Thank you, Mr. Chair, for giving me the opportunity to appear before the Standing Committee on Finance.
I agree with the government's goal of increasing the rate of retirement coverage. But I fear that the goal will not be achieved and that improving the Canada Pension Plan would have been and remains a better option to consider.
A number of things have been mentioned, but I would insist on the argument of weakness. For the same level of contribution, improving the Canada Pension Plan would make it possible to provide pensions that are twice as high as a defined contribution plan. This is basically because a group plan tends to invest in a full economic cycle, but also bypasses the problem of a person who, retiring with significant capital, has only a very few investment options because he or she must protect the capital at all costs. In fact, a group plan can have a diversified policy, and the Canada Pension Plan management fees, which are at 0.67%, are much lower than the current fees for mutual funds, which are more around 2%. Each 1% savings in fees results in 20% more paid at retirement.
Quebec has been using the simplified pension plan for over 10 years. It is similar to the PRPP in a number of ways, and the results have been quite modest.
It seems to me that, at the next finance ministers' conference, it would be desirable that improving the Canada Pension Plan still be on the table. In a context where the PRPP would be improved, this model could be one more tool that would be available.
I would like to point out three main issues with the bill.
The first issue relates to the choice of the administrator. The paradox of the bill is that it's the employer, who doesn't pay a penny into the plan, who chooses the service provider, which is fairly specific. There's an old saying that goes:
no taxation without representation.
You can find more details about this suggestion in the brief. Actually, during the 30-day consultation period, participating employees should have an opportunity to raise objections to the choice of the administrator, the way it is with Quebec's member-funded pension plan, which is also for small and medium-sized businesses. And if more than 30% object, it would be safe to say that the employees have some serious reservations about that choice.
The second item I wanted to draw your attention to is more specific. I would actually like to point out that some features of federal legislation should be reviewed. For a number of years, I have been with a multi-employer pension plan that was set up for community groups and non-profit organizations. This plan is designed for modest-income employees, earning about $35,000. Given that the salaries are low and that the economic opportunities for employers are limited, the contribution rate is very low, at around 6%. So right from when the plan started, a mechanism was developed to encourage participants to make voluntary contributions and to take advantage of the collective management mechanism. The idea was for them to convert their contributions into additional annuities with a higher interest than the regular annuity conversions, even though we are very careful with our assumptions. On page 9 of my brief, you will see a graph that compares the possibilities for the two scenarios.
We are currently in talks with the Canada Revenue Agency, which is strongly encouraging us to get rid of that mechanism. Yet, based on the last date for which we have figures, almost 8% of the plan's assets came from voluntary contributions made by participants who had understood the message that they had to assume their responsibilities and take advantage of collective mechanisms.
Finally, Mr. Chair, I urge the federal government to think about the impact of introducing the PRPP on labour-sponsored funds. Quebec has two funds: the Fonds de solidarité FTQ and the CSN Fondaction. Just those two funds alone have almost 600,000 shareholders of whom 60% are unionized workers. For a number of them, the RRSPs from either one of those two funds is their primary pension plan. Those funds had a major impact in terms of job retention and job growth in Quebec. But if those funds are not recognized as a PRPP, there is the danger that a registered group pension plan would drain this source of funding and it would deny employees access to attractive mechanisms both in terms of taxes and job creation and retention.
Thank you, Mr. Chair.