Finance Committee on March 1st, 2012

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

Another part of your presentation was talking about moving from the pension fund perhaps to this. One of the concerns that's been expressed is the pressure that might be put on employers, or they may put on, to move from defined benefit pension plans into this model. We're very concerned about that.

I'm not really posing a question there, so I'll move on. I have another one that goes a little further.

Mr. Roberts, are you familiar with the Australian super fund?

[Chris Roberts]

I am.

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

I've raised it here a couple of times. After the ten-year mark it was reviewed, and it didn't even keep up with the cost of living, with the fees and that.

You know, we have the government speaking of the PRPPs; we call it a savings scheme, which kind of annoys the government. We don't think there's evidence to prove the fact that the fees will be kept down. The majority of fees paid by defined contribution plans and sponsored RRSP members go to the record keeper, and financial advisers' fees paid to the actual investment fund managers used in the pension programs generally do not make up the bulk of the management fees paid by members. This means that the supposed lower costs will not be achieved through negotiating lower investment management fees.

Do you have an opinion on where they actually think they can find the lower costs?

[Chris Roberts]

I think what the Australian example shows, and it's fairly instructive, is that competition has been, at least in the Australian example, deemed to be ineffective in bringing down fees. The Cooper review of the superannuation guarantee system in Australia found pretty extensively that despite the existence of numerous funds competing, sales and promotion costs had driven up overall fees. It just hadn't been effective.

So I'm not sure where, in fact, low fees can be found, or how that can be insured in the Canadian instance outside of regulating caps on fees.

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

Yes, we've made that suggestion here.

Mr. Skerrett, there's something I would like to say, and I said the same thing in a previous meeting here. Greg Hurst of Benefits Canada made the statement, and this is just part of it, that from the latest reports of the chief actuarials, it shows that the federal pension obligations are fully funded with modest surpluses, and that there's “no crisis of unfunded pension obligations for the federal public service”.

The reason I say that is the Canadian Federation of Independent Business is doing a lot of talking across Canada these days about unfunded liabilities. Some municipalities certainly have them, and CUPE deals with more municipalities, I think, than at the federal level.

The other falsehood that's out there is how gold-plated the public service pension plans are. Now, I don't know whether CUPE's at this level, but the federal ones are, on average, $18,000 per worker per year, which is not huge.

I'd just like your thoughts on that.

[Kevin Skerrett]

I'll start with the second question, about the current levels of pensions being provided by the existing workplace arrangements.

In fact, CUPE, our union, represents, as you say, a lot of workers in the municipal sector, the hospital sector, school boards, the education sector, post-secondary. I would say it's by and large what could be called the non-professional sectors: custodians, cleaners, bus drivers, kitchen staff, that range of worker. As we might imagine, these are workers who don't have very high incomes in their ongoing work life.

It's very interesting, with all this talk of gold-plated pensions—which, as you say, is really popular talk, and pops up in the news a lot these days—to actually look at the pensions that are being paid by these workplace arrangements to those workers. I could share a couple of specific statistics; in fact, some I've come across just recently.

[The Chair, Conservative, James Rajotte]

Very briefly. There are about 30 seconds left.

[Kevin Skerrett]

Okay.

I was involved last year in working with the school board workers in the province of Prince Edward Island. I found out that their pension plan, which is supposedly a gold-plated public sector plan, is paying those workers an average annual pension today of under $5,000 per year.

I just saw recently in New Brunswick that for school board workers, their pensions are about $10,000 a year. In another case in New Brunswick, it's $12,000.

Now, you will have some that are as high as $15,000, but these pensions are not the $50,000, $80,000, or $100,000 a year being made out, in many cases.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Marston.

We'll go to Mr. Hoback, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Thank you, witnesses, for being here this afternoon. It's great to have your insight into this great bill. I appreciate all of your presentations here today.

I'd like to talk to all of you. As Mr. Marston said, there are lots of interesting questions and debates we could have, and that's a great country we have, Canada, where we can have disagreements and debate, but again, we only get five minutes.

Ms. Byrnes, I'm going to focus on you a little because you do handle a lot of pensions in your sector. I understand you handle about two-thirds of Canadian pension plans. Could you give me an idea...when you handle this type of fund, the pension plans, you're obviously not investing in one topic or one manufacturing sector or one business. You have your risk spread out over a variety of businesses. Is that correct?

[Leslie Byrnes]

Absolutely.

[Randy Hoback, Conservative, Prince Albert, SK]

So you'd be having different percentages in different sectors?

[Leslie Byrnes]

Yes.

[Randy Hoback, Conservative, Prince Albert, SK]

Wouldn't it be wise, if you were talking about pensions for Canadians, to say you've got the Canada Pension as one option, you've got OAS, you've got GIS, and now you're going to have PRPP as a fourth option? Wouldn't that be a wiser way to spread out that risk, rather than putting everything in the bag of the Canada Pension Plan?

[Leslie Byrnes]

We couldn't agree with you more. Getting back to the way our retirement savings system is set up, there are three pillars to it. Think about it as a three-legged stool. You need strength on each of those legs in order for the whole system to be stable. We see PRPPs as an opportunity to introduce an additional level of choice and opportunity at low cost for employers and employees.

The other thing I would point out with respect to this is we've got a world-class financial services sector in Canada. We're respected internationally for stability and innovation and the way we're regulated, so why wouldn't we want to take advantage of that?

[Randy Hoback, Conservative, Prince Albert, SK]

Exactly.

One thing that concerns me—and maybe you can educate me—is when we have unemployment, how does that affect your pension plans today? We had the Canadian Federation of Independent Business here saying that for every 1% rise in the Canada Pension Plan it's going to cost 220,000 person years of work. If you looked at that, if we looked at the opposition parties and what they're suggesting for increases in CPP contributions and how that would have a domino effect on the small business sector with the loss of employment.... I think the CFIB used the number of up to one million jobs. How would that trickle through to your pension plans, and how would that affect your earnings in those pension plans so that you could actually pay out pensions to the people who are already under your existing plans?

I guess I'm asking you what would massive unemployment in Canada do to your ability to service your pension plans?

[Leslie Byrnes]

Obviously there would be fewer people who we would be providing pension plans to, which would be the bottom line there.

[Randy Hoback, Conservative, Prince Albert, SK]

But then the companies you've invested in would not be paying the dividends that you'd be expecting and that also would have an impact on your plans, would it not?

[Leslie Byrnes]

It could certainly.

[Randy Hoback, Conservative, Prince Albert, SK]

I look at this and it makes a lot of sense to me. We've heard the business community being very vocal about not being able to afford an increase in the Canada Pension Plan at this point in time, with the economy in the shape it is and the risk of it sitting there. We've been very clear in talking to the members of the opposition about why we're doing what we're doing at this point, and we've been very clear in talking to people about this. This is just one of many tools for retirement savings, giving Canadians options and choice so that they can make the best preparations in their situation on an individual basis.

Do you have any suggestions on how small and medium-sized businesses would utilize PRPPs? When I look at my farm, for example, I don't want to administer a PRPP; I don't want to administer a pension plan for employees. So how does a third party...? I guess I'm looking at a third-party administrator such as yourselves. How would you go about administrating this, or how important is it to have a third-party administrator for these types of funds?

[Leslie Byrnes]

I think when you take a look at the prevalence or the lack of prevalence of retirement plans in the workplace right now, 50% in the private sector have nothing. They're too expensive too administer or they're too complex. Employers simply aren't offering anything.

What we're hearing from small businesses is that they would welcome the tool. They see it as a competitive tool, as an opportunity to attract and retain employees. They see it as something they could actually do. We're also hearing that even though they wouldn't be required to contribute, they'd be interested in looking at ways to do that.

[Randy Hoback, Conservative, Prince Albert, SK]

Actually, Chair, I'll stop there because my next question would go on for another five minutes.

[The Chair, Conservative, James Rajotte]

You've got about 15 seconds.

[Randy Hoback, Conservative, Prince Albert, SK]

I'll leave that back to you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Hoback.

Mr. Brison, please.