Finance Committee on Sept. 19th, 2016

[Lisa Raitt, Conservative, Milton, ON]

Now you're taking my time.

[The Chair, Liberal, Wayne Easter]

No, your time is done.

On the CPP enhancement side, which was part of your question, what is the process? I think Ms. Raitt was leaning towards the idea that CPP enhancement is something that should have been done later, as a result of that report.

[Glenn Purves]

It's simply in the act. There are some rules stipulating that if you're going to enhance the CPP, it has to be on a fully funded basis. On the process aspect, there would naturally be changes to legislation, as the minister highlighted. Upon royal assent to that legislation, you'd need seven out of 10 provinces, representing two-thirds of the population, to come forward with their orders in council. The final step is the federal order in council.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Mr. Duvall, you have five minutes.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Thank you.

I appreciate your coming here.

I understand that the new program will be fully phased in by 2025. So far, with the vague information that has been released, it would appear that in 2025 a person would have to contribute to the new levels for 40 years in order to be eligible for the full CPP enhancement. Is that correct?

[Glenn Purves]

That's correct.

There's a two-year notification period between now and 2019.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Right.

[Glenn Purves]

Until 2025, there's a seven-year gradual implementation. At that point, it's fully phased in. Then it's a 40-year accrual, so 40 years beyond that is when you would have the maximum benefit.

[Scott Duvall, NDP, Hamilton Mountain, ON]

That would be 49 years from now, so the first person who would be eligible for the full CPP enhancement would be 16 years old as of today.

[Glenn Purves]

Absolutely.

It has to do with the youth, the young workers of today who are going to be in need of retirement benefits in the future. That said, anyone of working age or who is working from 2019 onwards who contributes to this enhancement will generate retirement benefits.

Your specific question was about the maximum, and you were correct that it would take 40 years to get to the maximum.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Okay.

My question is, what benefits would a person who is currently 15 years old receive under the new enhancement plan, versus a person who is 35 years old versus a person who is 55 years old?

[Glenn Purves]

A lot of it has to do with your income. Your income will determine what your biweekly contributions are.

I'll use an example. If someone is earning $40,000 per year and they've contributed for a full 40 years, then the incremental benefit to that person at retirement—what's on top of their core CPP, just the CPP enhancement—will be $3,200.

[Scott Duvall, NDP, Hamilton Mountain, ON]

What I am asking, though, and what I'm trying to get at is that as of now, would a person who is 55 or a person who is 50 receive anything under this new enhancement?

[Glenn Purves]

If someone who is 50 pays in for 10 years, they would still have the full benefit from the CPP. They would have the number of years they contributed to the CPP enhancement as well, and, as the minister outlined, there are a whole number of measures that have been taken by the government to support new retirees or seniors on the GIS top-up, depending on their family situation, such as whether they have children, student assistance, the Canada child benefit, and so forth.

[Scott Duvall, NDP, Hamilton Mountain, ON]

What proposals has your department prepared for the minister to reverse the increased levels of poverty among seniors while Canadians wait for these enhancements to take effect?

[Glenn Purves]

I would say that if you look at budget 2016, a number of measures have been taken to support seniors. One is the GIS top-up, which amounts to $947 per year for single unattached seniors who qualify for that certain income range. There is also the OAS, and bringing the age of eligibility down from 67 to 65. As the minister said, strong benefits come with that as well.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

We'll have to move on to Mr. MacKinnon.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you, Mr. Chair.

I would like to thank all the witnesses for being here with us today.

A considerable capital reserve will of course be set aside and paid to the Canada Pension Plan investment board.

Do you know the additional amount of capital that will be received and managed by the Canada Pension Plan investment board?

[The Chair, Liberal, Wayne Easter]

Ms. Anderson, go ahead.

[Leah Anderson, General Director, Financial Sector Policy Branch, Department of Finance]

Yes, we have. Over time, it will increase as contributions increase, and we expect that by 2045 the amounts in the enhancement will be equivalent to what is in the current CPP investment account, so at that stage they will both surpass $1 trillion for a combined asset base of $2 trillion.

[Steven MacKinnon, Liberal, Gatineau, QC]

Given the considerable increase in assets under management, have there been discussions with CPPIB with respect to governance of the organization, investment strategies, or other matters with respect to the management of this obviously massive sum of money?

[Leah Anderson]

That's a very good question. They will be the managers of the new funds that will be accruing. Certainly the investment policies will be key, and they will need to be tailored to the fully funded status of the plan and the objectives of it. Once the funds start to flow to the organization, the board will be entrusted, through its fiduciary responsibility, with a fully funded plan to set up an appropriate investment policy.

In the context of the upcoming triennial review with our federal-provincial partners, we will be looking at these issues to make sure they are prudently managed.

[Steven MacKinnon, Liberal, Gatineau, QC]

So there will be a review of governance measures or considerations around the governance of CPPIB that may come into play with this pretty massive increase in funds under management?

[Leah Anderson]

We have learned, particularly through the financial crisis, that you can never be complacent with corporate governance, so we take this aspect very seriously and we will continue to look at it to make sure it's fine-tuned to do the job it needs to do.

[Steven MacKinnon, Liberal, Gatineau, QC]

Could you describe the interaction right now between the department and CPPIB with respect to these reforms?