Finance Committee on May 7th, 2009

[Claudette Carbonneau]

You're raising various points. You touched on one very delicate matter, the idea of a single securities commission for all of Canada. That's a point of view that we don't share at CSN and, in my view, that a vast majority of stakeholders in Quebec don't share.

There's definitely a way to discuss the matter, to try to cooperate in order to launch a movement. I'm seeking a fairly fundamental reform of pension legislation, but I don't believe it's simpler to design it at a single level of government. I think we have every interest in preserving the provinces' jurisdiction in this regard. However, I mentioned the fact that, in 1985, I believe, the federal government amended its legislation on pension funds, which subsequently allowed some interesting developments in various provinces, in Quebec in particular.

I don't think it's a matter of level of government, but of political will and of knowing how to take the time to stand back and really rethink matters in much greater depth. Another speaker earlier emphasized that we were talking a lot about pensions because we were in a crisis. I indeed think that may be a more current topic in a period of crisis.

However, in seeking a more fundamental reform of pension plans, I would say that, over the past 10 years, we had difficulties when were in a period of economic prosperity. For example, we saw the decline of the defined benefit pension plans, which offer the best security for workers. We saw them decline in a period of prosperity. Quite apart from current economic circumstances, we increasingly have an industrial structure involving small work places where people have to learn to deal with that reality.

I'll give you an example of success in Quebec where we've managed to negotiate an arrangement in the early childhood centres, which have 10 to 15 employees, and where there has never been a way to establish an adequate pension plan. So we developed a sectoral approach as a result of which, today, these people have protection that they could never have anticipated in other circumstances. That's why I think that, in a desire to reform pensions, we must look at new issues and approaches.

[The Chair, Conservative, James Rajotte]

You have 30 seconds left, Mr. Bernier.

[Maxime Bernier, Conservative, Beauce, QC]

So you're asking that the federal government play its role in its area of jurisdiction, that it conduct a reform of the supervisory legislation or regulation, which could drag the provinces along in the same movement.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Mulcair, please.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chairman.

I would like to ask Mr. Georgetti to comment on the terms chosen by my friend and colleague Ms. Hall Findlay, who last week, you'll remember, was among the Liberal members who voted against legislation to prevent the use of replacement workers, so that the Conservatives once again managed to kill any possibility of Canada having an anti-strike breaker act.

I would like him to make his observations on the choice of the term “tax”, used by Ms. Hall Findlay to describe employers' contributions to their employees' pension plans.

[Ken Georgetti]

Frankly, I don't think Canadians view CPP contributions as a tax, to date. I wouldn't advise that discussion and debate. Canadians view the CPP as a very secure instrument of security for them. They rely on it. It's administered very efficiently at the lowest cost of all pension plans in Canada.

I don't think Canadians consider it that way. We just did a poll of our entire membership, and only 4% are concerned about taxes. They're concerned about pension security far more. They're concerned about where their jobs are going to be, and they're concerned about whether or not their children are going to have adequate facilities for their needs.

This argument about CPP being a tax is a misnomer. It's clearly a pension plan, and Canadians contribute to it, respect it, and rely on it.

[Thomas Mulcair, NDP, Outremont, QC]

I will continue our examination of the Liberal Party's social conscience.

Yesterday Mr. John McCallum in The Globe and Mail said that as far as he was concerned it might be possible to have voluntary increases in your CPP contributions, which is interesting, because he is saying that the market can take care of things, whereas labour is in front of this committee regularly and business has been in front of this committee regularly, both saying we require some collective action on this issue.

The Liberals seem to be alone in believing that the pristine market, the same market that produced the current meltdown, is going to produce somehow a miraculous result for pensioners.

Do you agree that this should be voluntary? Or should it be compulsory?

[Ken Georgetti]

If I had my way it would be compulsory, and we'd make it a cost of doing business. I think the employers should pay the cost of the pension plans for their workforce. The workers give the corporations their life. Executives who give what they say is their all to those corporations get handsome million-dollar-a-year pensions. The same should be for the employees.

I see the employers setting aside billions of dollars to provide for pensions for their managers. They should be prepared to do the same for their employees.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you.

Ms. Carbonneau, I want to get back to you so that you can complete your presentation. You raised one of the most important points. We are at a tipping point. We realize that we haven't been on the alert in the past. That's a simple observation; that is to say that the margins of the system we put in place must take into account eventualities such as the current financial crisis.

Too many already retired people are now seeing their incomes decline. If there's no protection from inflation, even if inflation is only 2% or 3% a year, pensions will be reduced by half in a number of years. Even in collective agreements, it's very often sneaky because 1% or 2% of retirees' pensions are eaten up each year.

You talked about intergenerational fairness, but do you nevertheless think we could increase basic coverage and obtain better coverage for those who are already retired? Remember that a very large number of retirees are now living under the poverty line. Can we possibly think, if no one else but working people pay, that we could enact a slight increase in order to provide better support for people who are already retired?

[Claudette Carbonneau]

Our position is not to claim that pensions, on the whole, should not be improved. We are aware that retirees are fragile and vulnerable. You have to consider the best way to do it. There will necessarily be costs associated with that, and I'm of the view that those costs must be considered as payroll costs.

I liked your question that led us to say that this was a tax. In our minds, these are clearly wage costs. I think improvements at the margin can definitely be made to the public plans. I don't question that at all, but I think this is the time of much deeper changes. We have to work to consolidate this pillar of registered pension plans, which have aged somewhat and are declining. That's the meaning of the appeal we are making this morning.

[The Chair, Conservative, James Rajotte]

Merci.

We'll go to Ms. Hall Findlay, please.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you, Mr. Chairman.

Ms. Carbonneau and Ms. Joncas, I would like to continue along the lines of my colleague's question. Ms. Carbonneau, you talked about the systems of other countries, such as the Netherlands, Australia and England. First of all, I would like to say that the idea of holding a national pension summit is a very good idea because perhaps that may give us a chance to further the research you've done on comparisons with other countries. However, the situation is not easy because money doesn't grow on trees. Some people take risks in order to increase the funds, but at the same time they don't want contributions to be too large, but they want the benefits to be good.

In your comparisons with other countries, have you considered both aspects, that is to say contributions and benefits? We can contribute more or we can cut the benefits, but I don't believe we can do both.

[Claudette Carbonneau]

With your permission, I would like Nathalie, our actuary, to answer you.

[Madam Nathalie Joncas]

I'll try to do that.

As you say, money doesn't grow on trees, but the more money you accumulate—whatever its form—in a plan, the more money there will be at retirement. The important thing is to have good protection mechanisms to ensure that the risk is well shared between all those who contribute.

In a public plan, the burden of the deficit weighs on all those covered by the plan. All Canadians thus bear those costs if things don't go so well. It's spread over all the generations, as a result of which the costs are lower and spread over time. Ultimately, however, the costs are the same, whether they're paid by one or two generations.

I want to be sure I answer your question right. In some countries such as France, pension contribution amounts are much larger than here. The income replacement percentage is much higher than that offered by the Canadian system, if you consider only the public plans. When you compare Canada with the other OECD countries, what is mandatory and provided for by the public plans—whether it be the OAS or the Canada Pension Plan—is often much lower than elsewhere. It's lower when the contributions are voluntary, and we reach replacement levels far lower than others.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Merci.

Mr. Georgetti, can you give us an example of the average employment period for the union workers your organization represents--the length of time somebody works and contributes or participates in a pension plan that is fully contributed to by the employer--compared to the number of years that same person will receive a pension? If somebody works for 20 years, from the age of 20 to 40, will that person, assuming they live to 65...? If you can give me an idea of average numbers in those two categories, that would be great.

[Joel Harden]

Thank you.

We have research that indicates the rate of job turnover for this workforce is dramatically different from the rate of job turnover when the defined benefit pension system was built, so that's a major problem.

As far as averages, I can't quote averages from the brief we have; that information's not with us.

As a way of answering your question, I would say one of the reasons our organization is supporting a dramatic improvement in the CPP is that it would solve the issue of portability of pension benefits across jobs.

[Martha Hall Findlay, Liberal, Willowdale, ON]

No, the question wasn't about portability. The question was about the length of time that somebody is working and contributing to a plan, or working for an employer who contributes to a plan, compared to the number of years that person would then receive a pension.

[The Chair, Conservative, James Rajotte]

Okay, just very briefly, Mr. Georgetti.

[Ken Georgetti]

We don't have that information, but it would be a formula. You're entitled to collect based on how long you've served, and the age and service combined when you retire will determine the benefit you get for the rest of your life.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Yes, that's understood. I was looking for the numbers, but I've run out of time.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

[Ken Georgetti]

We can get them for you if you want them.

[Martha Hall Findlay, Liberal, Willowdale, ON]

I would like that, yes.

[The Chair, Conservative, James Rajotte]

Monsieur Carrier.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you, Mr. Chairman. I would like to put a question to Mr. Andersen, who is an economist.

Earlier, in response to my question on the Caisse de dépôt et placement du Québec, Ms. Carbonneau agreed that reforms were necessary with regard to risk assessment in that organization. You made a presentation on the Canada Pension Plan Investment Board. You mentioned that they engaged in speculation inconsistent with the mandate prescribed by law. You're also asking that those shares be sold as soon as possible since they involved too much risk. The impression one gets is that you're suggesting a short-term correction.

Don't you think that the more permanent remedy would focus on the bonuses paid to all those who negotiate the loans everywhere? Representatives of the Canada Pension Plan Investment Board appeared before us. We know that millions of dollars are paid in bonuses to people who make investments in those organizations. So they are definitely paid based on short-term yields, and that involves risk assessment deficiencies.

Don't you think that the problems stem precisely from those policies? In response to our questions on the subject, we were told that these are the standards of the industry. They defended themselves by saying they weren't the only ones who applied this system. Those who invest for the various plans receive performance bonuses. Can you tell us whether that's what's causing the problems in the system righ now?