Who's doing the constraining?
Evidence of meeting #11 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was benefits.
A recording is available from Parliament.
Evidence of meeting #11 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was benefits.
A recording is available from Parliament.
5:15 p.m.
Professor and Chair in Insurance and Risk Management, Haskayne School of Business, University of Calgary, As an Individual
In the market there are a number of factors. One seems to be that annuities are very capital-intensive for the financial institution. Another is that, among people buying annuities, there tends to be a huge amount of adverse selection: only healthy people with grandmothers who live to 108 are the ones who buy them. So it's a combination. In fact, in some ways it's evidence that the market is working, but it's not working perhaps as well as....
Given that it does seem to have relatively high prices compared to the risk that's being transferred, there are regulatory capital considerations that I think could be reviewed, as well as perhaps saying maybe the insurance company can manage this on behalf of the pension fund--a way to really handle the orphan pension funds. The CPPIB is one option, but there may be private sector alternatives as well.
5:20 p.m.
Conservative
5:20 p.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
Thank you, Mr. Chairman.
Mr. Cadieux, you referred in your presentation to a 15% increase in the Guaranteed Income Supplement and a doubling of Canada Pension Plan benefits. These are two separate measures. The Guaranteed Income Supplement is a social measure, whereas the Canada Pension Plan represents workers' accumulated savings.
You seem to know a lot about pensions. Based on your experience, could a doubling of Canada Pension Plan benefits—in other words, savings—result in less need or demand for the Guaranteed Income Supplement? Would it have an impact?
As you mentioned, income from GIS benefits is currently below the low income cutoff. For quite a few years now, the government has expressed its opposition to the idea of increasing it. By doubling workers' forced savings, would we solve part of the problem?
5:20 p.m.
National President, Canadian Office and Professional Employees Union
Yes, absolutely, in both the medium and long terms.
This is something that is needed because, at the present time, people are no longer contributing to the plan as they are receiving benefits. Let us not forget that, according to the most recent statistics, one third of seniors have an income less than $15,000 a year. One has an effect on the other. If we double CPP benefits, people will have less need of the Guaranteed Income Supplement. It is funded through workers' and employers' contributions.
I have been negotiating collective agreements for 30 years now. When the employer makes a contribution, that contribution is negotiated. It is differed salary and it is part of the payroll.
5:20 p.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
I see.
When you were discussing your proposal to double pension plan benefits, you also talked about portability. It seems to me that is automatic with a public plan of this type. What exactly did you mean?
5:20 p.m.
National President, Canadian Office and Professional Employees Union
I see this as another significant advantage for employers and for the different provinces. Transfers are currently not allowed under defined benefit plans. Even when they are, the process is very difficult and the actuarial costs are extremely high. As a consequence, there are very few.
When someone is benefiting from a public plan, whatever employer he may work for, his years of work will continue to accumulate throughout his career. These days, the world of work is not what it was 40 years ago. People just do not spend their entire career with a single employer. They may work for seven different employers, and it may even be more than that in the coming years. What we are talking about is a plan where people are not penalized when they stop working, whatever number of employers they have worked for in their lifetime and whatever province they may work in. For example, it could be a female worker who has children.
5:20 p.m.
Conservative
5:20 p.m.
Conservative
Ted Menzies Conservative Macleod, AB
Thank you, Chair, and thank you to all of our witnesses. It has indeed been an interesting panel.
I would just like a point of clarification, Mr. Cadieux. It may have been an error in translation, but I hope you didn't say 40% of seniors were in poverty. Did you say 4%? Because what came through in my ear was 40%, and I think you know that's not accurate.
5:20 p.m.
National President, Canadian Office and Professional Employees Union
One third—33%—of seniors have an annual income of less that $15,000.
5:20 p.m.
Conservative
Ted Menzies Conservative Macleod, AB
OECD qualifies their seniors' poverty levels, and those are accepted around the world. We're one of the lowest. We have 6%. I just wanted to clarify that. I think I'm going to go with the OECD number.
Ms. Nielson, you raised some very interesting and technical points. Mr. McKay asked the question I was going to ask about annuities. He is accurate; it's not a fluid enough market. I talked to some of the large pension fund holders, and if they did wind up, there wouldn't be enough annuities in Canada to deal with that, so they're basically trapped.
5:25 p.m.
Professor and Chair in Insurance and Risk Management, Haskayne School of Business, University of Calgary, As an Individual
That's one of the reasons for the technical suggestion that might increase some of the economic efficiency and functioning in that marketplace.
5:25 p.m.
Conservative
Ted Menzies Conservative Macleod, AB
You commented that there were no more defined benefit plans being set up. I'm not going to mention any names, but one of our largest employers in Canada continues to set up defined benefit plans to entice employees to come and work for them and keep working for them.
5:25 p.m.
Professor and Chair in Insurance and Risk Management, Haskayne School of Business, University of Calgary, As an Individual
And there was a major Calgary company that switched from defined contributions back to defined benefits. So it's the exception rather than the rule, but it's still out there.
5:25 p.m.
Conservative
5:25 p.m.
Professor and Chair in Insurance and Risk Management, Haskayne School of Business, University of Calgary, As an Individual
I was speaking in terms of the aggregate statistics.
5:25 p.m.
Conservative
Ted Menzies Conservative Macleod, AB
There's an actuary in Calgary who is actually setting up defined benefit plans for small businesses and continuing to do so on a daily basis. So these plans are out there, but they are challenging.
I was happy to hear two of our witnesses today suggest that it is good that we're looking seriously at this and consulting with our partners across the field, from the provinces to the territories, because the opposition too quickly finds a solution in search of a problem before we've actually defined it.
Do I have a minute left?
5:25 p.m.
Conservative
Ted Menzies Conservative Macleod, AB
Mr. Cadieux, you talked about taking off the funding ceiling. I'm not sure what your point was there.
5:25 p.m.
National President, Canadian Office and Professional Employees Union
No, I did not talk about removing it. I talked about increasing it to $62,000. If memory serves me, it is currently $46,300. So, we are proposing to increase it. If it is spread over the entire period, there will not necessarily be any additional costs--
5:25 p.m.
National President, Canadian Office and Professional Employees Union
-- because it is funded by plan members.
5:25 p.m.
Conservative
The Chair Conservative James Rajotte
Thank you.
I'm sorry, but we are near the end of our time.
I do want to thank all of you for being here with us this afternoon and for your presentations. If there is anything further you wish the committee to have, please submit it to the clerk.
I believe, Ms. Nielson, that Mr. Wallace did ask for further clarification on one of your points.
We want to thank you for being with us here today and responding to our questions.
The meeting is adjourned.