Finance Committee on Oct. 27th, 2010

[Christina Judd Campbell]

I train five times a week. I train two times with a personal trainer and three times with my rhythmic gymnastics coach. Right now I'm doing lots of cardio and practising my routines. When I go to the training camps and when it gets closer to going to Athens, I'll be training a lot more.

[Ted Menzies, Conservative, Macleod, AB]

Thank you. That's probably the most important message we need to hear--the dedication you have. I applaud your efforts. You do us proud.

I'm trying to keep this very short, but I have a question for our actuarial friends about suggestion five. Coming out of Charlottetown, we suggested modest incremental changes to CPP--multi-employer plans. Just quickly, what are your thoughts on that?

On financial literacy, I see you support that.

I'm a little intrigued about introducing legislation allowing employers to set up 100% employer-funded pension security trusts. What would entice an employer to want to fund 100%, other than a real shortage of labour? Please answer quickly, if you could.

[Marc-André Vinson, Member, Canadian Institute of Actuaries]

Yes, absolutely.

Mr. Menzies, the 100% referred to there is not actually for the totality of fund, but for the pension security trust aspect of it. The purpose of that side fund, if you will, is to ensure that with respect to solvency funding and...like special payments, that if and when things turn around and deficits turn to surplus, they have the ability to go and retrieve those sums of money, which is not possible in the present framework.

[Ted Menzies, Conservative, Macleod, AB]

So it's an insurance fund, funded by the employer, such that there is no question about who owns the assets in that.

[Marc-André Vinson]

Correct.

[Ted Menzies, Conservative, Macleod, AB]

Okay. And that's a problem we face now, who owns...?

[Marc-André Vinson]

It's to dissipate the question of ownership of that surplus, while at the same time ensuring--because it's already in there and is part of this proposal--that the target solvency margins are maintained so the plans are funded to an appropriate level of solvency.

[Ted Menzies, Conservative, Macleod, AB]

Okay.

I always have one question when I hear comments such as yours, that 72% of the people you polled are concerned, and 62% are concerned about funding health care.

What did you ask them? Was it, like, “How frightened are you?”, or did you say, “Is there concern in the back of your mind?”

I guess I'm a little fuzzy on the question here.

[Micheline Dionne]

It's a ranking from one to five on how preoccupied they are--very preoccupied, somewhat preoccupied, not preoccupied at all. It's the most preoccupied categories that we include in this.

[Ted Menzies, Conservative, Macleod, AB]

Thank you.

Mr. Généreux, please.

[The Chair, Conservative, James Rajotte]

Go ahead: three minutes.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I would like to welcome all the witnesses, particularly Christina, whose story I very much like.

My question is for Mr. Patry.

I don't want to make an inappropriate comment, but I wondered whether the initials of the author of your brief, B.Q., stood for “Bloc Québécois”. I must ask you quite an important question.

Last week, three employment insurance pilot projects were extended by eight months. If I follow your logic, that shouldn't have been done since the officials advised us against it. And yet they are the ones who requested a premium rate increase of 15¢ per $100. You say they should have proceeded that way and, in so doing, followed the Board's advice. They did not listen, and that was precisely in order to set funds aside to protect unemployed Canadian workers.

I'm trying to understand your logic. I don't know whether you have estimated what it would cost Canadians if everything you said earlier were implemented, that is to say increasing federal government spending and not cutting taxes, among other things. Whatever the case may be, Ms. Dionne, we definitely won't have any money to invest in our pension plans. Ultimately, you're asking for the moon.

[Pierre Patry]

No, we're not asking for the moon.

First, I want to note that the Confédération des syndicats nationaux is a union organization independent of any political party. If it happens that we are in agreement with one of the political parties, whether it be the Conservatives, the Liberals, the New Democrats or the Bloc, we say so.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I'm happy to know that.

[Pierre Patry]

Furthermore, with regard to the Canada Employment Insurance Financing Board, our logic is this: we would have liked there to be a genuinely independent employment insurance fund. You created a board; we emphasized that that was a step in the right direction, but it really had to play its role. When it proposes an increase in premiums to allow improvements to pension plans, it has to be allowed to play its role. I don't understand your logic either. You established a board; you gave it a mandate that we find too limited, and you don't even abide by it.

Lastly, with regard to what the Confédération des syndicats nationaux is asking, our brief contains more comprehensive figures. Whatever the case may be, Canada is one of the least indebted countries in the world. It is one of the countries where, in percentage terms, deficits are the lowest in the world. All economists currently agree that there is going to be a double dip recession, a recovery that could be very slow. When we see what's going on in the United States and Europe, we're extremely concerned. We think the Canadian government has to intervene to support the economy.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you for telling us that we've managed the country well. That's a compliment.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Mulcair, please.

[Thomas Mulcair, NDP, Outremont, QC]

I have a question for our friends the actuaries.

At the end of your document, you explore certain avenues. You talk about lowering the administrative costs of personal pension plans. Can you tell us more about that?

[Marc-André Vinson]

Thank you.

From an administrative standpoint, especially if we're talking about defined contribution plans, people who contribute to small plans can't get fees as competitive as those associated with larger plans.

Furthermore, participants in defined contribution plans generally do not have to decide on their own investments. That aspect is managed by experts who are devoted to that. Expected returns are thus greater than those that individuals who make their own investments can achieve. In that respect, it has been proven that there is a significant gap of approximately 2% per year between the returns of professional investments and those of personal investments.

[Thomas Mulcair, NDP, Outremont, QC]

That's quite high. That's an important point. You're absolutely right to point that out.

You also provided an excellent overview of the question. This is one of the most comprehensive ones we've had the pleasure of seeing. Everyone in this issue agrees that it's relatively complex, that various avenues are being explored. I think you can bet that the next budget will include elements relating to that.

Do you get the impression that one of the simplest solutions might be to increase the premiums and benefits of the public plan?

[Marc-André Vinson]

The submissions designed to improve the Canada Pension Plan are numerous, very different and very divergent. The consequences of these kinds of changes are quite profound, not only with regard to the system itself, but also with regard to all other related plans. Before venturing into this type of change, you have to consider—

[Thomas Mulcair, NDP, Outremont, QC]

That's why we need actuaries so much. There are already enough lawyers, but actuaries are a scarcer commodity.

[Marc-André Vinson]

Yesterday, a professor from the University of Calgary presented quite an in-depth study of each of the—

[Thomas Mulcair, NDP, Outremont, QC]

The people around this table are quite familiar with that study.

Thank you for your presentation.

Mr. Patry, I would like to go back to a point that you raised. I think you've done a comprehensive analysis of the situation that led to what is going on in the manufacturing and forest sectors in particular.

What happened in October 2008 tends to be considered as the reference point of the current crisis. This is an international crisis, of course. However, according to Statistics Canada, the manufacturing sector in Canada lost 322,000 jobs between 2004 and 2008. That's called the “Dutch disease”, which is a reference to what happened in the Netherlands when hydrocarbons were discovered. Before the advent of the euro, every country had its own currency. That of the Netherlands was the florin. Its value rose and suddenly the Netherlands could no longer export, even though it was a very manufacturing-oriented country. We are going through the same thing here. One part of the solution, in our minds, is to internalize the actual costs of the oil sands. Right now, we're pumping, but we're not including the long-term costs. So an artificially large number of American dollars is entering Canada.

I would like to know your opinion on one aspect that was part of the discussion we just had with the actuaries. When we talk about sustainable development. We very often think of the environment, but there's also a social aspect. Several hundreds of thousands of manufacturing jobs, paying wages that were high enough to support a family and provide for retirement pensions, are being replaced by low-level, often part-time jobs.

Let's take the example of the sales and service sector in stores. This in no way diminishes the dignity of the person who carries on this occupation in order to live, but it will be recognized that that person does not earn enough money to support a family and there is no pension associated with that job. Aren't we creating another bubble over the long term or for another generation? Many people won't have enough money to live off their retirement income because we've gotten rid of the manufacturing and forest sectors with retirement pensions and quite high incomes.

[Pierre Patry]

First of all, you're raising an important point, the manufacturing sector issue.

I remember that the Standing Committee on Finance heard our evidence on the impact of the rise in the Canadian dollar. That was before 2008, and the manufacturing sector had already lost a large number of jobs. We were talking about highly paid jobs with generally defined contribution pension plans. The Confédération des syndicats nationaux sees that, even in large businesses, but even more in the case of SMEs, there are increasing numbers of defined benefit plans that are being converted to defined contribution plans. We believe this important issue must be addressed.

For example, we propose the introduction of sectoral pension plans through which a certain amount of savings could be channelled. I thought the Canadian Institute of Actuaries made promising proposals. If no action is taken at this level, it may not be defined benefit plans, but a lot of people will have little income when they retire. In Quebec, 40% of Quebeckers have a defined benefit and defined contribution pension plan. If you rely solely on the public plans—