Finance Committee on March 30th, 2010

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

I guess this is more a question for the government than for you. Why did they propose such a dramatic change?

[Robert Farmer]

I can only speculate about that. Undoubtedly, there have been discussions on both sides, pensioners versus sponsors. Of course, sponsors are looking for some flexibility in their obligations from a financial point of view. I suspect that might have something to do with it, but I have to say, it has gone much too far. The payback period has grown from five years, typically, to 10 years on a temporary basis with conditions, and now to more than 10 years without conditions.

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

Thank you.

Ms. Eng, I was pleased to see that you gave us all of your data, even if the data don't necessarily agree with your own personal position. I thank you for that, because if I look at survey questions 5 and 8, there seems to be pretty strong support among your members for a voluntary CPP expansion as opposed to a mandatory one. I wonder how you would respond to that, but you could maybe also address the intermediate position in doing so.

We in the Liberal Party have spoken of a voluntary plan, but there is more than one way of doing a voluntary plan. As Keith Ambachtsheer has proposed, one could have a voluntary program, but with the initial position that you're in and that you would have to opt out. He argues that this would lead to substantially higher enrollment.

What would be your view?

[The Chair, Conservative, James Rajotte]

You have about 30 seconds, Ms. Eng.

[Susan Eng]

Our bottom line is that there should be as universal, broad-based coverage as possible. How do you get to that point? In current economic circumstances, many more people have woken up to the fact that they must do something. So a well-structured voluntary vehicle might just get enough of their attention to make this viable. Without that, however, as we have found in many other things, including the current state of RRSPs, voluntary is not enough by itself. So we're not latching ourselves to the idea that it must be mandatory, but recognize that people must have options.

Nonetheless, research has indicated that if you have mandatory enrollment, even with an opt-out option, many more people would stay with it than if you made it purely voluntary. To some extent, I'm personally agnostic about it. Our membership is certainly evenly divided. They do feel there is a need for a supplementary plan. They do understand it needs to be fairly universal, that it has to reach a critical mass, and it has to be affordable. All of those things can only be achieved through that critical size, and if you can get to a critical size with a voluntary system, that would be acceptable—certainly to our membership.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. McCallum.

Monsieur Paillé, s'il vous plaît.

[Daniel Paillé, Bloc, Hochelaga, QC]

Mr. Chairman, I will follow up on Mr. McCallum's question, because I would have thought that he would have directly addressed question No. 26. Perhaps he doesn't like it so much. A few years ago, I studied the way polls are conducted, and I am afraid that your poll is fairly biased. For example, on page 14, it says that 64% of people are already retired. So our pension system basically works fairly well, and this stands in relation to question No. 25. Statistics are for an economist what a streetlight is for someone who has had too much to drink. It is something to hold him up rather than to show him the way. However, I think that statistics can nevertheless be useful, but they have to be interpreted cautiously.

I have a couple of questions for the representatives of the FTQ. If our public pension systems were stronger and more complete—for example, if they had a replacement rate far over 25%, 30% or 40%—are you not afraid that you would be shooting yourselves in the foot because, through the Fonds de solidarité, you have an additional pension system? Further, is there not a danger that people will say their retirement income from the public system is plenty, and that, consequently, they might choose not to contribute, or to decrease their contributions, to the Fonds de solidarité?

To take that idea one step further, say Canada improved its retirement benefits, would you adopt specific investment policies, either by investing in a region or in a province, or pan-Canadian investment policies, rather than a more scattered approach?

[Réjean Bellemare]

We are really not afraid of shooting ourselves in the foot.

The main objective of the FTQ is not to operate the Fonds de solidarité, but rather to protect our members and Quebeckers and Canadians. We have always maintained that a public and universal system was the best solution to protect all Quebeckers and Canadians. We have not changed our position.

The same logic led us to create the retirement system based on payroll contributions for our members. This is a retirement plan, whereas the Fonds de solidarité is truly an economic development tool. However, it is not the best tool for retirement planning because it is a defined contribution plan. Again, we have not changed our position on the Fonds de solidarité.

[Daniel Paillé, Bloc, Hochelaga, QC]

What about the investment policy?

[Réjean Bellemare]

We still have not established an investment policy.

We regularly meet with the Caisse de dépôt which manages the Quebec Pension Plan, and we have always maintained that the Caisse is a good tool with which to manage domestic capital. This is good for the economy. The money stays here. It is invested in our country and creates wealth. We could also choose to invest abroad, but I think this money should be used as a development tool for our country.

[Daniel Paillé, Bloc, Hochelaga, QC]

I would now like to go to Mr. Farmer.

I'm interested in your formula. Basically, under the federal government's formula, you never get across the road, so to speak. One can see it in your graph. There is an asymptotic line and you never get across the road.

You say that if there is a 5% surplus, a company can stop making contributions, but that there is no obligation to have a 5% surplus. You say that there should be measures in place to ensure a surplus and to go with that. It's on page 2. You state: "We find the 5% situation regrettable".

This is my question. If a company has a deficit in its pension plan, but then the plan's funding is brought up by one-fifth per year, instead of stopping contributions when the plan is fully funded again—having erased its deficit—could the company not top its plan up to 105%, after its experience of falling into deficit? There would be a built-in mandatory incentive—I know that's redundant—for companies which let their plan fall into a deficit—or who were on the brink of falling into a deficit—so these companies would have to top up their plans to 105%.

[Robert Farmer]

Well, there's nothing I like more than encouraging a sponsor to go to 105%. One has to recognize the incentives for sponsors. It may be the case that on a voluntary basis they'd be prepared to do it, and perhaps some would. I was delighted to see, for instance, that the rule in the Income Tax Act that required no more than a 10% surplus was actually increased to 25%. That certainly gives some room, if in fact they had an incentive to do it. I'd love to see that.

Nevertheless, as I mentioned earlier, if the plan is 98% funded, say, and the sponsor brings it to 100% funding, there's no obligation on the sponsor to go to 105%. If there is a market downturn and the plan falls into trouble and drops to 93% over a very short period of time, then we would have a long way to go, but if you had at least gotten up to 105%, the fall would not have been quite so precipitous.

[Daniel Paillé, Bloc, Hochelaga, QC]

I understand that when a company is on the verge of bankruptcy, you believe that there are many ramifications. Generally speaking, this means that sometimes contributions are not made to the pension plan. The solution might lie in following the model of Quebec's Pension Plan, which steps in during certain periods—so that the pension plan does not have to be cashed out immediately—and this type of interim measure could be applied throughout Canada.

I was wondering whether, in your view, the government could apply this type of measure immediately.

[The Chair, Conservative, James Rajotte]

You have about 30 seconds, Mr. Farmer.

[Robert Farmer]

I can be very brief. The answer would be yes. I think it's a good option. I would only quibble with the word “solution”. It's something that would be very helpful, I think, because the QPP would be able to invest the money and the plan might grow along with the rest of the funds they're investing. That would be good, but it wouldn't necessarily bring the plan back to full funding, of course.

[The Chair, Conservative, James Rajotte]

Merci.

Mr. Wallace, please.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

I want to thank our guests for coming today.

Because I only have seven minutes, I will probably spend most of my time talking to our friends from CARP, just to clarify a few things.

First of all, how was your survey done?

[Susan Eng]

We have 85,000 opt-in subscribers to a newsletter, and of that group, some 3,000 to 5,000 people regularly respond to the survey. So it is self-selected, but with the kind of numbers we have and the geographic—

[Mike Wallace, Conservative, Burlington, ON]

Okay. Didn't you start off by saying that you have 300,000 members?

[Susan Eng]

Yes, and only 85,000—

[Mike Wallace, Conservative, Burlington, ON]

Only 85,000 out of that 300,000 get the e-mail.

[Susan Eng]

Yes. We encourage more to sign on, but a lot of people do not have e-mail.

[Mike Wallace, Conservative, Burlington, ON]

Okay.

I need to be frank with you. First, based on the number you told me, the 300,000, the response rate to the survey is less than 1%.

Secondly, didn't you say your organization is non-partisan? Isn't it kind of unwise to ask partisan questions such as, how are you going to vote in the next election?

[Susan Eng]

No, I think when you ask how they're going to vote, you're asking for their answer, not giving it to them.

[Mike Wallace, Conservative, Burlington, ON]

Well, your definition of “non-partisan” and mine might be different.

Regarding question 14, Mr. McCallum indicated there was strong support for the voluntary program. If I'm reading this right, 63% said there was no need; 20% said yes—that's 500 votes—and 9% said no.