Finance Committee on March 23rd, 2010

[Donald Raymond]

Okay. Clearly, as I said in my opening remarks, these are all decisions for policy-makers to make. As my colleague said, there's a range of options on the table. The one that is the simplest for us to manage, in fact, would be something along those lines, which is essentially a single pool of assets. There might be some differentiation between the two components, because one would be fully funded and the other would be related to the existing CPP. But on the spectrum, that would be the easiest for us to manage.

As I said in my opening remarks, we're building the capability to manage $250 billion to $350 billion over the next 10 years. That would accelerate that somewhat. But in general terms, we are heading in that direction already.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Obviously we'd only be able to roll out the increases over an extended period of time, but we wouldn't have, as Mr. Wallace's questions implied, a growing bureaucracy or a cost to the Canadian people.

Thank you.

[Donald Raymond]

That's right.

[Katherine Thompson]

Mr. Marston, I can tell you that the Air Canada component of CUPE and the flight attendants would certainly support this initiative put forth by the NDP.

We sought this during this summer's pension reform. When we had to agree to major concessions, virtually, in our pension regulations, we asked for preferred status. Given the financial situation Air Canada was facing, we were unable to negotiate that due to the fact that part of Air Canada's survival was the raising of capital. Unfortunately, when you put a pension plan ahead of creditors, it becomes challenging to raise capital. But we certainly support your initiative on this.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

You've got three minutes.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Ms. Brown, I understand that OMERS has decided to change its asset mix, with a little bit more risk than in the past. I'm surprised to hear that.

I was wondering, what has motivated that?

[Jennifer Brown]

Certainly, that's not my understanding in terms of taking on more risk. I think our asset mix changes move us more into the private markets, infrastructure, and real estate. We're shifting that so that we have long-term stable returns.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Thank you.

Mr. Chair, that's fine. I'm pretty well finished.

I'd just like to thank this committee, being an outsider and a guest here today.

I had made the suggestion to Mr. Mulcair that he ask the committee to take a look at pensions, and I'm really very pleased.

I want to thank the folks who have shown up here. You have provided good information. I'm looking forward to the answers Mr. Wallace is seeking as well.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Marston.

We'll go to Mr. McKay, please, for five minutes.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair.

Thank you, witnesses.

I think what drives this conversation currently has to do with situations, such as Air Canada, such as Nortel, such as looking at a lot of the ratios and the private plans, particularly the employer-sponsored plans, that are in difficulty. Even after the recovery of the market they're still in difficulty. So one of the suggestions, particularly put forward by our party, has been, if you will, a supplemental CPP plan.

Mr. Campbell raises some interesting questions.

By the way, Mr. Raymond and Mr. Dale, it's nice to talk to you about something other than our usual favourite subject.

Let me just go through Mr. Campbell's questions and see what your response might be.

He asked how Canadians would get advice on the investment decisions they'll have to make about contributing to a supplemental plan. My question would be, why would Canadians get advice if in fact it's simply a contribution plan where you make your contribution off your pay cheque or whatever on a monthly or weekly basis? Why would it involve advice at all?

[Terry Campbell]

Is the question for me?

[John McKay, Liberal, Scarborough—Guildwood, ON]

Sorry. I direct it to Mr. Raymond first and then Mr. Campbell could respond.

[Donald Raymond]

Sorry, I don't follow the question.

[John McKay, Liberal, Scarborough—Guildwood, ON]

His question is, how would Canadians get advice on investment decisions they'll have to make about contributing to a supplemental plan?

[Donald Raymond]

Well, he's referring to a defined contribution plan.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Yes, that's right. So this would be the additional plan we're talking about.

[Donald Raymond]

I think that's a valid question.

[John McKay, Liberal, Scarborough—Guildwood, ON]

It is a valid question, but it's a valid question for both of you.

Mr. Campbell has raised it, but CPP would be the one that would have to in effect answer it. He's asking how Canadians would get advice on investment decisions they would make on a defined contribution plan. Or would they?

[Ian Dale]

You know, the way we are currently set up, we're not equipped to do that. It would be a significant departure for us should policy-makers ask us to do that kind of thing. We're currently not set up to do that.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I tend to agree with you that it's an unnecessary question, but let me just turn it back to Mr. Campbell for a second, just so we can generate some debate here.

[A witness]

I'm going to ask my colleague Marion Wrobel to answer.

[Marion Wrobel, Director, Market and Regulatory Developments, Canadian Bankers Association]

The whole point is that many of these supplemental plans are defined contribution plans, not defined benefit. With a defined benefit plan like the CPP, there's really no need for advice because there's no decision-making on the part of the individual investor. When an individual investor is contributing to a defined contribution plan, that investor is taking on all the investment risk as well as a bunch of other risks. The investor needs advice--

[John McKay, Liberal, Scarborough—Guildwood, ON]

But aren't we in effect proposing a hybrid, that it is a defined contribution plan, but in fact the investor doesn't make any decisions with respect to the investment?

[Marion Wrobel]

Well, you're putting an investor in the position where he or she is, again, subject to all kinds of risk and then you're saying they don't make any decisions.

So what happens if they're put in a portfolio and it turns out to be far riskier than they wanted it to be or they thought it was going to be? Or they think they've got a supplemental Canada pension plan, which is a defined benefit plan, and they find they're not going to get nearly as much as they thought, and they had no access to advice.