Finance Committee on May 7th, 2009

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

Then I'll come back to Ms. Carbonneau.

Pension plans are all well and good. We have a public plan in Quebec, administered by the Caisse de dépôt et placement du Québec, the operation of which, we realize, is not as safe as that. You always have to exercise oversight.

Do you think there are any changes to be made to the management of pension plans with regard to the system of bonuses offered to those who negotiate the investments, who make big profits, but who ultimately don't make the right investments. Do you think a reform should be introduced in this area?

[Claudette Carbonneau]

You're obviously citing the recent example of the Caisse de dépôt et placement du Québec. I'm definitely not going to be the one to tell you I'm pleased with last year's results of the Caisse de dépôt et placement du Québec.

I also think you have to know how to put things in perspective. Since that institution was put in place, its average return has nevertheless been 8.3%. In that sense, this is not a disaster. Having said that, I think some reforms must be carried out by that institution's board of directors. I can tell you that some things are starting to be deployed in terms of internal reorganization at that institution, in particular a strengthening of risk management mechanisms.

You raised the entire issue of executive compensation policies, and that's definitely a factor that must be considered. We need to find balanced arrangements that also take risk protection into account in compensation policies, in particular.

[The Chair, Conservative, James Rajotte]

Thank you very much.

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

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair.

Thank you to the ladies and gentlemen who are here before us this morning. We realize how serious an issue it is we're facing, and we certainly appreciate those who come with suggestions and recommendations a little more than those who come with absolute demands. So thank you for your suggestions and recommendations.

Mr. Braniff, just to be clear here, you had suggested in your comments that perhaps we were a little late in coming to the conclusion that pensions were in trouble. I think Canada did get out ahead of some of the other countries in recognizing this, and I'm sure you understand, given the people you deal with on a day-to-day basis, how serious and how complex this is. That is evidenced when we get into the actuarial speak, as Mr. McKay refers to it. It is difficult to understand.

You referred to the 10% surplus. We've got into those discussions in many different communities and forums I have participated in. Do we need to expand that 10%? Many companies have told me that if they had had the opportunity to contribute more in the good times, they would have, and we perhaps would not have been in this situation. Are you hearing that? Do you think that's a possible solution?

[Dan Braniff]

It certainly is an impediment to have that ceiling, and it would be my contention that there shouldn't be a ceiling. There are other ways of doing this, one of which would be when there is a surplus to have it amortized as insolvency is amortized. In other words, have a plan when it goes up, and have a plan for it to go down. If you have an insolvency problem, you do the same thing. You bring it back to solvency.

Should it be specific? Do you need five years or seven years or whatever? I'm not sure of that. I'd leave that to the experts. But I think we've been fussing with this. It seems to be a limitation. It is a consequence now of some of the problems we have, because that alnd contribution holidays have put many of these sponsors into the predicament they're in right now. Some of them, I suspect, use this as an excuse. I've heard from actuaries, not this one, who have said they can produce just about any number you want, that the limit doesn't mean much, but then maybe we should look into that proposition.

I'm suggesting there shouldn't be an impediment, because what we're doing is penalizing our own system. So I agree with you. And by the way, I do agree that your consultation has been very productive. It has got the attention of the media. And I can tell you that despite some of the corporate witnesses you've had, pensioners are much better informed today because we're having these discussions, and I think that's imperative.

I'd like to thank Ms. Thompson from Air Canada. We agree with her proposition that this blanket ruling.... This is one of the problems when you're not prepared. I know the intention was to give relief to the pension plan, but this temporary measure was a sledgehammer when we needed a scalpel. Certainly Air Canada needed some special consideration, but when you look at the super group of seven, some of them--and one of them I'm very familiar with--at the same time they put in their annual reports that they were going to adopt a ten-year plan with a letter of credit, announced an increase in dividends. They showed the largest liquidity they ever had of $3 billion. They bought back $1 billion worth of shares and they made a major acquisition of a retail chain across the country. And I ask you, wouldn't that money have been better placed in the pension fund?

[Ted Menzies, Conservative, Macleod, AB]

I guess that just exemplifies the fact that we're not looking at a one-size-fits-all scenario, so I appreciate your comments.

Do I have a couple of minutes left, Chair?

[The Chair, Conservative, James Rajotte]

You have two and a half minutes.

[Ted Menzies, Conservative, Macleod, AB]

Mr. Andersen, you referred to the Canada Pension Plan, and I know we're trying not to deal with that specifically, but every witness who has come here has talked about expanding. I'm sure you're aware it's jointly managed, provincially and federally, and a triennial review culminates this spring. The finance ministers from the provinces and the territories will be looking at that review this spring. Have you spoken to provinces to share your concerns with them, the concerns you shared with us this morning?

[Erik Andersen]

Only tangentially, to the B.C. premier, but nothing beyond that.

[Ted Menzies, Conservative, Macleod, AB]

Well, I would encourage that, because it's joint jurisdiction. They're all dealing with the review right now.

[Erik Andersen]

Well, I'm working on the premise that the Minister of Finance takes the leadership in this particular issue, so I refine my representations to his office.

[Ted Menzies, Conservative, Macleod, AB]

Okay. Well, I'd encourage you to consult with the premiers or the particular finance ministers.

Finally, Mr. Georgetti, during our consultations we heard from many of your member retirees that when they retired, they had no clue as to what their pension was or wasn't going to provide to them in their retirement, and I suggested on several occasions that perhaps that's a role the union could play. We also heard from concerns from retirees that the unions were only representing their active employees right now, and not the retirees.

I am more focused on what you are proactively doing for your employees who will retire in the next year or the next ten years. What are you doing proactively in terms of advising them on how to prepare for their retirement? Is that a role that the unions could, or should, be playing?

[Ken Georgetti]

Well, it is indeed a role that we do play.

I would be surprised.... Any pensioner, whether a prospective pensioner or an active member, who belongs to a union and wants information relative to the pension plan can get it either through the union or through the trustees--

[Ted Menzies, Conservative, Macleod, AB]

I mean proactively. Person after person came to the microphone and said, “I did not understand what my pension was the day that I retired”.

[Ken Georgetti]

I can't answer the specifics of that. As I said, all our major affiliates are very proactive on pension consultation and pension education. In fact, the Canadian Labour Congress set up an association, called the Shareholder Association for Research and Education, that publishes information on not just their specific pension plans, but on the broader issues of pensions.

I also understand that the issue of pension financing, as I'm sure you've heard through your hearings and in the obfuscation from employers, etc., does become very confusing on smoothing and actuarial evaluations and net present values, etc., and the system is very complex, but let me tell you something: most Canadians know what their Canada pension is. They get a statement every year that tells them what their benefit is going to be. Again, to reinforce, I think that's what we should be pursuing, but the complexity of pension financing, Mr. Menzies, as you heard yourself, needs to be addressed and simplified. People need to have it.

However, we are active; in fact, I have a full-time staff at the congress, and others, just to deal with the issue of pension.

[The Chair, Conservative, James Rajotte]

Right. Thank you.

We'll go to Monsieur Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chairman.

First I want to thank all the people who made presentations today. In my opinion, that series of presentations has made the greatest contribution to the advancement of our work to date. They were full of nuances, and we see that the subject is starting to be addressed in detail. The intergenerational fairness aspects raised by Ms. Carbonneau must be part of our thinking.

I would ask Mr. Georgetti to talk more about the notion of insurance, which I think is a basic element. Some countries, in particular Japan, Sweden, Switzerland and the United States, are tending toward better insurance of these systems, whereas it's the Netherlands that was mentioned. These countries have managed to avoid this problem through a much more elaborate regulatory structure.

I would like to ask Mr. Georgetti to talk more about his notion of insurance and to say how it could help people reach retirement now. Then I would like to discuss that notion of intergenerational fairness.

[Ken Georgetti]

I'm going to have Mr. Harden answer that question.

[Joel Harden, Senior Researcher, Canadian Labour Congress]

Thank you, Mr. Mulcair.

On page 24 of the brief we've circulated, we have a table from the OECD that summarizes the pension insurance arrangements in various countries.

Canada has only one jurisdiction, Ontario, with a very minimal pension insurance system. That province, Ontario, just had a commission that recommended that the insurance program be increased and that the monthly benefit level be increased to $2,500 a month.

Our view is this: for all the important things in their lives, workers are required to have mandatory insurance. It is required for their houses and for their cars, and even to work. An employer needs to make WCB and EI contributions, even though half the time workers can't get it, but that's another issue.

We think that not having an insurance program for people's pensions, which are probably the biggest assets they have after their houses, is a major flaw in the public policy framework in Canada, so we're proposing, as we do in the brief, an insurance program that would work in the same way that the Canada Deposit Insurance Corporation works for credit union deposits and bank deposits. In those cases, if your financial institution declares bankruptcy, there's a program there to protect you.

We think there should be a similar program for defined benefit pensions. We think the program should be robust and should prevent employer fraud and fraudulent use. Several other countries have these programs. If we had this program, we wouldn't have the level of fear in Quebec and in English Canada that we have right now.

[Thomas Mulcair, NDP, Outremont, QC]

I want to move now to the very important question of intergenerational equity raised by Madame Carbonneau, and she did it in very clear terms. I can allow myself perhaps to try to summarize in the following way. As we try to make sure that people who are now retired don't live below the poverty line, it's important that we not shovel that additional responsibility onto the shoulders of young people working today. I think that might be a fair way of summarizing Mrs. Carbonneau's proposition.

So the question is, how do we do it? I mean, we're living this perfect storm right now of bankruptcies, market meltdown—which has reduced the values of RRSPs—and the baby boom coming to retirement. So how do we do that at the same time that we're shovelling an $80 billion deficit onto the shoulders of future generations with very little to see in return for it right now? How do we make sure that we take care of the people who are already there without adding that burden to the younger people who are working today?

Mr. Georgetti, I'll start with you, and then I'll get back to Madame Carbonneau.

[Ken Georgetti]

I think you have to do it in three or four ways, as Joel said. First of all, with the plans that exist now, we have to establish an insurance policy on those so that the people who have contributed to that plan can continue to move forward.

But I think you heard from the former actuary of the CPP that this would be phased in terms of the contributions, as people working start contributing, and employers contribute more into their Canada Pension Plan, and as you get older and make more contributions, your pension asset goes up. It wouldn't be something we think you would have to start with immediately. It would have to come over a generation to start the funds and roll in a national pension scheme that works for all people.

[Thomas Mulcair, NDP, Outremont, QC]

Ms. Carbonneau.

[Claudette Carbonneau]

I think I very clearly stated that we are more in favour of a legislative approach such as that of the Netherlands. The mandatory establishment of supplementary pension plans at all businesses can be an extremely appropriate arrangement because it makes it possible, among other things, to take into account the situations of various classes of workers in a much more detailed way. Allow me to explain. I know that the public plan for low wage earners manages to cover a good portion of their previous employment revenue, which is less the case as you move away from these minimum thresholds.

So I think we can build in a much finer way using, for example, sectoral and inter-corporate approaches. Currently, for many workers, the public plans cover such a small percentage of their previous incomes that, if we considered enhancing the public system, we would have to have an extremely significant quality seal which would necessarily cause a burden to be carried over to the generation now entering the labour market.

Particularly at a time of demographic imbalance, this is something that must concern us socially and make us look for other solutions. It is true that we are having trouble negotiating pension plans, and that's why we think we need to be supported by an act in order to require that such plans be required to be put in place in all businesses. Once that requirement is met, that allows much more leeway to find types of protection that are more suited to the many and various situations of the various classes of workers.

[Thomas Mulcair, NDP, Outremont, QC]

Isn't part of the problem, Mr. Georgetti, the fact that we already started bleeding out hundreds of thousands of well-paying manufacturing jobs before the current crisis? Those jobs not only paid well and were enough to support a family, but they often came with pensions. They're being displaced and replaced by jobs in the service sector that don't pay nearly as well and that systematically don't have pensions. It's a little bit what Madame Carbonneau was referring to. In the collective bargaining sphere, where you have an employer-employee relationship that's controlled, you have a better chance of negotiating, but most of those people don't even have unions.

[The Chair, Conservative, James Rajotte]

Briefly, Mr. Georgetti.