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.

The House proceeded to the consideration of Bill C-25, An Act relating to pooled registered pension plans and making related amendments to other Acts, as reported (without amendment) from the committee.

Speaker's Ruling

[The Deputy Speaker, Denise Savoie]

There is one motion in amendment standing on the notice paper for the report stage of Bill C-25. Motion No. 1 will be debated and voted upon.

I shall now put Motion No. 1 to the House.

Motions in Amendment

[Irene Mathyssen, NDP, London—Fanshawe, ON]

moved:

Motion No. 1

That Bill C-25 be amended by deleting Clause 1.

Madam Speaker, it is important that we look very carefully at the pooled registered pension plan, because it simply does not serve Canadians. In addition to not serving Canadians, it does nothing to solve Canada's pension crisis.

The pension crisis has been the subject of debate for the past several years. The issue is that more than 11 million Canadian workers do not have a workplace pension plan. Old age security and the Canada pension plan, which everyone has, do not provide enough money for people to live on in their retirement. To make matters worse, most Canadians are not making up for their lack of pension plan by saving for retirement on their own. Less than one-third of people entitled to contribute to RRSPs actually do so. There is now more than $600 billion in unused RRSP contribution room being carried forward, and only about one-third of Canadian households are currently saving at levels that will generate sufficient income to cover their non-discretionary expenses in retirement.

It also needs to be noted that the market is not a reliable place in which to gamble retirement security. Turmoil on financial markets has had and will continue to have a devastating impact on workplace pensions. People who were saving for retirement through RRSPs have found all too often that the value of their investments has dropped so much that they are now faced with having to postpone their retirement or struggle to replace retirement savings by attempting to find some kind of work. The reality is, however, that finding employment at age 68 or 70 is profoundly difficult. The workplace has changed, and the skills that retirees once brought to the job are no longer marketable.

For several years there has been a clear consensus among experts that real pension reform was and continues to be critical. However, rather than intelligently and positively engaging in reform that is practical, the government has instead introduced pooled registered pension plans, PRPPs, which, according to the federal finance minister, will make low-cost, private sector pension plans accessible to millions of Canadians who have up to now not had access to such plans. It is magic.

The legislation introduced in mid-November would allow employers to offer PRPPs to their employees. The scheme would be run by insurance companies and other financial institutions that would pool the savings of workers whose employers sign up for the program. The financial institutions would run the program on behalf of employers and, of course, would charge fees for doing so. Employers would not have to contribute to the plan. Workers' savings would be locked in unless employees provide notice in writing that they want to opt out, which, apparently, would be allowed.

No pension would be guaranteed by this program. In effect, it is yet another voluntary savings scheme that would do nothing to address the pension crisis we face. Since very few people take advantage of existing voluntary retirement savings schemes, it is not clear why officials are claiming that proposed PRPPs will prove more attractive than existing programs. So far, the only advantage being promoted by PRPPs is that management fees will be lower than for individual RRSPs since contributions will be pooled. However, there is no guarantee of lower fees nor is there any certainty that this will be a big selling point for the plans. It is also worth noting that there is no evidence people are not saving through RRSPs because of the high management fees. It is far more likely that, because individuals are raising families, paying bills, trying to manage the cost of housing and educating kids, there is no money left at the end of the month for an RRSP.

The PRPP is not a defined benefit plans. It does not provide a secure retirement income with a set replacement rate of pre-retirement income. It is not fully transferrable. It is not indexed to inflation and will not increase with the increasing cost of living. Employers, not employees, will decide contribution levels and it will not be mandatory for employers to contribute or match workers' contributions. Without employers contributing, it is not really a pension plan. In fact, employers who do not help their employees save for retirement could end up with a competitive advantage over those who do.

Canada does not need yet another voluntary tax-assisted retirement savings program. It needs public pensions that provide all Canadians with a basic guarantee of adequate income that will protect their standard of living in retirement. Expanding the Canada pension plan would meet this objective.

In fact, federal and provincial finance ministers seemed set to take this route when they assembled for their meeting in Alberta in December 2010. However, because Alberta opted out, the federal government decided to abandon talks and introduce the PRPP scheme instead.

Improving the replacement rate of CPP retirement benefits would provide much better retirement pensions to virtually all Canadians. A relatively modest increase in contribution rates would be required, but that could be phased in over a period of time, as the Canadian Labour Congress and others have proposed.

The CPP covers all workers, including those who are self-employed, and its benefits would be guaranteed in relation to earnings and years of service. They would be indexed for inflation and fully portable from one job to another. This option would address the two key issues in the pension system that are causing concern, the lack of coverage of workplace pension plans and the fact that individuals are not saving for their retirement on their own. As well, of course, an expanded CPP could reduce federal expenditures on GIS, because more people would have adequate retirement incomes.

While the government says CPP contribution rates cannot be increased when there is a fragile economy, it is worth noting that when the financing of CPP was changed at the end of the 1990s, combined employer-employee CPP contribution rates nearly doubled from 5.6% of covered earnings to 9.9% over a five-year period, during which the unemployment rate fell from 9.6% to 7.6%. It should also be noted that the PRPP scheme will do nothing to help the baby boomer generation now coming up to retirement.

It seems this is a lost generation as far as pension reform is concerned. It has been estimated that roughly one-third of Canadians now in the age group 45 to 64 are likely to end up with incomes that fall far short of adequate minimum incomes and/or incomes that would allow them to maintain their standard of living when they retire.

The adequacy of CPP benefits has been an issue for more than 30 years. It is time now for federal and provincial governments to set aside ideology and work together to solve the problem.

The study by pension expert and Canadian Centre for Policy Alternatives research associate Monica Townson provides a thorough analysis of the PRPP program and argues that expanding the Canada pension plan would provide better retirement pensions to virtually all Canadians. Ms. Townson found that the expansion of the CPP would provide a mandatory defined benefit pension to virtually all Canadians, giving them a basic retirement income that for modest and middle income earners would preserve their standard of living.

The government's PRPP proposal does not do that. It does not guarantee a pension. Benefits would depend on selection of investments and stock market performance. Participation would depend on an employer's deciding to take part in the program. It is basically just a defined contribution pension.

In a defined contribution plan, there are no guarantees of how much money would be left when an individual retires. The risks are borne entirely by the individual employee. In these types of plans, the amount of money available at retirement depends on the outcomes of the investments, which cannot be relied upon. Defined contribution plans lack the security of defined benefit pension plans like the CPP-QPP, which pay a guaranteed set amount upon retirement.

It is important to remember that Bill C-25 places no caps on administration fees or costs, and merely assumes lower costs will emerge through competition in the marketplace. Financial institutions like banks, insurance companies and trust companies stand to profit substantially from these fees. However, expanding the CPP-QPP would not cost the government any more than its proposed PRPP.

More important, expanding the CPP-QPP would not entail transferring huge management fees to private financial institutions.

How can I get through to the government? Seniors have worked hard all their lives. They deserve decent retirement. Bill C-25 would not provide that.

[Mike Wallace, Conservative, Burlington, ON]

Madam Speaker, based on the NDP's position that the pooled registered pension plan would not be good enough because it is not a defined pension plan, does that mean the party is opposed to RRSPs? That is a voluntary program that has been around for many decades. Is that party advocating we get rid of RRSPs as a tool available to Canadians for saving for retirement?

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Madam Speaker, as everyone knows, RRSPs have been around for a long time and they are quite significantly entrenched in our system. People need to know that unfortunately there are problems with RRSPs that the government simply does not talk about.

First and foremost, it is about $17 billion in terms of cost to provincial and federal governments in order to sponsor these RRSPs, $5 billion for the provinces, $12 billion out of federal government revenue every year. Imagine what we could do with $17 billion in federal and provincial government revenues in terms of making sure there is pension security for Canadians.

The government also does not tell people that the management fees I referred to take up as much as 40% of the investment an individual makes in an RRSP over a 40 or 45 year period. That means these folks think they are going to have enough and they are actually making headway, but the reality is they are not. They are being taken advantage of in many ways.

We cannot get rid of our RRSPs because they have been entrenched for too long. But we need to be cognizant of their downside.

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

Madam Speaker, I agree with my colleague from London—Fanshawe. I am glad to have my RRSPs. I have been trying to put money away in RRSPs. However, when one looks at their efficacy, one finds that overall they cost the system a tremendous amount and really provide little pension availability, and they provide less as we look down the income scale. The people who most need pension benefits are less likely to find them through RRSPs.

I am attracted to the idea of more municipal bonds. I know we are thinking outside the Bill C-25 box, but what does the member for London—Fanshawe think of Canadians being able to put their retirement savings in municipal bonds in their own communities?

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Madam Speaker, that is something we should be investigating.

In December 2010, the federal government said it was going to sit down with the provinces and talk practically in a progressive way about the retirement crisis we face. Perhaps future talks with a different government would find something solid and workable. I hope there is a different government in 2015. In fact, I know there will be a different government.

Perhaps we can sit down with municipalities and find something solid and workable that would invest our pension funds in a way that provides a significant return, safety and security, defined benefits and the kind of pension deserved by Canadians who have spent their entire lives building this country, putting in place the social safety net. It would be far better than allowing that bunch to destroy our social safety net, because, quite frankly, that is what they are up to.

[Malcolm Allen, NDP, Welland, ON]

Madam Speaker, I want to thank my colleague from London—Fanshawe for articulating what really is wrong with pooled registered pension plans.

When clearly there is unlimited room in an RRSP for most folks, why does the government want to duplicate it? It is just the same plan all over again, only with a different fee structure; it looks fancy and has a nice name. It would let workers think that somehow magic will happen.

The reality is that if people do not have money for an RRSP, they will not have money for a pooled registered pension plan. The government would argue that it can come off at source and therefore the tax is lower, but people can do the same thing with an RRSP.

Does my colleague from London—Fanshawe think the government is headed in the wrong direction and is really handing out a fairy tale to workers across this country that somehow this plan would help them in their retirement years?

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Madam Speaker, it is indeed a fairy tale. I would call it a myth. I would call it an attempt to create an illusion. The Conservatives are very good at illusions. They have a whole box of tricks. The point is that pooled registered pension plans are not what they are cracked up to be. They depend on the stock market. It is not safe out there.

[Mike Wallace, Conservative, Burlington, ON]

Madam Speaker, in this timeframe we often make speeches about the legislation, but it is a debate and I am going to debate what I just heard from the member opposite.

It is unbelievable. First of all, the NDP members need to know that the CPP, which they like to claim is the panacea for all retirement savings, is invested in the stock market. We have a board that looks after the billions of dollars invested in the CPP, and it is invested in the stock market.

I am a bit frustrated and angry. I do not know why the members criticize the investments in the stock market as if it is something evil, something that is not going to return anything to anybody. Our CPP, the savings of every working Canadian, is invested in the stock market, and there is an investment board that looks after that investment. We cannot ignore the fact that all investments, whether CPP, RRSP or individual stocks, are invested in the stock market. We should get off the concept that there is something evil about or wrong with investing in businesses that will create jobs and growth in our country. That is what the stock market does for us. It provides retirement savings for every pension plan,--OMERS, for example, and all the pension plans, public and private. The stock market is a key component to every savings tool that is out there. We should drop the concept that because it is invested in the stock market, it is something risky or evil in which we cannot participate.

The other comment that was just made was in regard to RRSPs. Based on the NDP philosophy that I just heard, the members would remove the concept of people saving for themselves for their retirement, because it is taking tax money from the Government of Canada, and they think they can spend it better than we who are saving for our retirement.

I disagree 100% with that. It has been a very good tool for Canadians to save for their retirement. Is everyone taking it up? Even I have room in my RRSP. I have not taken it all up, and many Canadians do not, but that does not mean we remove the tool. We do things to improve the tool, and the pooled registered pension plan is an opportunity.

Our friends across the way talk about talking to Canadians at their kitchen table. A large number of organizations have come to committee and have told Canadians and the government that this would be a tool in the toolbox of retirement, that the pooled registered pension plan would be an opportunity that does not exist now that would be another piece of the puzzle for which to be able to save.

Why would members turn that down? The opposition may like something else, but does that mean that everything else is wrong just because they want something else? I disagree. If they were true to themselves, they would talk to the individuals in their ridings and say it is not the panacea that is going to solve everyone's retirement plan, but it is an opportunity.

For people who work for a small business that does not have a retirement plan, there would be a program that offers a pooled system, the key being that it would be pooled. Companies with small numbers and even those who are self-employed could belong to a plan that takes the risk and spreads it over a larger number of contributors. It would take the risk from the employer away because the administration would be done by a third party. It would take that liability away and it would pool the opportunity that is not available now.

Vitally important to me is the portability. This pension plan would be portable. People would take it with them. When people leave company A and go to company B, if company B does not have a pooled plan they could still keep their money in the pooled plan they are in. If company B has a pooled plan, they could move their money over to make that happen. They could keep their money in there.

There is nothing wrong with locked in. Part of the problem with Canadians, including myself, is that we are not great savers for retirement. We have all these other things. I have two daughters in university, for example, who cost me a lot of money. I did not do a good job of saving for that.

Lots of Canadians have issues with savings. Deductions at source help with savings. The pooled registered pension plan would have deductions at source. Those deductions would go into a pooled pension plan for individuals. If they moved or things changed, the funds would be locked in. Some could always be taken out if something happened, they become disabled or had other issues and needed to access the capital. That would be their capital and they would be able to get it, but really, it would be a retirement savings program.

Members opposite talk about the CPP as a panacea. It is a deduction at source and it is locked in. We cannot take it out until we retire. This is the exact same process. We are doing it so that Canadians have an opportunity to prepare themselves and their families for their retirement.

Members opposite say it is voluntary, it is an opt-out program. If individuals join a company that has a pooled plan, they are automatically enrolled. They have to make a decision within perhaps the first six weeks or six months. There is a timeframe within which they can opt out. They may not interested in saving for their retirement in a pooled plan, and they may opt out. It is a program that attempts to ensure that Canadians put a little bit aside for their retirement, which I think is what we are all after. There is not one member in the House who does not want a decent retirement for those who have worked all their lives and for their families.

However, we have to have tools to do that. The RRSP is an individual tool. I agree with the previous speaker, the cost of those programs is high. It is exactly why we want to go with the pooled system. It is portable, it is locked in and it has a lower cost.

Let us look at an example. We can all buy paper individually for our offices. It is all basically the same thing, paper. If we purchase in a pool, everyone gets paper. It is cheaper, more efficient and more effective. That is what pooled registered pension plans are for. That is why it is important that we move forward with this.

Members opposite cannot support this because they want the CPP changed. They know and Canadians know that it takes two-thirds of the provinces with two-thirds of the population to make a change to CPP. We cannot unilaterally do it. It is not legal for us to do it, we are not capable of doing it and we do not have support from all provinces at present.

Not speaking for the government, but for myself, reviewing what is happening with CPP and making changes is a policy initiative that I fully support. However, if we cannot get the provinces to agree, we have to find other solutions. It might not be the final solution, but we have to find some other opportunities. Why are opposition members ignoring opportunities that exist for which we have general support?

Before I wrap up, I want to say that this is an opportunity that will pass this House and will be for federal employees. I would like each and every province, including my own province of Ontario, to take advantage of this opportunity. It would not cost a dime.

I understand from the Ontario budget that Ontario will not proceed with legislation required to enable this to happen in Ontario for other employment groups. I have no idea why the Ontario government would not do that. Why is it denying Ontarians the opportunity to save for their retirement? It does not make sense to me. It does not cost anything. We should be moving ahead. We should be looking for tools that solve the problem.

RRSPs do not solve the problem, but would we get rid of them? Absolutely not. We have to look for opportunities, we have to look for tools. The pooled registered pension plan is a tool that does not exist now that would help many working Ontarians and other Canadians. I would appreciate the support of everyone in the House.

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

Madam Speaker, I would like to thank the hon. member for commenting on this plan that we consider particularly toxic, in that people will be well aware of what they are investing but will have no guarantee of what they will get back. This is not savings; it is not really a pension plan. It is quite simply a financial instrument to enable financial institutions to make even more money.

The banks will be the first to benefit from this money. They are the ones that get paid first. Perhaps the hon. member can provide confirmation: it is the financial institutions that collect the administrative fees, that set rates to make a profit. Then, if there is a return, it goes to the participants' savings, and if there is a deficit, if the return is negative, the financial institutions are in no way prevented from collecting administrative fees and setting a profitable rate, which worsens the shortfall.

[Mike Wallace, Conservative, Burlington, ON]

Madam Speaker, what was just expressed by my colleague from the other side is a complete fallacy.

Of course the pooled pension plan would have fees. Administrators would charge a fee for administrating, but the law would set the level of those administrative fees, which could be much cheaper in a pooled system than individuals see through the RRSP system that we have now. Therefore, we would have some say.

I have no problem with organizations providing a tool for retirement. They are providing the service of administration, and taking that administrative burden off employers. Employers do not have pension plans, defined or otherwise, or DC plans, because of the costs and liabilities that go with them. This is an opportunity to remove that liability, to provide an opportunity for employees to have a savings program at a lower cost because it is pooled across a larger number. If the organization, whether it is a bank or a life insurance company, charged an administrative fee, it would be allowed to do so. Those administration fees would be reviewed and controlled by this legislation.

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

Madam Speaker, speaking of tools, I want to talk about RRSPs. The member is right, they are a tool. When we consider the whole package of retirement funds, I agree that this pooled pension plan is one of the tools in the shed that is certainly of good benefit for many, but not really a lot.

If we are talking about doing a lot of heavy lifting with a shovel, what the member is armed with here today is a very large spoon. There is no doubt that it does its work. The problem is, when he talks about pooling the purchasing of paper to bring costs down, not everybody is buying paper. Therefore, I would suggest to him that, in addition to this, maybe he should look at using that CPP investment board that he spoke of as a voluntary option to supplement the current mandatory CPP payments. This would be a vehicle, another tool in the shed.

[Mike Wallace, Conservative, Burlington, ON]

Madam Speaker, the hon. member across likes to ask me questions, and I like to answer them.

I am not sure if the Liberal Party will have this in its platform the next time, but in the past it put forward making CPP voluntary. People could take that deduction, voluntarily add more money on their own and the CPP board could manage it for them. That is what the Liberals' proposal has been. If they do not know that, or they do not understand it, they should read their own platform.

The pooled pension plan would allow small, medium and large companies that do not have a pension program to pool together and have required deductions at source for those under the plan, whether they are in the same industry or not.

The voluntary piece is what is at issue. Canadians are not great savers unless we take it off their paycheques, which has been the case, including for myself. If they are part of a pooled plan, it is an automatic deduction that is locked in, which is much better than the voluntary system the Liberals are advocating.

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Madam Speaker, it is with pleasure that I am able to add a few words today on what is a very interesting bill. It clearly demonstrates first-hand the differences among the Conservative-Reform Party, the New Democratic Party and the Liberal Party.

I will pick up on the member's reference to the Liberal Party's position, saying it wanted to make CPP optional. Of course, that is not true. Let me start by saying that the whole issue of pension has been a very interesting subject to Liberals for generations. In fact, the area of retirement and making sure our seniors are taken care of is nothing new for the Liberal Party. The Canada pension plan, old age security and the guaranteed income supplement were all programs initiated by Liberal prime ministers, going back to some of the ideas that were at the forefront in making a difference and enhancing seniors' pensions today. The Liberal seniors critic today was talking about how we could have incorporated some form of additional contributions to benefit CPP.

What I like about this particular bill is it shows that there are differences among political parties. Let me reference the NDP's position. It is saying it does not support this bill. It does not recognize pooled registered plans as a viable alternative for consumers, individual companies and self-employed individuals. I do not understand why. Many individuals would see this as a positive step forward. It is not going to be the major pension supplement into the future for our seniors but many seniors would be able to benefit from this program.

It is not just the Liberal Party that recognizes that. Some provincial administrations across the country have also seen the value of it. Thousands of small businesses throughout the country have seen the value of pooled registered pension plans. There seems to be fairly tangible support for the concept of having pooled registered pension plans. This is where Liberals differ from New Democrats on this bill.

Then there are the Conservatives, or the Reform-Conservatives as they are better known as nowadays, saying they want to create the fund with management fees. Australia has developed a similar program and the management fees are a killer. They are taking away a great deal of profit, which would, in essence, go back to the seniors who are hoping to be able to use this money to supplement their CPP and OAS.

It was not that long ago that the leader of the Liberal Party spoke on this bill at second reading and talked about the overhead cost structure for CPP. Why are we not going out of our way to incorporate or allow for some sort of similar situation, perhaps one in which the pooled pension plan would have the same structure? What are the options we have? The government tends to turn a deaf ear. We have to ask why it is not looking for a mechanism that would allow for this tool to be maximized for our seniors?

I challenge the government to seriously look at that and to look at bringing in the potential for amendments. I recognize we are already into the third reading stage, but maybe we could get the Senate to rectify this issue. Obviously the government has not been sensitive to that.

It makes sense. If we can allow our seniors to generate more income on their savings and allow the employers that put money to the side to generate more revenue for retiring seniors, why would we not do that?

If we look at what happens in other jurisdictions, we can see these types of funds have huge administrative costs and management fees. There is a good number of people who make huge profits and those profits are in essence taken away from seniors in their ability to maximize their pension benefits.

We are not necessarily against profits. We recognize where the Canada pension plan contributes and relies on profits. A structure is in place where there have been great savings, compared to other types of pooled registered pension plans.

That is why we suggest the government open its eyes and look at how CPP is administered and structured to see how we might be able to maximum the benefits of a pooled registered pension plan and maybe allow some of those agents that manage the CPP an opportunity to deal with this pooled registered pension plan, at the end of the day believing that seniors will benefit.

The issues of pensions is very important nowadays. It is on the minds of a lot of Canadians because the government seems to be fixated on creating a crisis with respect to our OAS. The government has suggested Canadians not retire at age 65 but wait until age 67. That has sent significant shock waves through our communities.

From the perspective of the area that I represent, Winnipeg North, when the Prime Minister was overseas, musing about what he wanted to do with pension plans and the pensions of seniors, it was somewhat insensitive to the day-to-day decisions seniors had to make. Some of those decisions deal with things such as whether they should pass on lunch to buy medicine, or whether they have enough money to take their grandchildren out to a special event.

Seniors face some serious financial issues today in a very real and tangible way. They are looking for leadership from the Government of Canada. What they want to hear from the government is that it truly cares. They want it to provide hope for individuals as they get closer to retirement.

When I look at Bill C-25, I will give the government some credit. It proposes to expand the tool box of what some seniors might be able to look at, including working with good employers that recognize the value of pensions. However, the bottom line is we need to think about pensions a lot more than we are, and we need to look at a wide variety—