Finance Committee on April 15th, 2010

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Hiebert.

We'll go to Mr. Marston, please.

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

Thank you, Mr. Chair.

Mr. Généreux, I want to make a point here: the reason I raised the $50,000 in the beginning was not to malign or humiliate anybody, but to try to talk about the lens through which people are looking at this problem. Those who earn in the area above $50,000 a year have a different perspective from those below that figure.

I agree with everyone at this table that this is not something we can get a quick solution for. We as a party have offered some suggestions and ideas. One of the things we talked about was somehow addressing the quarter of a million people who are below the poverty line in an immediate way.

On preferred status, Ms. Puffer, I should correct one thing I said. When I talked about the Australian survey, I should have mentioned that it was brought to our attention by Melanie Johannink, who was here on Tuesday. It was a 2005 study, so when I said it was released on Tuesday, I gave the wrong impression and should correct that.

We're talking about a situation that when Nortel shut its doors it had $2.4 billion or thereabouts in cash assets, and $4 billion in solid assets. It refused to pay severance. As my friend across the way mentioned, there are 400 people who are walking away with nothing. I had two people in my office in Hamilton who are long-term retirees and who are facing a loss of benefits and everything. So that does bring a certain passion to what we're all trying to do here.

It should be a two-stage process, in my view. We must do some things immediately. I think one of them is to protect the quarter of a million people and the other is to give preferred creditor status for pension plans. We also need a national summit to bring together the people and ideas that we're all hearing, and to do it with due diligence to ensure that we do the best thing we possibly can do.

For small businesses, I believe we need a mandatory CPP increase, though people may take issue with this, for a small-business person to put something into, instead of putting their money into an RRSP where they have administrative and other fees going forward. As my friend indicated, there are some people in small businesses who live a very fine line financially, particularly in the early years. If things do improve, they would still have the opportunity to further invest later in life.

We have a generation, as Ms. Di Vito said, that's parking debt into the future. It's a generation that's not looking at planning in a way that my parents did or we have been able to do. As a result of that, I again bring us back to perhaps considering a mandatory CPP. If you think in terms of growing the assets exclusively within the CPP, where it's mandatory, rather than having a supplementary plan on the outside with its new administration and new costs, whether or not we get to the full doubling, I think it's something we have to give very serious consideration to.

I've made more notes here than I probably should have done.

Ms. Cameron, if you look at the situation at Nortel, though it's been indicated before that you had no role to play, the only possible federal role would have been an amendment to the CCAA or the BIA to help to protect those workers with those kinds of assets, the $2.4 billion in cash and the $4 billion in solid assets. That would have been the only way, that I can see.

[Judy Cameron]

There's certainly no role within the pension regulatory system.

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

I agree.

You made the point, I think, about the underfunding of the guaranteed plan in Ontario. It has been there for 15 years or thereabouts. There's no point in putting a plan in place unless there's a strategy to fund it as well. Again we're talking long term here, and again that brings me back to this national pension summit. I think there are a lot of minds beyond government circles or beyond sitting at this committee that we could put in a room over a period of time and come up with some real resolutions going forward. If we don't, in 35 or 40 years we're going to have a catastrophe in this country.

I don't have any comments beyond that.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Marston.

Ms. Di Vito, I just want to finish up here by clarifying a few things in your presentation.

First of all, you talked about raising the maximum RRSP contribution limits. Others have talked about a lifetime contribution limit as opposed to an annual limit. Would you favour that as well? Is that what you're referring to here?

[Tina Di Vito]

We have to remember that we do have a carry-forward opportunity, which I think is almost akin to a lifetime maximum. I think the lifetime maximum that people are referring to is, at age 55 or older, to have an additional lump sum amount, say $50,000 or $100,000, that could be available in terms of RSP contribution room.

Another suggestion that I put forward recently went back to our pre-1995 rules where in fact if someone aged 55 or older, for example, were to get a severance payment, he or she was able to roll over $2,000 per year of service into an RSP tax-free. We can't do that any longer. That could mimic the additional lump sum contribution that you're speaking of as well.

[The Chair, Conservative, James Rajotte]

Okay.

I also want to clarify where you recommend that the prescribed rate at which funds must be withdrawn from a RRIF be reduced—reduced to what or reduced by what?

[Tina Di Vito]

Right now, at age 71, the minimum withdrawal is 7.38%. Given that we are living longer, at that rate of withdrawal and if it increases, that money will not last. We've heard that 4% or 5% withdrawal rates were more sustainable, but I leave it up to future discussion to determine what that exact amount is.

[The Chair, Conservative, James Rajotte]

Okay.

With respect to your second recommendation, that the contributions be taxed as employment income and the investment income be taxed at a lower rate, do you have a cost to this?

[Tina Di Vito]

We have not determined a cost at this point. At this point, it's a suggestion.

[The Chair, Conservative, James Rajotte]

Okay.

In terms of the age of 71, in your first recommendation, you're not saying to move it from 71 to 73, as other witnesses have.

[Tina Di Vito]

I had also heard conversations of age 71 to 75. I don't know what that magic number is. Perhaps as we have further studies in here....

One of the things I have noted from self-employed individuals—business owners—is that their retirement date tends to be later anyway. When Canadians are asked how old they feel versus their chronological age, they say they feel 15 years younger than they truly are. The age 71 limit has been around for many, many years. If we accept the fact that we are living longer, to age 93, as my colleague's mother has, perhaps 71 is not appropriate any longer.

[The Chair, Conservative, James Rajotte]

Okay, thank you. I appreciate that.

The last issue I want clarification on is the issue of pensionable age, which both Mr. Lee and the CFIB, Ms. Swift, raised. And you're right, it is pensionable age, not age of retirement.

[Prof. Ian Lee]

Yes.

[The Chair, Conservative, James Rajotte]

Have you done any studies, Mr. Lee, or do you want to supply any to the committee with respect to any savings if you do raise the age?

Obviously this is something that, if the government were to look at it, would have to be done gradually. You can't simply do it overnight.

Do you have any further information that you could provide? Do you have something that you want to supply to the committee?

[Prof. Ian Lee]

Not on the savings side. If you have so many years and start later collecting, you don't have as much money to fund. That was the logic of that.

But I'm collecting data on the Europeans, because the Europeans are way ahead of us in this respect of pushing back retirement age. This is happening just in the last two, three, or four years because of their massive deficits as they confront these unsustainable pensions.

[The Chair, Conservative, James Rajotte]

Are they giving their citizens, though, five years' notice? Over what period are they doing that in terms of raising the age?

Obviously they can't make a change like that overnight, so are they giving a certain amount of leeway before they implement it?

[Prof. Ian Lee]

Well, Ms. Swift brought that up. I never thought that this would be announced overnight. It would produce a revolution.

It would be staged, as they did with social security in the States, where they are moving it back and it's announced ten years in advance of the change so that people can make adjustments to their financial planning.

[The Chair, Conservative, James Rajotte]

Okay.

Ms. Swift, do you want to make a brief comment on that issue?

[Catherine Swift]

For once, no. I think we've already said enough.

[The Chair, Conservative, James Rajotte]

Thank you.

On that note, I do want to thank all of you for being here. I apologize about sometimes shortening the time, but we try to get as many members in for questions as possible.

If there's anything further, if you want to supplement any of your answers or presentations, please submit that to me or the clerk. We will ensure that all members get it.

Thank you so much for being here.

Colleagues, I just need someone to move acceptance of the subcommittee report.

[Mike Wallace]

So moved.

(Motion agreed to)

[The Chair, Conservative, James Rajotte]

Okay, thank you.

The meeting is adjourned. We'll see you Tuesday.