage all Canadians and all members of Parliament to support this legislation.

[Francine Raynault, NDP, Joliette, QC]

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

Something similar was tried in Australia more than a decade ago, and the results were not encouraging. After a dozen or so years, people did not have more money. Their investments did not do better than the rate of inflation.

The members of this House know that the Canada pension plan has barely lost any ground, with barely a 1% drop in interest, while the stock market, in which the government would like Canadians to invest more of their pension and retirement savings, has declined by 11%. I would like to hear what he has to say about that.

[Merv Tweed, Conservative, Brandon—Souris, MB]

Mr. Speaker, the fact that 60% of the Canadian working public does not have access to this type of plan is the very reason we are considering it.

We have spoken to provinces, employers and employees. This appears to be the best vehicle for them to move forward with. It would be tightly managed by professionals. I believe very firmly that this would be an ideal opportunity for employers and employees to work together on a pension for each other.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Mr. Speaker, I would first like to say that we could pick any point in time to suit an argument on the returns of the stock market.

The whole point behind the PRPP is that it is over a lifetime, with the dollar cost averaging over 40 years. With a tax-free savings account, RRSPs and now this program, we would provide Canadian working families a great opportunity for their retirement future.

I wonder if the member could talk about the importance of fiscal and financial literacy for Canadians of all ages moving forward for their retirement.

[Merv Tweed, Conservative, Brandon—Souris, MB]

Mr. Speaker, it is extremely important. When we are moving into a program that is new to a lot of people, the understanding of it is very important. The member for Edmonton—Leduc has put forward a bill regarding financial literacy, which is of utmost importance.

As I said earlier, as a young first-time employee, it was the experience and depth of a senior statesman who gave me the advice I needed. Trust was a big part of it, but I believe and think it is imperative that all Canadians understand what they are signing up for, what the benefits are and what the long-term benefits are for their families.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Mr. Speaker, we clearly do not have the same definition of financial security. This bill clearly indicates that the administrator administers all the plan assets, pays himself management fees, a margin, bonuses and that anything left over goes into the fund.

The plan member has no guarantee of a return. Even worse, the member cannot plan his retirement because he will have absolutely no idea of the amount accumulated. Can that be called a pension plan? It certainly cannot. Above all, there should not be closure on this bill, especially in light of the fact that Nortel could lose $7 billion that could be directed into its pension fund. And yet, the government is not doing anything. Why not?

[Merv Tweed, Conservative, Brandon—Souris, MB]

Mr. Speaker, like anything in this world, we can look at it as the glass being half full or half empty. We on this side look at the world as the glass being half full and wonder how to continue to add to that glass.

The bottom line is that 60% of all working Canadians do not have any form of pension plan within their area of work. The bill is designed to address that. It is based on a collection of information from the owners of businesses, employees and professionals across the world. I wish I could give every member a guarantee in life, but that is not how it works. What we have to do is give them the best opportunity.