Finance Committee on Feb. 28th, 2012

[Daniel Kelly]

Absolutely. We like the combination of retirement savings tools we have. We feel that this will be an additional one.

I think there's a great deal of interest. We have to keep in mind that there's a brewing shortage of labour, particularly in your part of the world, Mr. Jean. We have a large number of small firms desperate to hang on to their staff. One of the ways they can do so is to try to dig deep and ante up some form of retirement savings options for their employees. As the demographics of Canada start to shift and we get out of the recession, we think this will be a tool that small businesses will be able to use to equalize their retirement savings options.

Right now, large firms have access to defined benefit pensions. Small firms, in practical terms, just do not. This will help.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thanks, Mr. Kelly.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Jean.

Mr. Mai, you have the floor.

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

Thank you, Mr. Chair.

Ms. Eng, I saw you react when we were talking about the QPP, the addition. Can you comment? I just want to give you the opportunity to respond.

[Susan Eng]

Yes, I wanted to comment about the reason premiums were increased both in the CPP and latterly with the QPP. It wasn't on account of investments, but rather that when the QPP and the CPP were first put in place, the politicians of the day deliberately underpriced it, and the actuarial calculations were brought together to force the increase in contributions in the CPP first and then the QPP. So it was a question of pricing it properly. They wanted a low-cost plan to go into it, and they realized they couldn't afford it. It had nothing to do with the investments.

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

Thank you.

Mr. Dubreuil, let us talk about pension plans. You said in your presentation that young professionals do not trust pension plans. Could you explain why this is the case? What are the problems with respect to this issue?

[Guillaum Dubreuil]

We found that there were two primary reasons explaining why people have less confidence in a pension plan provided by their employer.

The first reason pertains to what people see going on right now. We see businesses shutting down and taking their pension plans with them when they close. In this situation, people have lost everything that they have accumulated up until the day of the shutdown. So people are right to be more cautious.

Secondly, some survey respondents believe that they are better able to administer finances than a pension plan would be. These respondents would therefore prefer to manage everything by themselves.

These are the two reasons that were given in the survey.

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

Perfect. Thank you.

I have a question for the representative from the Canadian Bar Association. In your brief, you stated that the proposed pooled registered pension plan resembles a pooled RRSP. Could you elaborate? You also said that the pooled registered pension plan does not necessarily provide an adequate pension income. Could you explain why we should be viewing this plan as an RRSP equivalent?

[Mitch Frazer]

I think it's one element of the entire overall savings. There's a lot of discussion about whether CPP is better or PRPPs are better. We as an organization think that the key issue here is coverage: what gets more people into a plan? We think PRPP is a great step in terms of actually getting increased coverage, but would it lead to 100% coverage in the country? No, but if it's put in properly it will definitely increase coverage. It will allow more people—self-employed, small-business owners—to be in there right now, but it won't by itself solve it, and it won't, as some members here talked about, provide a fixed guarantee at the end of the day. If we're talking about perfection, it's not, but it will definitely increase. What we're concerned about is whether it will be enough. Time will tell.

[The Chair, Conservative, James Rajotte]

You have one minute. Mr. Kelly did want to respond, but I don't know if you had another question.

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

No, I haven't. I'm sorry.

I have just a specific question.

You also talked about unintended consequences for those individuals recognized as aboriginals. Could you elaborate further? What is the problem with the current program and how should we resolve the problem?

[Mitch Frazer]

The issue with respect to the current situation is that there's not a system in there that encourages aboriginals in particular to save. So the issue here is whether this pooled retirement pension plan on its own will be enough to resolve that problem. That's something we're not sure of. That's really the concern.

When we spoke to our membership, they felt this is definitely a step in the right direction, but it's not—and people use different words here—a panacea. Will this solve all the problems? No. It's definitely a step, but it's not going to encourage.... For example, we won't have the entire aboriginal population involved in this and it will not have complete coverage. It will not have retirement savings. That's one of the things you take when you have a defined contribution plan. It's certainly something that forces people to save. In this case, it's a voluntary plan. It will encourage people to save, but it won't be the be-all and end-all.

[The Chair, Conservative, James Rajotte]

Unfortunately, Mr. Mai's time is up.

We'll go to Mr. Van Kesteren, please.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Chair.

Thank you all for appearing.

I love the story of the wise king—maybe you've heard it—who sent his sages out to get him the wisdom of the ages. Have you heard this story? They came back with 12 books, and he said, “Shorten it; nobody will read it.” They came back with a book, and it was still too long. They came back with a page. He looked at it and said, “No, it's still too long.” So they came back with one line. Looking at that line, he said, “That's it; that's the wisdom of the ages.” On that line was written: “There ain't no free lunch.”

We talk about defined contribution and we have talked about defined benefits.

Mr. Wrobel, how has the market performed in the last four years?

[Marion Wrobel]

I couldn't give you a number, but I think the performance has not been stellar.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Has it recovered?

[Marion Wrobel]

I think there is a hope that it will be recovering, yes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Where does most of the money come from to recover the market—I mean in the activity of the Dow Jones?

[Marion Wrobel]

I'm not an investment analyst—

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Does anybody know?

[Marion Wrobel]

—so I couldn't tell you.

[Daniel Kelly]

Investment returns went way down, and then they came up. They have not returned to their previous levels, but they have rebounded to a large extent.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I'm confused. I think most of the activity in the past has come from pension funds. If pension funds are stressed and if people can't afford to buy them, then who is pumping the market up now?

[Marion Wrobel]

To your point about there being no free lunch, ultimately the retirement income that Canadians will earn is a function of two things. It's a function of how much they save and the returns they earn on that. At the end of the day, we're all investing largely in the same market. We can do it through individual RRSPs, we can do it through the PRPP, and we can do it through the Canada Pension Plan. I think it's a mistake to think that there is one option that is somehow immune to market forces and market risk.

There is an element of risk associated with the PRPP, of course, but it is no worse than for the other options out there.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

There's a method to my madness. I was going somewhere with this.

Public pensions are defined, isn't that right? They make contributions, but it really doesn't matter; they're still going to get something in the end. What they're going to get is defined.

How many public pensions are underfunded at this point? Does anyone have any idea?

Mr. Kelly.