Evidence of meeting #20 for Finance in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was retirement.
A recording is available from Parliament.
Conservative
Mike Wallace Conservative Burlington, ON
I'm short on time and I don't meant to be rude, that's for sure, but I think you're suggesting that a universal pension plan should cover 70% of what somebody earns, up to $116,000. Am I right?
Conservative
Mike Wallace Conservative Burlington, ON
I just want to be clear. Are you advocating that we get rid of all company pension plans and have one pension plan funded by the taxpayer to this level? Tell me where I'm confused.
Vice-President, Canadian Association of Retired Persons
First of all, it's not funded by the taxpayer; it's funded by the employers and employees, as is the current state of affairs with the CPP. In the--
Conservative
Vice-President, Canadian Association of Retired Persons
No. It is a contribution towards your own retirement. There are small employers who call it a payroll tax, but in fact it is a contribution by employer and employee towards the retirement of that individual. That is the kind of model we're recommending for a universal plan to cover the rest of it.
Conservative
Mike Wallace Conservative Burlington, ON
Have you costed out your plan, in terms of what's being collected now in the private sector between employees and employers and what we would have to collect as the Government of Canada?
Vice-President, Canadian Association of Retired Persons
Remember that the private plans have their own defined benefits, and so it's going to cost what it costs for them and their employee group as to what it will cost actuarially to pay for their benefits. The CPP, which is the example we use, costs employer and employee together 9% for the coverage that it is giving now.
Conservative
Mike Wallace Conservative Burlington, ON
Companies that aren't providing a defined benefit plan now....
Vice-President, Canadian Association of Retired Persons
They would have to come up with it.
Conservative
Mike Wallace Conservative Burlington, ON
That would be a new tax, or a new payroll deduction for them that they're not paying now?
Vice-President, Canadian Association of Retired Persons
That they are not currently paying. That's correct.
Conservative
Vice-President, Canadian Association of Retired Persons
The estimates are that it would be up to about 15% when you add in the CPP and the excess amount, but because the amounts roll up to where they are now, and with the demographics, it's about 19% combined for the employer and employee.
Conservative
Mike Wallace Conservative Burlington, ON
In this marketplace, that might be a significant hit to some companies. Are you planning on a rollout that's a long-term change?
Vice-President, Canadian Association of Retired Persons
This is for the very long term. The estimates are that it will take some 40 years for this to roll out and be complete. That's if there's no immediate contribution of tax dollars. This is only by the employer and employee.
Conservative
Independant analyst, As an Individual
I'm sorry. I think when we're doing cost-benefit analysis it's also important to keep in mind that a lot of private plans are in deep trouble, and they're going to cost the taxpayers anyway because the governments, whether they are provincial or federal, are going to backstop them. We have to think about the universal plan and how it will enhance productivity in Canada. Over the long run, I believe this will enhance productivity in Canada, so I'm firmly behind Ms. Eng's proposal.
Conservative
NDP
Thomas Mulcair NDP Outremont, QC
Thank you, Mr. Chairman.
Mr. Kolivakis, before you were looking for some time to complete an answer. Have you had occasion to do that?
Independant analyst, As an Individual
No, that was on the issue of extending solvency amortization from five years to ten years. I think it's important for us to keep in mind that we can be buying time. We can change the discount rates so that when you have a AA corporate bond yield that is higher than the Government of Canada's yield, the liabilities end up being a lot less, but that is tinkering, and really what you're trying to do is buy time. And I don't think that is really a long-term solution.
Air Canada, I believe about four or five years ago, did the same thing, and when they extended the amortization period it didn't really help them. So I'm saying that we have to start thinking about long-term solutions and not tinkering at the edges.
NDP
Thomas Mulcair NDP Outremont, QC
Mr. Chairman, when we talk about sustainable development, we immediately think of the environment. In reality, sustainable development means thinking about the effect that every government decision will have on future generations.
Over the past two years, we have seen the collapse of two major sectors of our economy, the forestry sector and the manufacturing sector. This is a matter of political debate. Our view is that the Conservatives are responsible because of the bad choices they made in reducing taxes across the board. By definition, a company not making any profit in the manufacturing or forestry sector received nothing from those initiatives. So the benefit went to the most profitable companies such as the banks and big oil companies.
One of the effects of that is that, before the current crisis, 350,000 jobs had already been lost in the manufacturing and forestry sectors. Those were high-paying jobs that often came with pension plans as well. For months the government kept telling people not to worry because those jobs were being replaced by new ones. But if you want to know what this really looks like, look at the former site of the GM plant in Boisbriand, which is now one of those huge shopping malls. Everyone, of course, has the right to work in a store, but if you earn $12 an hour selling clothing, you have no pension plan and it is pretty hard to pay for your family's needs.
Ms. Eng or Mr. Lamoureux, have you had a chance to look at the long-term impact of this structural change in our society? We are losing hundreds of thousands of high-paying jobs in sectors where there were pension plans and replacing them with lower-paying jobs, without pension plans, especially in the service sector, such as shopping malls.
Vice-President, Canadian Association of Retired Persons
I'm not sure if I fully understood the question through the translation, but I think you're asking how we deal with the kind of job situation that we have now, where people are losing jobs that have pension benefits attached to them and are gaining jobs that do not. In fact, the dynamic is to push people towards manufacturers--the car manufacturers that don't offer pension plans, for example. That creates a great instability in our economy and in our society. This is what we're facing now. Individuals who had hoped to have peaceful retirements are now being confronted with some great upheavals in their lives. This is one of the issues that a stable pension system across the country would help to prevent. That's probably one of the most important things we're doing here today, looking at how we prepare for our own future.
It was pointed out earlier that we worry about whether young people are going to be supportive of this. I can tell you right now that people get old very quickly in this kind of market, and when they're losing their jobs, they're looking at what kind of cushion they have. One of the areas we can help them with is to provide for their future.
Mr. Chair, if I may, I've been corrected in relation to a comment I made earlier, and I would like to clarify it. In relation to my answer to a question about how much more it would cost to have a universal pension plan, I was properly corrected by the former chief actuary of the CPP that we already pay 10% according to our CPP contributions, so the additional amounts would cause a further 10%, for a total of 19% to 20%. I didn't want to leave the impression that we would be adding another 20%.
Special Advisor, Canadian Institute of Actuaries
This is obviously a political question, since free trade means that jobs may move from one country to another. But in the automobile industry, for example, Roger Lowenstein wrote a very interesting book in which he clearly shows that the unions and management provided benefits that they knew were not sustainable in the longer term. Things like the so-called thirty-and-out are very expensive, and it is clear that no one set money aside for that.
So we need to be careful when we talk about pensions. We need to calculate the long-term costs and think beyond the present. The only way to have a stable pension system is to invest in Canada Savings Bonds. No one wants to assume the cost involved.
