Thank you.
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.
5:05 p.m.
Conservative
April 22nd, 2010 / 5:05 p.m.
Conservative
Bernard Généreux Conservative Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC
Thank you, Mr. Chairman. I would like to thank all our witnesses for being here.
First of all, Mr. Cadieux, you said earlier that it would be a good idea to convene a national summit to look at all the issues surrounding pension plans. What is strange is that we are being accused of all sorts of things. Right now, we are being accused of holding useless consultations, because apparently some people are already prepared to make decisions. But based on what I have heard from witnesses so far, this study does not appear to me to be useless. So, again, I would like to thank you for being here.
Ms. Nielson, what exactly are your reservations regarding the possibility of doubling plan contributions? I want to be sure I understand your concerns regarding a twofold increase in CPP contributions.
5:05 p.m.
Professor and Chair in Insurance and Risk Management, Haskayne School of Business, University of Calgary, As an Individual
If you're going to do this on a fully funded basis, that means we start collecting the taxes today. The people who will have actually doubled their replacement ratio will see those benefit cheques in about 40 years. So a lot of it is a concern about paying for 40 years before anybody starts to see a very big benefit. It has political challenges as well, as I suspect those of you on the other side of this table know better than I do.
5:05 p.m.
Conservative
Bernard Généreux Conservative Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC
Do you think Mr. Cadieux's proposal to bring in the increase over a long period of time could be a solution? Would that answer your concerns? Obviously, if we did this overnight, a lot of people would clearly be unhappy about being forced to do this. However, if it were done gradually over a long period of time, would you find that acceptable?
5:05 p.m.
Professor and Chair in Insurance and Risk Management, Haskayne School of Business, University of Calgary, As an Individual
It could be. There's a very small window of people with insufficient retirement savings--below a 50% replacement ratio benchmark. Not everybody who has no pension plan has inadequate retirement income. It's a relatively small group and tends to be in the lower-middle to middle class. It would be less disruptive and perhaps just as successful to target that group--which might be those making between $47,000 and $60,000, for example--if we can solve that problem.
I don't know how disruptive it would be to the availability of other pension coverage. If you start doubling the taxes right away, I think you'd see more employers killing the pension plans they still have and getting out of the liability, the extra administration, and the cost.
5:10 p.m.
Conservative
Bernard Généreux Conservative Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC
Mr. Cadieux, as part of these Committee hearings, we heard from Mr. Lee, who is a professor at the University of Ottawa. In his presentation, which was eloquent, he said that, compared to other OECD countries, we are not necessarily facing a crisis with respect to pensions and pension-related issues. According to him, we have just come through a financial crisis, which had an impact on pensions. Considering what you said, I would like to know whether you think that is a realistic statement.
As I was listening to you earlier, I was thinking about my own situation as an entrepreneur. I have a business that employs 20 people. But we do not have a pension plan. As I listened to your proposal, I began wondering who was going to pay for it and how I could remain competitive as an employer and young entrepreneur. If I had to add that to my expenses, I do not know how I would manage. Small firms also have to be competitive.
How would these measures be implemented?
5:10 p.m.
National President, Canadian Office and Professional Employees Union
We need to make a distinction. First of all, the eminent professor who appeared before you was probably talking about private pension plans. The insolvency problems associated with these plans since 2001 are due, in large part, to two successive financial crises. Obviously, when interest rates begin to rise and people stop taking premium holidays, it will be possible to stabilize defined benefit pension plans.
However, what you need to know, as members of Parliament, is that six out of every ten Canadians do not have a pension plan. For a small business, it is far less costly to contribute 3% more, over seven years, to a public plan than it is to contribute to a defined benefit plan. I know of few defined benefit plans in Canada where the contribution is less than 13, 14, 15, 16, 17, 18% and, nowadays, it is as much as 20% or 21%. Rather than contributing to a defined benefit plan, a small business would really be better off contributing to a public plan, because the risk is distributed over the entire population. I think that everyone would benefit from that. You were talking to Ms. Nielson earlier. We are clearly not suggesting that the increase happen all at once. It has to be capitalized and spread over a number of years, as was done when reforms were introduced in 1991.
5:10 p.m.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
Thank you, Mr. Chair.
Ms. Nielson, when you were talking before about plans where people were 90% covered as a replacement ratio, Statistics Canada says there are close to 300,000 Canadians, mostly on old age security and GIS, who are living below the poverty line on about $1,160 a month. As just indicated by Mr. Cadieux, 63% have no pensions and no savings whatsoever at this time.
I can understand Mr. Généreux's concerns about new employer taxes, but the proposition of doubling CPP to the employers' side is 2.5%. Coming back to the replacement ratio, were the people taken into account who were on minimum wage, or the 300,000 I referred to who were probably stay-at-home mothers, because most of them were women and never got into CPP? So you have a situation where 63% of the people have nothing and very low income, and they are facing a wall when retirement comes. You have the other ones who are already living below the poverty line. Are they in the mix of what you studied?
5:10 p.m.
Professor and Chair in Insurance and Risk Management, Haskayne School of Business, University of Calgary, As an Individual
Yes. But they were not my studies that I cited.
There's no doubt that 95% of not very much is still not very much.
5:10 p.m.
Professor and Chair in Insurance and Risk Management, Haskayne School of Business, University of Calgary, As an Individual
The way to deal with that is not to talk about replacement ratios. If it needs to be raised, then perhaps look at the OAS and GIS and say, “How little is too little?“ It's really a separate question from the pension issue.
5:15 p.m.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
I agree, and that was the point I was trying to make. We talked earlier in this particular meeting about something needing to be done for OAS and GIS right now, for those people who are in poverty now, and then we're looking at the mid-term in the evolution of a plan.
Mr. Cadieux talked about seven years doubling the CPP before you start to get some return, 40 years before it's fully funded. That was at the 5% for each.
If you think in terms of a national process—CPP—it takes you away from the encumberment of all those different provincial laws as well if we're able to make that adjustment there. Would that not make sense to the private employers who are struggling through the maze that they have to go through, especially if they happen to have their business over two or three provinces?
You have yourself a national plan to begin with. We're seeing that as a foundation. We're not seeing that as a resolution of all the problems. God bless them; if somebody has a private defined benefit plan, more power to them. If somebody is an entrepreneur and can make better and invest, that's wonderful too. That's not meant to be an impediment to future investment; it's to build that foundation going forward to ensure that we capture the bottom end who are getting lost along the way now.
So I'm pleased to hear that you did take those people into account, but again, as you said yourself, 90% of minimum wage is still 90% of very little.
On the CCAA, Mr. Lockwood, there is Bill C-501, which Mr. Rafferty has put in for our party, which was originally my bill. Are you aware that there was an Australian study in 2005 that said that having preferred status for pensions had very little impact on the investment climate?
You're aware of that.
5:15 p.m.
NDP
5:15 p.m.
Professor and Chair in Insurance and Risk Management, Haskayne School of Business, University of Calgary, As an Individual
No, I don't believe I am.
5:15 p.m.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
It was tabled in 2005, so I thought I would put that on the table.
Mr. Chair, I think I've covered everything I need to.
5:15 p.m.
Conservative
The Chair Conservative James Rajotte
Thank you, Mr. Marston.
We have time for three quick rounds. We're going to Mr. McKay to start it off. If we could do three-minute rounds, it would be very helpful.
5:15 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Thank you, Mr. Chair.
Mr. Wacheski, just to finish up the conversation with respect to priority and whether you're preferred, ahead of preferred, or behind preferred, I'm looking at a definition of what constitutes preferred here. For our purposes, I think, really, it's the public purse, whether you rank ahead of claims by municipalities or provinces, and so on.
5:15 p.m.
As an Individual
We're just asking to be above the unsecured, first in the list of the unsecured, because the rest of the unsecured have all the leverage; we have none.
5:15 p.m.
As an Individual
I'd really like to understand the arguments against changing this. I haven't heard any, so I would like to hear them. If anyone can offer them, please do.
5:15 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
I'd be interested myself.
Finally, Professor Nielson, with respect to number eight, where you talk about revisiting government-imposed restrictions on the purchase and sale of annuities, I'm not quite sure I understand that problem.
5:15 p.m.
Professor and Chair in Insurance and Risk Management, Haskayne School of Business, University of Calgary, As an Individual
There are some requirements. I may have my federal and provincial requirements a little muddled in this one, but if a plan is winding up even partially, it must convert all the assets from the pension into an annuity. Given that the annuity market seems to be very constrained and not terribly efficient, I'm not sure that's the best solution to the problem. There may be a more creative way to get security for the people being turfed out of, say, a disinvestment, a de-acquisition kind of thing.