Thank you, Mr. Chairperson and committee members, for providing the Public Service Alliance of Canada, the PSAC, a union representing approximately 172,000 members, the opportunity to appear before this committee today to discuss the retirement income security of Canadians. Unfortunately, my presentation wasn't finalized in writing before leaving the office, so I will have copies to the clerk in French and English first thing tomorrow morning.
Before starting my presentation, though, I'd like to acknowledge the human tragedy of the Nortel bankruptcy and the urgent need for the Government of Canada to do the right thing, not just for these workers but for all workers in situations where companies do go bankrupt. Bankruptcy should not be carried out on the backs of workers and at the human cost of workers.
The majority of our members pay into and ultimately receive benefits under the Public Service Superannuation Act, the PSSA. The PSSA is a final average earnings defined benefit pension plan and is funded through contributions from both employers and employees. Both the contribution rate and benefit formula under the PSSA are integrated with the provisions of the Canada and Quebec pension plans. Pension benefit payments under the PSSA are indexed each year to the cost of living. The PSSA contains provisions that provide the opportunity for participants to retire with an unreduced pension after having reached at least the age of 55 with a minimum of 30 years of pensionable service. It is with some consternation that PSAC has observed a number of organizations in Canada diverting attention away from the public debate on retirement security in Canada using criticisms of the pension entitlements of federal public sector employees. These efforts are also accompanied by the perpetuation of myths concerning the actual pension entitlements of Canadian public sector employees.
First and foremost, PSAC would emphasize to the members of this committee that according to the most recent report of the Office of the Chief Actuary of Canada, tabled in the House of Commons in November of 2009, the federal public service pension plan is in an actuarial surplus position of approximately $4.6 billion for service accrued prior to April 1, 2000, and $972 million for service accrued subsequent to April 1, 2000. Consequently, the results of this actuarial evaluation would indicate that there are no immediate financial issues with the federal public service pension plan that would require any further infusion of public funds.
Secondly, in accordance with the Public Sector Pension Investment Board Act, the contribution rates of employees to the federal public service pension plan will have increased by approximately 60% over the period from 2005 to 2013. A significant portion of the current salary of public service employees is deducted as pension contributions to provide for future retirement benefits under the federal public service pension plan as prescribed by the act.
Finally, as indicated in the latest report on the public service pension plan, the average annual pension provided under the PSSA is $24,506 a year. It is the position of PSAC that PSSA plans are on sound financial footings and do not need to be changed.
PSAC has long advocated for a strengthening of the public pension system in Canada to ensure a dignified retirement for all Canadians. The resolve of PSAC on this matter has only been intensified in response to the weaknesses and vulnerabilities of the pension entitlements of Canadians that have resulted from the financial crisis and recession of 2008 and 2009.
PSAC stands strongly behind the current Retirement Security for Everyone campaign, the campaign of the Canadian labour movement that was presented to this committee by the Canadian Labour Congress. This campaign includes, for the doubling of future Canada Pension Plan benefit entitlements, a one-time 15% increase in the guaranteed income supplement and a new national system of pension insurance.
These proposals are necessary and justifiable. For example, the most recent data from Service Canada indicates that 1.6 million seniors across Canada collected the guaranteed income supplement with their old age security pensions. This means that they earn less than $15,000 per year.
In addition, all available evidence indicates that CPP is a primary public program providing retired Canadians with a standard of living above the poverty level. In comparison with other retirement income instruments in Canada, the CPP represents a cost-effective and efficient mechanism for providing Canadians with a secure post-retirement income.
In order to ease the transition, the labour movement proposes that over a seven-year period, employer and employee contribution rates be increased and that the yearly basic exemption for earnings subject to CPP contributions be increased from the current $3,500 to $7,000.
As federal Finance Minister Jim Flaherty stated on March 27, 2010, at the pension summit co-sponsored by the CLC and the Ontario Federation of Labour, the current pension challenges confronting Canadians will necessitate a generational shift in required policy.
Canadians have grown increasingly tired and wary of quick-fix solutions to complex problems. While it is true that the full implementation of the proposals for the CPP will require 40 years to complete, retiring Canadians would experience incremental CPP benefit increases immediately. PSAC is confident that the Canadian public would be receptive to such an approach.
In closing, I would again like to thank the committee for the opportunity to present these viewpoints today, and I would again urge you to do the right thing for the Nortel workers.