Evidence of meeting #22 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was retirement.
A recording is available from Parliament.
Canada Research Chair in Public Policy, Johnson-Shoyama Graduate School of Public Policy, University of Saskatchewan, As an Individual
I agree with this answer. We are moving in a different direction. That's probably not where we should focus much of our attention right now.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
I want to give Mr. Paillé the 30 seconds I have left so that he can ask more questions about QPP.
Bloc
Daniel Paillé Bloc Hochelaga, QC
Yes, I'm very pleased that my lobbying worked well. My question is for the person from the OECD. It's said that businesses would have financing difficulties if pension plan obligations became a priority claim on the same level as salaries.
I think that's only an urban rumour because investors would include those risks in their models. Do you have any analyses showing that managing investments ultimately means managing the risks and that that wouldn't prevent healthy corporations from financing themselves in the market?
Conservative
Head of Pension Policy Analysis, Social Policy Division, Organisation for Economic Co-Operation and Development, As an Individual
The regulation of defined benefit plans has improved significantly over the last 20 or 30 years. In the past they were scarcely regulated at all. In most jurisdictions there is a detailed requirement that those assets be held separate from those of the company as a whole, and they should, in some sense, be sufficient to meet their liability. Part of the problem was that during the 1980s and 1990s, the actuarial evaluation, as Mr. Ambachtsheer was saying, based on the historical high investment return, suggested that these schemes were in substantial surplus. At that point the regulators were happy that schemes were in surplus, but the people who were unhappy were the tax collectors. They said that the companies were overfunding these pension schemes and that they were like a tax-free corporate savings plan. The revenue authorities came out on the other side and said, no, we won't let you overfund your pension by more than 5%. We had companies trying to fit into a very narrow window between not being less than 5% underfunded and not being more than 5% overfunded. When we had the payoff in the markets, it was a very hard corridor in which to fit.
Bloc
Daniel Paillé Bloc Hochelaga, QC
We could ask him to say hello to the parliamentary secretary and the two finance critics who are in Paris while the government tables a securities bill.
Head of Pension Policy Analysis, Social Policy Division, Organisation for Economic Co-Operation and Development, As an Individual
I will be meeting him tomorrow.
Conservative
The Chair Conservative James Rajotte
You can say hi to him for us.
Mr. Weston, go ahead, please, for five minutes.
Conservative
John Weston Conservative West Vancouver—Sunshine Coast—Sea to Sky Country, BC
Thank you very much, Mr. Chairman.
Thanks to our guests. Ms. Borenstein's testimony today was very moving. Everyone spoke clearly.
I have three questions for you, Mr. Béland, and also for you, Mr. Ambachtsheer. In your view, who are the most vulnerable people in Canada with respect to pension schemes today and 20 years from now, if current trends continue?
Second, in your opinion, who are the most unjustly treated people, today and 20 years from now, if matters continue in this way?
How many people are affected in the two groups I just named?
Canada Research Chair in Public Policy, Johnson-Shoyama Graduate School of Public Policy, University of Saskatchewan, As an Individual
I didn't understand the last question, but I'll answer the first two.
Who are the most vulnerable individuals? Obviously, those who have no private coverage, who have no private pension, who are unable to save. That's a large category. There is the issue of gender: single women are also more vulnerable in old age than married women. There are these categories; there are quite clear figures on the subject. I believe that—we talked about this a lot today—those who don't have access to a private pension or to private savings are vulnerable and will be even more vulnerable in future. I think that's quite clear.
Which people are treated most unjustly? First you have to define what you mean by “justice”; it's in fact a loaded question; you would have to explain to me a little what you mean by “justice”. Nevertheless, it's definitely those whose employers offer no protection, who have to make do, or those who are unable to save. However, I'm not sure about the question, of what you mean. What do you mean by “justice”?
As for the last question, I didn't understand it; so I wouldn't be able to answer it.
Conservative
John Weston Conservative West Vancouver—Sunshine Coast—Sea to Sky Country, BC
In your view, how many people are affected by this vulnerability or this lack of justice?
Canada Research Chair in Public Policy, Johnson-Shoyama Graduate School of Public Policy, University of Saskatchewan, As an Individual
We talked about poverty rates, about income replacement problems. The question is whether that will increase in future or whether the situation will remain the same. I think the risk is that the vulnerability of certain categories will increase as a result of changes. There's a decline in private coverage; there are fewer and fewer people whose employers contribute to the plan; so that's a problem. In addition, there is a switch away from fixed-benefit plans to fixed-premium plans, which could also ultimately reduce the financial security of millions of people.
There again, I don't have a crystal ball to see what the economic and fiscal situation will be. We didn't predict the 2008 crisis. There is a lot of uncertainty, but I think the shift away from a fixed-benefit system will increase the uncertainty, the insecurity in future financial crises. The next time should be even worse than what we saw in 2008, if we continue down this path and if we don't increase the protection offered by the Canada Pension Plan and the Quebec Pension Plan. I think there's a vulnerability that will only increase in financial terms, which could therefore also cause injustices.
Conservative
Conservative
Director, Rotman International Centre for Pension Management, As an Individual
Yes. I think the way to answer the question is, first of all, to say that we know for certain now that the post-war period—the 1950s, 1960s, 1970s, 1980s, and 1990s—generally was a period of relatively high economic growth. There was some inflation, but it was eventually controlled. It was generally a good economic period to live in and to be retired in. There's a whole question now as to the next and future decades with the changing demographics and the lower growth expectations. I think all of us are in for a riskier time. Then the question is, within that reality, which groups are most vulnerable?
I think there are two ways of answering the question. One is in terms of the whole poverty line question that we've already had. Are more people going to fall below that line, and what do we do about that? But I think there's another sense that is very important. Again, the Nortel case is a classic example. I think we're going to end up with a significant number of workers who are doing relatively well and who, for whatever reason, believe they're going to have a good retirement at an early age but are wrong. There's going to be some set of circumstances where either their company fails or they don't get on the savings track, and they're going to have a significantly lower standard of living than they thought during their lifetime.
Conservative
The Chair Conservative James Rajotte
Thank you very much.
We just have a very brief question from Mr. Marston, a final question or final round.
NDP
Wayne Marston NDP Hamilton East—Stoney Creek, ON
It's going to be very quick.
First of all, to our Liberal friends who were talking about having a superpriority, Bill C-501 is at committee, and we're looking at having a priority, not a superpriority. We can work together on that, I'm sure.
To my friends from the business community who are here, I really appreciate your engagement today.
The CPP offers a safe, well-managed vehicle. It's a defined benefit plan, and as we heard, many of those are just disappearing. So it's a very real outcome that we can work towards.
I'm not going to ask a question because there's not enough time, Mr. Chair. I appreciate it.
Conservative
The Chair Conservative James Rajotte
Thank you. I appreciate that.
I just want to thank all of our witnesses. I want to especially thank our witnesses from Toronto and Paris for checking in, especially at such a late time. We appreciate the very substantive discussion. If you have anything further to say, please submit it to the clerk. We will ensure that all committee members get it. We may in fact ask you back for further discussion. Thank you to those of you who are with us here in Ottawa.
The meeting is adjourned.