Finance Committee on March 23rd, 2010

[John McCallum, Liberal, Markham—Unionville, ON]

Well, that's exactly what a life cycle fund is. The investment mix is a function of your age, correct?

[Terry Campbell]

If the individual is comfortable with that particular fund and they have the choice to go into it, that is great. Our concern--and again, we haven't seen the details--is that if a new plan is put in place where it's automatic enrolment and because of inertia people don't go out of it, they may not have the choice--

[John McCallum, Liberal, Markham—Unionville, ON]

Well, I think your point is a bit of a red herring, because there already exist bank-run funds that are life cycle funds, with the investment mix being a function of the age. I would suggest, even though it hasn't been fully worked out, that a supplementary defined contribution, supplementary CPP, could be modelled on exactly the same lines. And there you have it: the problem is solved.

But I'd like to now return to the question of the cost and the 60 basis points. I had my other source of information saying that's closer to 100, but in any event, if it's 60, so much the better. You'd be even better placed to compete with a new public sector plan, because 60 is pretty low.

So I guess I will repeat my question. Given that we have a life cycle type of plan, which the CPPIB is saying they could do if asked, and it's similar to something provided by the private sector, then to go back to my earlier question, why can't we have that and your expanded multi-employer plan that you're asking for? Why can't the two coexist, compete with each other, and offer more choice to Canadians?

[Dean Connor]

I think I'll repeat what I said earlier, in the sense that the two, indeed, could coexist. Our view is that there's absolutely nothing stopping the country from enabling multi-employer plans and auto-enrolment and all those other things, and getting that going, because we really think that would help, and we should go ahead and just do that as a country.

As for the question of whether there's a supplementary CPP set-up, I think it could exist alongside, and I think you're back to the question—and I guess that's what you were all debating—of whether that is a good thing for the country.

One thing I would just observe on that--and it ties in to the earlier discussion--is that it's one thing for members of our defined contribution plans to not like the investment performance, but in a year where, for example, the CPP earns a minus-18%, which does happen, and you have a lot of Canadians in that one investment with one sponsor, I think that would pose quite a challenge.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. McCallum.

We'll go to Mr. Hiebert, please.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thank you, Mr. Chair.

My questions are mostly for Mr. Swedlove and Mr. Campbell.

You both suggested increasing the age limit at which Canadians could withdraw from their RRSPs, or would have to withdraw from their RRSPs, and you also both suggested that allowing a lifetime pension contribution limit would be better than an annual limit. One of you pointed to the U.K. as an example.

I'm just wondering if you could unpack what some of the implications to Canadians and to the government would be if those changes were adopted.

[Terry Campbell]

Do you want me first or Mr. Swedlove?

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Sure.

[Terry Campbell]

Let's take the lifetime one first, and then we can come back to the increased age, because I know life insurers suggested a specific age, and they might want to comment on that.

I think the idea of a lifetime limit—and, you know, I don't have a fully worked-out plan. There are a number of commentators who have proposed this, and it seemed to make sense. Again, there is its flexibility over the life cycle. There is an element of that already in the RRSPs in the sense that you can make up contribution room, but because it's tied to employment income, when you're younger, the amounts are lower.

If you had a set amount—and different analysts will say whether it's $1 million or more—what it would allow you to do, I think, particularly when you're in a position to make more contributions as you get older, is to top those up, whereas if you had that employment-income-based catch-up, as you do in the RRSP, and you didn't do it in your earlier years, you would have perhaps a smaller amount. We just think it's a more flexible way.

There are a lot of people who go through their working career and they have disruptions. They're out of a job for a while, or they have a period of low income, or they're out of work, or whatever. If there's an ability for those people to do some catch-up when they're in a position to do so, that might help.

I'll turn to my friends from the CLHIA.

[Dean Connor]

I would agree with that point that Mr. Campbell made on raising the age at which RRIFs or RRSPs and pensions need to be started. I would just observe that in 1978 the age 71 limit was additionally put in for RRIF withdrawals. Since 1978, Canadian life expectancy for men and women aged 65 has increased at an astonishing rate. People are living longer, so the additional flexibility given to Canadians who started a little bit later, we think, would be of great value to people, especially to those who want to continue to work.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Do I have time for another question, Mr. Chair?

[The Chair, Conservative, James Rajotte]

You have two minutes.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Mr. Swedlove, you also suggested expanding the definition of earned income to capture such things as royalties and active business income, to be more inclusive of self-employed Canadians. Could you elaborate on that suggestion?

[Dean Connor]

We're suggesting an expansion of the earned income definition for RRSP contributions just to make it a little easier for self-employed Canadians whose income shows up in different ways. It doesn't necessarily show up as a salary, as it does for employed Canadians. For self-employed Canadians, income shows up in the form of dividends and other forms coming back to the individual, and we're just suggesting that to make it easier for them to save for retirement we should expand that definition of earned income.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

I have one last question, again for you, Mr. Swedlove. You mentioned that multi-employer pension plans exist. If that's the case, what more needs to be done to help them be more effective?

[Dean Connor]

I'm sorry, the multi-employer plans...?

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

They already exist. You made reference to them.

[Dean Connor]

I should clarify that the multi-employer plan exists today for employers who are already connected to each other, for example, in the construction industry. As for what's missing, we need to change the law, or we're recommending that the law be changed to allow unaffiliated employers to band together in a multi-employer plan, which they cannot do today.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

I see.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Hiebert.

I want to thank all of the witnesses for being with us here today, for your presentations, and for your responses to our questions. As you know, there were a lot of questions. We may in fact ask you to come back at a future date on the same study.

Colleagues, we have a motion by Mr. McCallum. I will suspend the meeting for a minute or two and then ask Mr. McCallum to bring his motion forward.

[The Chair, Conservative, James Rajotte]

Mr. McCallum, would you like to introduce your motion?

You should all have a copy of the notice of motion from Mr. McCallum.

[John McCallum, Liberal, Markham—Unionville, ON]

Do you want me to speak now?

[The Chair, Conservative, James Rajotte]

It's not in camera; it's a public meeting.

[Daniel Paillé, Bloc, Hochelaga, QC]

You are on TV.

[John McCallum, Liberal, Markham—Unionville, ON]

Okay. I have a motion, which you have before you dans les deux langues officielles. The idea is that the Parliamentary Budget Officer and the Department of Finance would use exactly the same private sector forecasts for GDP, interest rates, and inflation. But the issue involves how to go from the economists' forecasts to budget revenue, expenditure, and deficit forecasts, which is where the finance department and the Parliamentary Budget Officer disagree. The only source of their difference is in going from the economists' forecasts to the budget. The Parliamentary Budget Officer makes his assumptions. He criticizes Finance for not being more transparent in terms of what they do inside that black box to move from economic forecasts to budget forecasts.

My proposal is to invite the two parties, the Parliamentary Budget Officer and Finance officials, to come before us. Each of them can explain how it is that they move from the economic forecasts to the budget forecasts. Given that we have such a high deficit, I think it's a worthwhile exercise for the finance committee to hear from both sides in terms of how this is done and to possibly conclude that there needs to be a little more transparency or clarity from Finance in terms of how they make the transition.

That is the essence of the motion. I don't have a precise date, but the topic is quite warm. I would hope that we might find perhaps an hour to hear from the Finance officials and the Parliamentary Budget Officer on this topic in the not too distant future.