Evidence of meeting #26 for Finance in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was plans.
A recording is available from Parliament.
9:30 a.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Okay, I understand that.
Okay, thank you very much. I'd like to pursue that, but I have limited time.
9:30 a.m.
President, Air Canada Component of the Canadian Union of Public Employees
Thank you.
9:30 a.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
On the Canada Pension Plan Investment Board, you're essentially saying that CPP is into high-risk investments and that there's little or no recourse. I've heard a lot of things said about CPP, but as a high-risk investor, that's not one I've frequently heard.
What percentage of the CPP's investment portfolio would you consider to be high risk?
9:30 a.m.
Economist, As an Individual
They are assets that are not market-related, so you can't define valuation properly, in my view, and the rest is made up of public markets--equities.
9:30 a.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
So if CPP invests in a public-private partnership, for instance, we'll say for building the train from the Vancouver airport to downtown Vancouver, that's not a publicly traded investment. Would that fall within your category of high risk?
9:30 a.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Okay, thank you.
Mr. Braniff, item four of your recommendations says, “The existing CPP provides a maximum 25% of occupational. Enhancing CPP to 60-70% of pre-retirement income...”. I'm not quite sure what you mean by that proposal.
9:30 a.m.
Founder and Spokesperson, Canadian Branch, Common Front for Retirement Security
I'm going to let Bernard Dussault, my associate here, comment on that point, if you don't mind. He's the former chief actuary with CPP.
9:30 a.m.
Bernard Dussault Senior Research and Communications Officer, Federal Superannuates National Association
The CPP expansion would consist of two things. Two things would be expanded. The benefit rate, which is currently 25%, would be increased to 70%. The maximum earnings on which the CPP applied, called the YMPE, would be increased from $46,300 this year to the maximum applicable for tax purposes to a registered pension plan, which is $116,000 a year.
This expansion, contrary to all previous CPP amendments, would be done a fully funded basis. This is a new provision in the CPP Act.
So the day that the expansion is implemented, the 70% will apply, but only to earnings earned since age 18. This means that the 70% will be earned gradually. It will take 47 years before the 25% benefit rate will reach the 70% level.
9:30 a.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
You're lapsing into actuarial-speak. Possibly others understood what you were saying, but I'm not sure I did.
Unfortunately, I've run out of time, but I'll reserve the opportunity to come back and try to have you explain that to me in non-actuarial language.
9:30 a.m.
Senior Research and Communications Officer, Federal Superannuates National Association
Okay.
9:30 a.m.
Conservative
9:30 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
Thank you, Mr. Chairman.
Good morning, ladies and gentlemen. Thank you for coming and giving us your comments.
Since our time is limited, we have to make choices with our questions. First I'm going to speak to Ms. Carbonneau.
Earlier you mentioned that virtually all workers should have access to a pension plan and that we should consider establishing a new plan. However, government plans are in effect, particularly the Canada Pension Plan and the Quebec Pension Plan. Private plans are often a support for those plans, which are not adequate.
You're talking about further extending the pension plans, but would that be done through government pension plans or private plans, which would be improved? You talked about making it easier to establish inter-corporate plans so that everyone would be covered.
9:35 a.m.
President, Confédération des syndicats nationaux
We looked at two scenarios. It would have been almost natural for a union organization to tell you that it would be preferable to enhance the public plan, but that's ultimately not the scenario we chose. That's essentially because the mere fact of going back a little in time brings the risk of extremely high costs for future generations, given the demographic context.
We also believe in the need to offer coverage for the entire working population. We use the legislation passed, in particular, in the Netherlands, Australia and England as our model. It has the effect of forcing all employers to allocate a portion of their payroll to pension plan contributions. That subsequently makes it possible to establish good supplementary plans, among other things, if that can be done on an inter-sectoral basis, hence the need to establish an inter-corporate base.
This makes it possible both to limit the risk and to be realistic, in view of the fact that the industrial structure includes an enormous number of small and medium-size enterprises. We are more interested in this model than the idea of enhancement. This should be substantial so that real income protection at retirement is guaranteed. We think that by acting retroactively we would shift a very heavy burden of costs, which we consider prohibitive, onto future generations.
9:35 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
With respect to pension plan protection, you said earlier that there was a difference between federal and provincial legislation with regard to application. That was mentioned briefly. Can you give me any more details on that subject?
9:35 a.m.
President, Confédération des syndicats nationaux
With your permission, I'm going to ask Nathalie Joncas to provide some details on that.
9:35 a.m.
Madam Nathalie Joncas Employee Benefits Advisor, Labour Relations Services, Confédération des syndicats nationaux
Good morning.
Under the legislation governing the provincial plans, in Quebec and Ontario, if a company closes and is nevertheless in good financial shape, but the plan is deficient, meaning the fund is in a deficit position, that becomes a debt of the business, which must cover the amounts promised. That's what's provided for in cases where the company is still in good financial position. If the company is bankrupt, things are different.
In the case of plans covered by federal legislation, if the plan is terminated and is insolvent, it's not a debt of the business. The employer may therefore terminate the plan and not cover the deficit, the guaranteed amounts, even though it is still in decent financial position. If it declares bankruptcy, that's not the same thing. What we're asking is for the situation to be as it is in the provinces, that is to say that, if the plan is fully solvent, it must become a debt of the business where that business terminates the plan.
9:35 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
All right, thank you.
Now I'll turn to Mr. Georgetti, from the Canadian Labour Congress, which represents 3.2 million members, if I read correctly earlier.
On that same subject, do you believe that the protection of a pension plan should be fully applied to all workers by an act, by terms and conditions contained in an act?
9:40 a.m.
President, Canadian Labour Congress
Are you talking about bankruptcy protection or protecting the CPP?
9:40 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
I'm talking about cases where workers don't have a pension plan with the business where they work. Ms. Carbonneau suggests that all workers should have access to a pension plan through an act that would compel businesses to provide such a plan. Is that consistent with your ideas, or do you think that's pointless?
9:40 a.m.
President, Canadian Labour Congress
We think it's useful. Let's remember, over 93% of Canadians are covered by the Canada Pension Plan or Quebec Pension Plan right now. We think that's a good model to use and to enhance. Private plans that we've negotiated, although adequate and sustainable, are very difficult to negotiate.
Secondly, right now there exists a small quirk in our economy, which is that employers that don't provide adequate pension protection to Canadians gain a competitive advantage against those that do. We think that's something that's wrong in the system itself. Enhancing the Canada Pension Plan would at least level the playing field so that good employers providing adequate pension protection aren't penalized in the competitive environment they have to work in.
