Finance Committee on May 7th, 2009

[Dean Del Mastro, Conservative, Peterborough, ON]

I know, Ms. Thompson, for example, that there's great concern about Air Canada. How do we balance the concern between preserving jobs and preserving pensions?

[The Chair, Conservative, James Rajotte]

Be very quick, Ms. Thompson. I know that it's a big question.

[Katherine Thompson]

That's a very big question at this point.

Our members start their careers buying into the concept of a pension promise. They believe that if they work for their employer and the employer stays viable, when they choose to retire they'll be able to live with dignity and respect. Unfortunately, the current crisis, and Air Canada's situation in particular, is putting that pension promise at huge risk.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Pacetti, please.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chairman.

Thanks to the witnesses for being here.

Ms. Carbonneau, I listened to you and I don't know whether you're version is the same as that of Mr. Georgetti. Everyone agrees that, when we retire, we'll receive benefits from Old Age Security, the Canada Pension Plan and the Quebec Pension Plan.

However, we're talking about the third pillar. Some will be covered by a third plan, while others won't. Today we're talking about finding another way for everybody to be covered, both people who have a private plan and those who do not. In fact, for people planning their retirement, the Canada Pension Plan, the Quebec Pension Plan and Old Age Security will not be enough.

Are you in favour of the alternative proposed by certain individuals which essentially consists in increasing CPP and QPP premiums? I didn't hear your organization say it.

[Claudette Carbonneau]

We're perfectly aware that what's paid by the public plans isn't enough and that protection should be expanded, but we're fundamentally suggesting another way of doing it. I'm going to ask Ms. Joncas to provide a few details on that.

[Madam Nathalie Joncas]

The Canadian system has three pillars: the Old Age Security pension, the QPP, the CPP and corporate plans. This isn't a bad system.

Currently, the weak pillar is corporate plans, which do not cover 40%—and less than 40%—of the labour force. We could always increase the second pillar, the Canada Pension Plan or Quebec Pension Plan, as some people have suggested, but that would cause other problems. France has a large plan and it has had these problems at certain times. A large universal plan raises other kinds of problems.

Fundamentally, if we consider the OECD countries, having three different pillars is really a good retirement system. It's currently the third pillar of our system that poses a problem.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I agree.

Our committee has heard a number of witnesses, some of whom want us to increase contributions to the Canada Pension Plan or the Quebec Pension Plan. I agree with that, but people in the middle class who earn between $30,000 or $50,000 can't afford to have their premiums increased. They're the ones who aren't contributing to their private pension plan if they're not forced to do so. What's the solution in their case?

[Claudette Carbonneau]

We are advocating greater flexibility, ensuring that everyone can access a suitable pension plan, but that we can organize, negotiate those plans based on the specific characteristics of the labour force in various classes of businesses. We think that's a more flexible solution that enables us to build adequately.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Ms. Thompson, in your case, if we decide to recommend that the QPP or the CPP be increased so that people secure an increase in those revenues in their retirement years, would your organization prefer to perhaps ask your employer to reduce premiums so that they would be less exposed? They would be paying a payroll deduction every week, or whenever the paycheques are—once a month or twice a month—whatever that would be. So there would be no question, at the end of x number of years, that there would be a pension liability that the company could never afford to catch up on.

[Katherine Thompson]

If the premium the members would be paying would maintain the same contribution and their risk would be reduced, I think they would be supportive of that.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Okay.

[The Chair, Conservative, James Rajotte]

One more question.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Mr. Andersen or Mr. Braniff, we're looking at a lot of these pension plans that hire experts, and they're the ones who are supposed to be able to manage our money. I think I could do a good job when times are good, but they're supposed to protect us, I think, during the hard times, because they're supposed to prevent plans from being subject to a 15% to 30%—

[The Chair, Conservative, James Rajotte]

Question, please.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

—loss of return. So how do we avoid this? Do we really need experts?

[The Chair, Conservative, James Rajotte]

Very briefly, Mr. Braniff.

[Dan Braniff]

Yes. I really come from the corporate side. You might not have recognized it, but I can tell you that it's our culture. We have created this monster. I don't blame these particular people. It's the way we've structured their rewards.

I simply say find a system that rewards them in accordance with what the pensioner has to be exposed to and is exposed to. In other words, let him be a part of that pension plan that he's tinkering with so that his compensation eventually is going to be hit by the same particular crisis that the rest of us get hit with.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Kramp now, please.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Mr. Chair.

Maybe just before I start, I will acknowledge my colleague across the floor sitting in a wheelchair in recognition of the plight of the disabled. I think it's a good move. Thank you.

Might I suggest just a couple of things to our panel? Thank you very much for coming in. I might perhaps preface my comment by saying it is sad in one way, but hindsight is 20/20 for almost everybody around the table here at some point. You know, five, ten, twelve, maybe even three or four years ago, when things were rock and rolling in the economy, we didn't seem to have this same concern, and now all of a sudden we have that concern.

Do we need a wholesale radical reaction to the circumstance right now? Or do we recognize that we are cyclical in nature as economies and we have to find a way to transition through this difficult period?

Mr. Braniff, what are your thoughts? Is this time to reinvent the wheel, or is it time to fix the wheel?

[Dan Braniff]

First of all, the Common Front has been focused on this since 2003. We saw this coming. We had no idea of the impact, of course.

The media and perhaps some of us are calling this a tsunami or some kind of pandemic. This is not an act of God. These are man-made circumstances, and there are ways of correcting them. I think we have the brain power to position Canada as a leader in this area—and it's already a leader in many respects, with CPP, for instance.

For me, panic is not an option. I think we have everybody's attention, and wouldn't it be the appropriate time to create a summit? Because as you keep pointing out, you only have 7% of the pension regulation in this room. The provinces are missing, and they're coming together with some pretty good ideas. B.C. is going to go alone and you might not like what it is going to do. Wouldn't it be a shame that the federal government would have to reinvent everything again?

I side with you. Let's be very calm. Let's be deliberate. Let's make one step at a time. Let's not think that we can solve it all in one swoop, but let's make sure we made the right start and we put in place the kinds of systematic reviews we need as circumstances change. I think we've learned from this crisis that we can be surprised, and sometimes we can be surprised on the delightful side.

I have one characteristic that is probably unique in this room: I've been on pension for 25 years, and it's very nice. You should try it.

[Voices]

Oh, oh!

[Dan Braniff]

I don't know if I've answered your question.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you for that.

Mr. Georgetti, you and previous witnesses and people at the table here have raised the issue of a potential expansion of the CPP. I'm looking for the balance.

I think most people in this country would agree we don't need a cradle-to-grave philosophy with absolutely no incentive and no way to be productive and move ahead in a competitive global economy. However, we do have to find a way to be compassionate and care for our society when we have circumstances that are beyond people's control.

Quite frankly, and certainly don't take any offence, I find your argument well representative of the people you represent. I think it's a fair position, but I think we also have to balance that with the rest of society. I think this is the policy debate that is definitely worth having, but I think we have to be honest and consider the cost, the benefits, the rewards, and the gains for all sides.

Have you considered the immediate cost to the economy of addressing that, for competitiveness, etc.?

[The Chair, Conservative, James Rajotte]

Just briefly, Mr. Georgetti.