Finance Committee on April 28th, 2009

[The Chair, Conservative, James Rajotte]

Good morning, everyone.

Welcome to the 22nd meeting of the Standing Committee on Finance. Pursuant to Standing Order 108(2), we are continuing our study on measures to enhance credit availability and the stability of the Canadian financial system. Within that study, this is our third meeting dealing specifically with the issue of pensions.

We have with us here this morning five organizations: first, the Rotman International Centre for Pension Management; second, the Office of the Superintendent of Financial Institutions Canada; third, the Canada Pension Plan Investment Board; fourth, the Canadian Chamber of Commerce; and fifth, the Communications, Energy and Paperworkers Union of Canada.

I'll ask each organization to make a presentation of five minutes, and then we'll go to questions from members.

We'll start with the Rotman International Centre.

[Keith Ambachtsheer, Director, Rotman International Centre for Pension Management]

Thank you. It's good to be here this morning.

Fifteen years ago in Canada we reformed pillars one and two of our retirement income system, OAS/GIS and CPP/QPP. Fifteen years later it's time to do something else. It's now time to move on to pillar three, which is the supplementary part of the system. It basically breaks down into two components: registered pension plans on the one hand and individual RRSPs on the other.

It's good to just get a grip on the numbers. We have about 15 million workers in the workforce, which breaks down nicely into three five million parts. There's a low-income earner part, which is largely taken care of by the reforms in OAS and CPP. The other 10 million break down into two five million worker pieces: five million workers who have registered pension plans and five million who don't. And they face quite different challenges today.

The bottom line is that most of the workers who are members of registered pension plans will in fact get their pensions. There is a small proportion who will likely only get 60¢ on the dollar, because they work for private sector organizations that are now in financial difficulties.

It's interesting to contrast with the other five million who don't have pension plans. Many of them will in fact have trouble replacing an adequate amount of income once they stop working, with their current arrangements. The markets have not been kind to them in terms of reducing the value of their RRSPs, and there are other issues related to the consistency with which contributions are made and to how well the plans are carried out.

So those are the overall challenges today with the system.

The good news is that we know how to fix the problems. There has been a lot of research done in the last few years. I wrote a book a couple of years ago, Pension Revolution: A Solution to the Pensions Crisis, and since that time the C.D. Howe Institute has come out with a number of papers. Most importantly, there are now the three expert provincial commissions that have looked at the issues and have made recommendations. And there is in fact a fair amount of consistency in where the solutions lie. They lie in the direction of fixing the problem with the benefit formula. DB plans are too rigid and DC plans aren't structured enough. We need to go to a target-benefit approach that lies between those two extremes. The other thing we've learned is that we have to deliver pensions through large pension delivery organizations that have scale, are at arm's-length, and have expertise to do that kind of work.

The third and maybe most important thing that we need to fix is the coverage issue, the fact that out of those 10 million workers who should have supplementary pensions, only half have a formula approach; the other half are basically left to fend for themselves. That is not an appropriate way to go.

I have made a specific proposal through a C.D. Howe paper called “The Canada Supplementary Pension Plan (CSPP): Towards an Adequate, Affordable Pension for All Canadians”. There are a number of similar proposals now floating around, and I believe we need to take them very seriously.

The final point I want to make is how we get from here to there. That will be no mean challenge. A lot of these things actually are already happening. DB plans are being closed or they're being converted to more flexible arrangements. DC plans, group RRSPs, are increasingly moving toward auto-enrolment and various types of default options that get people to where they want to go. There was a discussion just last week about super-funds in the papers. Michael Nobrega floated that idea. And we do need to move to larger, more expert entities to manage these funds.

On the coverage front, as you know, it's already an election platform in British Columbia that there should be a province-wide plan for all those workers not covered. I think that idea will move east. It will go to Alberta and to Saskatchewan. Ontario will pick this up as well, as will Nova Scotia. This leads us to the question that I will leave you with, which is, what's Ottawa's role going to be in all this?

You have a choice, all the way from being a passive bystander and watching all this happen, to taking a more proactive role in deciding what Ottawa can do to facilitate moving to the retirement income system, the third pillar, that all Canadians deserve.

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now go to OSFI, please.

[Jean Claude Ménard, Chief Actuary, Office of the Superintendent of Financial Institutions Canada]

Mr. Chair, distinguished members of the committee, good morning. Thank you for the opportunity to appear before you today to discuss Canada's social security system and how it is faring in the face of today's economic turmoil.

The primary role of the OCA is to provide actuarial services to the federal and provincial governments who are Canada Pension Plan (CPP) stakeholders. While I report to the superintendent of financial institutions I am ultimately responsible for the content and actuarial opinions reflected in the reports prepared by my office.

The mandate of the OCA is to conduct statutory actuarial valuations of the CPP, the Old Age Security Program and other pension plans covering the federal public service every three years. Although OSFI is the regulatory body for approximately 7% of all private pension plans in Canada, accounting for approximately 12% of pension assets, OSFI has no role in regulating the Canada Pension Plan. As the chief actuary, my responsibility is not regulation of the CPP; rather it is limited to providing regular actuarial valuations of the long-term sustainability of the CPP.

The financial turmoil has touched countries in all continents. Pension plan funding has been affected, and the financial status of social security schemes has deteriorated. The average pension fund return for OECD countries was negative 19% for the first 10 months of 2008. The CPP fund dropped by $13.8 billion during the last nine months of 2008. Still, the CPP assets of $111 billion represent four times the annual benefits paid. In comparison, 10 years ago, the assets represented less than twice the annual benefits paid.

Despite the current volatility in financial markets and the fact that the value of CPP assets will fluctuate over the short term, it is the ongoing contributions made by working Canadians in addition to long-term investment performance that will determine the plan's ability to meet its commitments to plan members.

I will now move to English.

The Canadian retirement income system is composed of three pillars, old age security, the Canada and Quebec pension plans, and the third pillar, the RRSPs and the registered pension plans or employer-sponsored pension plans.

According to a Statistics Canada study as of year-end 2007, Canadian pension assets equalled 138% of gross domestic product. A comparable OECD/World Bank study identified Canada as one of only seven countries in the world where pension assets exceed 100% of gross domestic product.

For the old age security program, aging will cause an increase in the expenditure of the OAS program. However, compared to other G-7 countries, Canada has shown remarkable budgetary improvement since the mid-1990s. Balancing the budget and taking steps to put debt as a proportion of GDP on a downward track are effective ways to ensure the sustainable financing of the old age security program. Despite Canada's return to a budget deficit this year and projections of further economic contraction, it is anticipated that these will be temporary and will not affect the government's ability to pay future OAS benefits.

For the Canada Pension Plan, from 2000 to 2019, the net cashflows of the plan, that is, contributions less expenditures, have been and will continue to be positive, resulting in a rapid increase in the plan's assets expenditure ratio and funding status.

To conclude, in these uncertain times it is necessary to continue to monitor the financial health of social security systems. In Canada the next CPP, Canada Pension Plan, and OAS actuarial reports will be performed as of December 31, 2009, and will take into account the current economic environment as well as the long-term demographic outlook. The combination of old age security, the guaranteed income supplement, and the compulsory contributory pension plans, the Canada and Quebec pension plans, has contributed significantly to reducing poverty among seniors over the past three decades. The OECD and the Luxembourg Income Study Research Institute consider Canada to be the country that has the least difficulty answering the economic well-being of retirees. To quote the research institute:

The choice of policy is crucial, as shown for instance by the low cost but highly target-effective Canadian efforts in fighting elder poverty.

With the Netherlands, Finland, and Sweden, Canada is in a select group of countries where the incidence rate of low-income seniors is less than 5%.

I wish to thank you for the opportunity to appear before this committee and will be pleased to answer any questions you may have.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We will now go to the CPP Investment Board.

[Benita Warmbold, Chief Operations Officer and Senior Vice-President, Canada Pension Plan Investment Board]

Good morning, Mr. Chairman and members of the committee. My name is Benita Warmbold and I am senior vice-president and chief operations officer of the CPP Investment Board.

With me today is Don Raymond, senior vice-president and head of public market investments.

When the federal and provincial ministers of finance successfully reformed the Canada Pension Plan in the mid-1990s, they endowed the CPP and the CPP Investment Board with a number of advantages. Three of those advantages have proven invaluable in the recent economic environment.

First is the clarity of our investment mandate enshrined in legislation to maximize returns without undue risk of loss.

The second is a governance model that balances independence with accountability. The CPPIB operates at arm's length from government and is overseen by an independent board of directors, which approves investment policies and makes critical operational decisions. To balance that independence, the CPPIB is accountable to the federal and provincial finance ministers, who act as stewards of the CPP. We have a high degree of transparency, so Canadians can see how their pension fund is managed.

The third is stability, through legislation that protects the CPP assets and governs the CPP Investment Board, which requires the cooperation of the federal and provincial finance ministers to change.

All of these advantages reinforce our ability to earn investment returns to help sustain future benefits for the 17,000,000 Canadians who participate in the CPP. To fulfill this objective, the investment strategy of the CPP fund is designed to generate returns over decades and generations. As a result, we have a long-term investment horizon. That long-term focus is central to my remarks today. The combination of our long-term focus and the funding structure of the CPP in which contributions are expected to exceed benefits through 2019 has proven extremely valuable in helping CPP withstand a prolonged market downturn.

The assets of the CPP fund have grown steadily as the portfolio has been diversified over the past 10 years. As of December 31, 2008, the CPP fund had assets of $108.9 billion. That's an increase of $71 billion as a result of both investment returns and contributions from employees and employers. The fund today is a broadly diversified portfolio of public equities, private equities, real estate, inflation-linked bonds, infrastructure, and fixed income instruments. Just under half of the fund, about 49%, was invested in Canada and the balance was invested globally as of December 31.

As recent results have shown, the CPP fund is not isolated from the storms buffeting financial markets and the global economies. Sharp declines in global equity markets have negatively impacted our recent results. For the first three-quarters of the fiscal year, the fund declined $13.8 billion, reflecting a return of minus 13.7%.

While we recognize that Canadians may be concerned about these short-term results, our long-term investment horizon creates advantages and opportunities. First, the portfolio we manage today is not being used to pay benefits today. In fact, it will be another 11 years before money from the fund will be required to help pay pensions. Second, as a result of new cashflows for the next 11 years, we have the opportunity to invest in quality assets at attractive prices when many other investors cannot. Third, our portfolio reflects our long-term mission and is designed to generate returns over four-year periods rather than focusing on a single year.

Appropriately, our policy on management compensation reflects our long-term investment strategy, our portfolio design, and our long-term outlook. The key principles are that compensation rewards performance over the long-term, as measured in four-year periods. The pay for performance is based on two factors: how the fund performs overall and whether we generate returns above a market-based benchmark. Overall, the program balances pay for performance with the ability to attract and retain the best investment professionals to manage the fund.

In summary, the CPPIB is very confident that we have the investment strategy to generate the long-term returns required to help sustain the CPP. Given recent conditions, we know Canadians are placing an even higher value on a strong public pension system. We take very seriously our responsibility to help sustain one of Canada's most important social programs for decades and generations to come.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll now go to the Chamber of Commerce.

[Shirley-Ann George, Senior Vice-President, Policy, Canadian Chamber of Commerce]

Thank you, Mr. Chair and gentlemen.

My name is Shirley-Ann George. I'm the senior vice-president of policy at the Canadian Chamber of Commerce. With me today is Mr. Serge Pharand, vice-president and corporate comptroller at Canadian National.

It gives us great pleasure to be before the House of Commons Standing Committee on Finance to present the views of the Canadian Chamber of Commerce and our members on this important issue. As many of you know, the Canadian Chamber of Commerce is the largest business organization in Canada, with membership of 175,000 small to large businesses from all sectors of the economy and all regions of this country. We pride ourselves on being the voice of Canadian business, and we work hard to ensure Canada's business community is able to maximize its economic and social contribution to all our well-being.

We commend the finance committee for consulting with Canadians on the most appropriate means to strengthen Canada's pension plan. Today, I will focus my remarks on the voluntary pension system—the defined benefit, or DB, and defined contribution, or DC, pension plans.

The unprecedented decline in global equity markets and long-term interest rates has significantly reduced the funded status of DB pension plans. According to Watson Wyatt, the ratio of plan assets to plan liabilities—that is the solvency ratio—of the typical pension plan fell from approximately 95% in 2007 to 69% at the end of 2008.

Many companies with DB pension plans are required to make substantially higher pension contributions to offset the substantial pension losses. This requirement is taking effect during a recession when they can least afford it. As a result of these large special payments, companies are diverting available funds from productivity and growth-enhancing capital investments. Their competitiveness and that of our nation is undermined. Reduced capital spending puts the economy at risk of a longer and deeper recession.

For many companies, these increased costs may force layoffs and compel reductions in employee compensation and/or increases in employee contributions. In some cases, it may even force companies into bankruptcy. The real proof of the seriousness of the situation is the level of concern expressed by plan sponsors. According to a Watson Wyatt survey, 88% of senior Canadian executives believe defined benefit plans are in a widespread funding crisis.

In early April, the federal government released proposed regulations to provide temporary solvency funding relief for federally regulated DB plans. One option was to allow the sponsor to extend the solvency funding period by one year. Another option was to allow a plan sponsor to extend the solvency payment schedule from five to ten years, provided no more than one-third of both plan members and retirees object. If consent is not obtained, the difference between the five-year and ten-year payment schedule would need to be secured by a letter of credit.

Our members expect that obtaining the consent of employees and retirees at this time will be difficult. In particular, the requirement for retiree consent may preclude access to funding relief for the very employers and plan sponsors who most need the relief. In our view, the option to extend the amortization period should not be conditional on consent.

Our members agree that the five-year solvency deficit amortization period imposes onerous and volatile cash demands on companies. It should be extended to at least 10 years and applied consistently to all companies to allow businesses to spread their solvency payments over a longer period, freeing resources for today's operations.

Plan sponsors should be able to either use a letter of credit or place funds in a trust separate from pension funds in lieu of solvency contributions. If utilized, such instruments would provide the same security to plan sponsors as cash contributions to the pension fund and should be recognized as a pension asset in solvency valuations.

With credit markets remaining tight, it is difficult for many companies to obtain a letter of credit or secure one at a reasonable price. If used, letters of credit and funds in trust should be released if the pension returns to a fully funded position.

We strongly urge the government to move quickly to provide the funding relief many employers urgently need.

I also have some recommendations that would benefit the employees. Employers should provide affected plan members with notice of any changes, greater clarity and understanding of the issues, and full disclosure of the funding status. Employee concerns should be alleviated by making it clear to employers that they should not be able to terminate a plan and continue in business without funding benefits, and there should be no partial termination.

To add transparency to this whole process, we recommend that annual valuations be required. When compared to the existing rules, our 10-year amortization proposal, combined with the requirement to file annual valuations, can result in more security for the members of a plan and achieve the goal of reducing volatility for the sponsors. We urge the committee to take a long-term view when assessing our proposal.

I also have some comments on needed changes to the defined contribution RRSP and RRIF programs and recommendations that might be considered alongside the Rotman proposal, but given the shortage of time, I hope one of you will ask questions on that during questions and answers.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now go to the Communications, Energy and Paperworkers Union of Canada.

[Renaud Gagné, Vice-President, Quebec, Communications, Energy and Paperworkers Union of Canada]

Good morning. Thank you for agreeing to meet with us to talk about the difficulties we are experiencing.

With me this morning is Germain Auclair, who will perhaps speak more to the problems specific to Smurfit-Stone, which was granted protection under the Companies' Creditors Arrangement Act, and the direct consequences of that protection on workers who are about to retire and those who have already retired.

I am the Vice-President of the Quebec section of the Communications, Energy and Paperworkers Union of Canada. We represent 50,000 workers in the forestry sector, 22,000 of whom work in Quebec. Since 2006, more than 5,000 people have permanently lost their jobs. The forestry sector is going through an unprecedented crisis. I will not dwell on the fact that, to date, the forestry sector has received little assistance, compared with the automobile sector.

What must be understood is that, once companies are protected under the Companies' Creditors Arrangement Act, be it AbitibiBowater or Smurfit-Stone, nearly 10,000 pensioners are threatened because there is no system that will protect their benefits. This is happening in all regions throughout Quebec, so there is an extremely significant impact on the regional economy.

There is another difficulty: for the last three years, we have been negotiating all sorts of cost cutbacks that would allow workers to retire. Today, under attrition programs, people are still waiting, and we are waiting for the money needed to allow them to leave, while keeping the youngest workers in their jobs. Unfortunately, it was announced yesterday that AbitibiBowater will not finance the solvency deficits. If there were to be a bankruptcy, the consequences would be dire. Some people would not be able to retire, young workers would be laid off, and there would be a labour shortage in the short term.

What is even more disappointing is that, just as Smurfit-Stone was granted protection under the Companies' Creditors Arrangement Act, it was able to secure $47 million to use as executive bonus retention incentives. Meanwhile, in Montreal, 200 employees at two paper factories had their pension plan cut by $8 million.

So, it is obvious that current measures applicable to private pension plans do not provide financial security to workers when they retire.

One of the first recommendations would be to create a pension insurance program that would prevent total insecurity for these people. We need a federal pension insurance system, and we believe that this system should be built in collaboration with the provincial governments.

I will hand the floor over to Germain so that he can talk to you about the direct consequences, in his capacity as a retired member and a member of the Retirement Committee.

[Germain Auclair, Member of the Retirement Committee, Smurfit-Stone, Communications, Energy and Paperworkers Union of Canada]

Good morning. My name is Germain Auclair, and I have been the Vice-President of the Smurfit-Stone Retirement Committee for the last 20 years. This committee represents factories in Burlington, Matane, La Tuque and Pointe-aux-Trembles.

Everyone knows that Smurfit-Stone is protected under the Companies' Creditors Arrangement Act here in Canada, and chapter 11 of the U.S. Bankruptcy Code. Our plan covers approximately 725 active members and 900 pensioners. The plan's assets went from $214,598,000 in 2007 to $175,908,000 at the end of December 2008, an amount that does not account for the fact that the company has stopped making its contributions for past service since January 2009. A payment of $706,366 for past service is not made to the plan each month. The plan's solvency ratio was 64% on December 31, 2008. Presumably, that ratio is even lower today, considering that the company has suspended its contributions for past service.

Smurfit-Stone can declare bankruptcy and shut down the plan; the Régie des rentes du Québec also has the power to shut it down. Unlike Ontario, we have no law whatsoever to protect our pension plans, so members and pensioners would absorb a considerable loss, which would have repercussions in municipalities that are already grappling with plant and sawmill shut downs, such as in La Tuque and Matane.

As a clear illustration, based on bridge benefits, a 58-year-old pensioner would lose $12,181 if the company were to go bankrupt, and by the time that same pensioner reaches 60 years of age, he would lose $10,237 per year. Losses would be in the range of $11,000 to $12,000 per year, per pensioner. This amount of money is very significant for a pensioner who draws approximately $35,000 or $36,000 per year. Real losses for future pensioners would be approximately 32% for maintenance workers and 35% to 40% for production workers. Average losses would be about 32%.

Losses for all pensioners taken together would be approximately $5,580,000 per year, an approximate average loss of $6,488 per pensioner. It must be noted that losses would be lighter for older pensioners and much heavier for others.

In conclusion, after having explained what would happen to the pension plans for the factories in Burlington, Matane, La Tuque and Pointe-aux-Trembles, and the financial impact on our pensioners and workers, we, the workers of Smurfit-Stone, hope that a law similar to that of [Editor's Note: Inaudible] will be implemented to protect all of our pension plans. It is important to remember that, to date, governments have helped only companies and have forgotten about the workers and pensioners who are also bearing the brunt of the recession and massive layoffs.

We hope that you will take into account our comments in your future decisions, since the confidence in the system we live in is at stake.

We also wish to take a few moments to thank the member for Champlain, Jean-Yves Laforest, for inviting us to this meeting. We also wish to thank all members who agreed to give us the opportunity to explain how our pension plan works.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll start with Mr. McCallum, for seven minutes, please.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair.

Thank you to all the witnesses for being here today.

My first question would be to Ms. Warmbold.

It's my understanding that the six top people at the CPP Investment Board had bonuses in the order of $10 million, not this past year but the year before. I know you can't give a precise number, but given the return in the first three-quarters of minus 13.7%, can you say what impact this is likely to have on bonuses?

[Benita Warmbold]

Sure. I mentioned in the opening remarks that our performance program is definitely a pay for performance, and this links a significant portion of our performance to our value added over the reference portfolio, as well as our absolute returns. So given what's happened this year, it will definitely have a downward impact on our compensation for this year. Our results will be out at the end of May.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you.

Mr. Ambachtsheer, I know you've studied pensions for years and decades. In terms of this new pension arrangement that's moving from west to east, I have two questions for you.

If you assume that we have a federal government that wishes to be active in this area--and I won't comment whether or not we do at the moment, but if we do--given all your knowledge and experience, what do you think would be an appropriate role for the federal government to play? This is my first question.

I'll give you my two questions together, and the two may be somewhat related.

My second question is that there's been a lot of debate about whether your scheme and other similar schemes will be compulsory or voluntary in terms of contributions. I believe at least one version of yours is voluntary but with a default position that if you don't say you're not in, you are in. It seems to me that's a crucial decision.

Those are my two questions.

[Keith Ambachtsheer]

The potential role the federal government can play in bringing all these things together is in fact to help flesh out the vision as to where we should be going, and as I say, it really revolves around putting three things together. One is to move to target-benefit plans. Another one is to move the delivery to cost-effective organizations, and the third is to increase coverage way beyond where it currently is.

Just the idea--if we can get buy-in across Canada--that this is what we're trying to achieve would be a huge step forward. It gets rid of a lot of the noise, and it gives clarity to where we're going. The second question is how we get there. There are some very big challenges in how we get there, but I think if we know where we're going, we can talk about a vision of how to get there. The other thing that clearly is in the Ottawa camp is the Income Tax Act. There are certain things in the Income Tax Act that prevent the efficient generation of pensions right now. So that's an important role that Ottawa can play in that dimension.

[John McCallum, Liberal, Markham—Unionville, ON]

If I could interrupt for one second, would you see the possibility of a single national scheme, or possibly a Quebec-Canada, Canada pension plan-Quebec pension plan scheme as being the most desirable outcome?

[Keith Ambachtsheer]

The research shows that scale is very important. Bigger scale means lower unit costs. Delivering pensions at low cost is tremendously important, because if a lot of the returns are eaten up in costs, then there are no pensions. So in that sense, scale is important.

As to whether it needs to be one national plan, the way I wrote it up, as the Canada supplementary pension plan, or whether you have a CPP-QSPP as a variant of that, or whether we have a number of regional plans, I think they can all achieve scale.

So now you get to the question of portability. Portability across the country, if you want labour mobility, is obviously very important. So even if you have somewhat different sponsorship, you want the formulas to be the same. You want them all to be target benefit plans. You want them all to have individual pension accounts, and you want all of the older workers and retirees to be part of an annuity balance sheet that is secure and will in fact pay pensions.

So it's an interesting question whether we end up with one national scheme or whether we end up with three or four regional schemes. I think that needs to be seen. I think we're going for regional schemes right now. I think what starts to happen, when people start to talk to each other about what they should do separately and where they should collaborate, is that you're going to find there are a lot of things that make sense to do together, and you may in fact end up with a national scheme that's not top-down but is in fact bottom-up.

The other question relates to compulsory versus voluntary. It turns out that the research showed the answer is neither, and that in fact an approach that automatically enrols workers in a scheme that then needs to be communicated is in fact cost-effective and works in their interest. The research shows that most workers will stay in a scheme like that. They will not opt out. However, if you have some libertarianism in you, then the idea of something that is compulsory, that you cannot opt out of, is somehow distasteful.

I think we can get to 95% of where we need to go by having an auto-enrolment scheme with an option to opt out.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you very much.

I'm not sure which one to go with. I'll stick with Mr. Ambachtsheer for one last question.

One thing that people don't seem to always grasp--and I'd like you to explain this--is that it takes a generation to build up the pension benefits to the final levels. So if we do this scheme, presumably people who are 45 or older won't get a great deal of benefit. It's mainly for the much younger ones. Is that correct?

[Keith Ambachtsheer]

That is correct, unless you want to get into some kind of wealth transfer arrangement where you take money from one group and give it to some other group. If you want it to be one that is sort of transparent and fair and one in which you get what you pay for, then yes, it takes a generation to in fact have a fully sustained mature system.

[The Chair, Conservative, James Rajotte]

Thank you.

Monsieur Laforest, s'il vous plaît.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you, Mr. Chair.

Good morning witnesses.

Mr. Gagné, from the Communications, Energy and Paperworkers Union of Canada, I do not believe that the workers you are talking about can afford to wait an entire generation before changes are made to both private and public pension plans.

You and Mr. Auclair have described an extremely critical situation for workers. Mr. Auclair gave us some very specific examples of workers who, after having given years of their lives, now run the risk of losing one-third of their retirement income. This is devastating.

Mr. Gagné, one of your recommendations is to create pension insurance. We, at the Finance Committee, hear all sorts of plans and proposals, but I believe that we should analyze all of these recommendations, put forward by different groups, to see how we need to improve pension plans in Quebec and Canada.

Do you have any other recommendations from the union or the FTQ, the Quebec workers union?

[Renaud Gagné]

The FTQ, to which we are affiliated, made a submission containing a series of recommendations. It includes several measures, such as contribution holidays. We suggest a pension insurance system that would oblige all pension plans to make contributions, so that in the event of bankruptcy, it would still have funds to honour its obligations, similar to how insurance companies operate. This type of pension insurance is based on the same principle.

In the other recommendations, it is clear that we want to ensure that trustees and companies are responsible, and that pension plans are fully funded. There must be a series of guarantees.

We should not allow a retiree who has made payments their entire life to lose a portion of their retirement income. These payments must be insured, and this applies equally to those no longer working. In our industry, the one thing that has to be remembered is that, had we received financial assistance such as guaranteed loans to refinance company operations, we would not be in this situation.

A large part of AbitibiBowater would have been able to refinance its debt were it not carrying a $4-billion debt; when the market drops, factories are closed, people are forced into retirement and others are relocated. There are not too many problems. It is only when it becomes impossible to refinance a major debt during a financial crisis that a company must resort to bankruptcy protection. Otherwise, we would be able to honour our obligations towards our retirees. There are 8,900 retirees from AbitibiBowater in Quebec and another 1,000 from Smurfit-Stone. This is huge; it represents one-third of our workforce.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

We do not have the document that you referred to earlier, but I would like you to submit it to this committee or send us a copy. I am referring to your presentation, as well as the complete submission of the FTQ that contains all of the recommendations. This is important.

[Renaud Gagné]

We did submit it, but it is not translated.