Finance Committee on Feb. 16th, 2012

[Hoang Mai, NDP, Brossard—La Prairie, QC]

So you have nothing on that.

I have a question about the costs. We've talked a lot about costs. It was said that cost is an important element and that costs should be as low as possible. There are currently problems with certain retirement savings plans because the costs could in some cases affect the return. I know that there are plans for a system to resolve that issue.

You mentioned that costs were much lower in the private sector than in the case of an individual RRSP. With the Canada pension plan or the Quebec pension plan, do you not think the costs would be lower since those systems have more participants and already have the administration and management in place?

[Diane Lafleur]

This isn't necessarily the case because the administration isn't in place. For the Canada pension plan to establish accounts like the ones we're proposing here, it would need to build a whole other administration system.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

We were talking about costs related to a voluntary system. But I'm not talking about the cost of a voluntary system; I'm talking about the present costs. We know that the Canada pension plan is very effective. It's universal.

Of course, as you know, we want to improve the plan. With respect to the costs of the plan, if we improved it, would there necessarily be any impact on the administrative costs?

[Diane Lafleur]

The potential is there for the costs of the pooled registered plans that we're proposing to be very competitive with the Canada pension plan. Obviously we'll see what happens over time. But the incentives are there and the requirements will also be there for the costs to be reasonable.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

But can you guarantee that the costs would be lower than the current operating costs of the Canada or Quebec pension plans?

[Diane Lafleur]

I can't guarantee that all the funds will offer the same lower costs. But I can tell you that there will be competition. Based on the consultations we've had, I can say that a number of administrators are willing to take on the challenge and offer these products. We are also confident that, with the competition there will be, the prices will drop.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

The current RRSPs are managed by the private sector and there is competition, but the costs are still high. We are concerned because there are no guarantees in this respect.

[Diane Lafleur]

It's because these are individual accounts and not pooled accounts.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

That's also a choice. The same product is being offered. We go through financial institutions that offer this product. So a market exists. I'm not comparing the costs of RRSPs with the costs of a plan like the one you've proposed, but I'm talking about administrative costs, regardless of the RRSP. Of course there's a change, but these costs are higher than what we could get in the public sector.

I also wanted to come to development and where we want to go with that. What guarantees are there with respect to participation?

[The Chair, Conservative, James Rajotte]

You have 30 seconds left.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

We've talked a lot about choice and that's what Ms. Glover tried to explain to us.

I'll give you two choices. When you retire, would you choose a system that gives you a fixed amount of money that doesn't depend necessarily on external costs and the market or another that depends on the market? If you were retiring, which one would you choose?

[Diane Lafleur]

The idea is to give employers another option.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

You didn't answer my question, but thank you.

[The Chair, Conservative, James Rajotte]

Okay, merci.

We'll go to Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you once again, Mr. Chair.

Just so I'm clear, I actually am a union member. I'm a Winnipeg Police Service officer who's on a leave of absence here, and I have a pension plan at the Winnipeg Police Service. I understand that my pension plan is directly impacted by markets as well. As I understand it, the Canada Pension Plan also is impacted by markets. So the suggestion made by the NDP that only the PRPP would be at risk because of markets is completely false, and I would like you to correct me if I am wrong.

[Diane Lafleur]

It's a different mechanism, because the CPP is a defined benefit plan. The returns of the CPP funds are affected by market returns. However, the benefit that flows to workers is a defined benefit. So it's a guaranteed benefit. What would happen in the extreme, if you had many, many years of negative returns and the value of the funds started to climb, is that you would likely have to raise contribution rates. So current workers and employers would be paying more to pay out the guaranteed benefits of retirees.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good. I take issue with the way it was explained without having the other side of it, so I appreciate that.

I do have to say that when we're talking about the pooling of funds, I understand what you're trying to say about reduced administration costs. I know you were continually interrupted, so I really want to give you the opportunity to explain how we maintain the costs at a low level. You continued to repeat yourself that it would be competitive, and the opposition continued to try to get you to say, we want a guarantee, we want a guarantee, we want a guarantee. Well, no one can guarantee that the CPP costs are going to be lower either. So I would like to give you an opportunity to answer that question without interruption.

Thank you.

[Leah Anderson]

There are a few things in the act that fit together to make that...in addition to the broader principles that have been elaborated. One that's new and different from RRSPs, for example, is that administrators will be licensed, and they need to be licensed in accordance with how they meet the provisions of the act. One of the provisions in the act is that these things will be offered at low cost. So at licensing time, regulations on that, which have yet to be developed and elaborated on, will be looked at by the supervisor who licenses the administrator. Also, the regulations that are to be developed to support this will set out the criteria against which an administrator will need to demonstrate that they are offering it at low cost. We are working with our provincial colleagues right now to determine the best test to demonstrate that, and there are a variety of tools one could use. People are very focused on that, because this is a key aspect of the plan they want to see realized.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good.

I also want to give you an opportunity to answer a question that Monsieur Giguère put to you. I thought it was a very good question, to be frank. He did cite two conflicting areas of the bill, clause 24 and paragraph 76(1)(i). The question gets put and then you never get to answer fully, so I want to give you that ability.

[Diane Lafleur]

It's paragraph 76(1)(i) and which one?

[Shelly Glover, Conservative, Saint Boniface, MB]

It's clause 24, which says that no inducement may be given. Paragraph 76(1)(i) says the Governor in Council may “specify...the circumstances in which inducements may be given”.

[Diane Lafleur]

The prohibition is intended to guard against a situation in which an employer might get a benefit from choosing a plan administrator. We're trying to ensure that employers make choices to the benefit of their employees and not to their own benefit. However, there can be situations in which inducements that are offered are beneficial to all parties, including the plan members. So we want to make sure we're not casting so broad a prohibition in the act that members of the PRPPs would be prevented from getting some of those benefits where, for example, a PRPP is being offered along with some health care coverage, which might be offered at a lower cost if those two are offered together. But the employee is really the winner, because the employee is getting the benefit of both.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good. I understand that much better. So it really does negate what Monsieur Giguère was suggesting.

Thank you.

[The Chair, Conservative, James Rajotte]

Actually, those were the clarifications that I, as the chair, wanted as well.

I understand from both sides that we've had enough questions for today. We will have you back before us on March 6 for clause-by-clause, but we do appreciate your being here. If there is anything further you wish the committee to consider beyond the materials we have or your responses today, please do submit it to the clerk or to me and we'll ensure all members get it.

Thank you so much for being with us here today.

[Diane Lafleur]

Thank you, Mr. Chair.