Finance Committee on Nov. 14th, 2016

[Claude Lavoie]

Yes, but the negative impact will be very minor in the short term. The system will be implemented over a seven-year period. It won't be fully in place until 2025. Five years later, growth will increase. The impact will be outweighed as of 2030 or 2035, five years after the system has been completely implemented.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

What do you mean by implementation period? Does each employee and employer need to make an additional contribution?

[Claude Lavoie]

No. The system will be implemented over a seven-year period. The first increase in contributions will take place in 2019. The contributions will gradually increase and will be two percentage points higher in 2025. Therefore, the contributions will keep increasing. The contributions will have increased by a maximum of two percentage points as of 2025.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

The contributions will have finished increasing in 2025.

[Claude Lavoie]

Yes.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Also, employment will be affected until 2030 or 2035.

Once the workers have invested, when will they start making real gains? I'm referring to the improvement of the offer. I'll rephrase my question.

We want a greater return on people's investment. When will real gains be made? Will it be when the system is implemented or will it take decades?

[Claude Lavoie]

I'm not sure that I completely understand your question. When they retire, people will receive larger amounts under the CPP. In the end, they'll receive a greater retirement income.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

They key words are in the end. According to estimates, it may take up to 40 years for the movement to be fully accepted, for the full cycle to take effect, for the new system to be 100% in place, and for tangible results to be achieved.

[Claude Lavoie]

No. If a person contributes for only a few years, he'll still receive a higher pension when he retires, but on a pro-rata basis according to his contribution. Obviously, he'll receive the full amount if he has worked for 40 years. If a person contributes for five years and retires at the age of 55, he'll receive a higher amount, but not the full amount.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

That's more or less what I was saying. It will take 40 years for the full cycle to take effect. That's basically what you just told me.

[Claude Lavoie]

Yes, but it doesn't mean that people who contribute to the plan won't receive any benefits. They'll still receive benefits even though they don't have 40 years of service.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Okay.

Supposedly, the additional charge for employers could amount to $1,000 per employee. Is that correct?

[Claude Lavoie]

I don't have the exact figures, but it's possible. The figures are in the backgrounder. I know the contribution rate will increase by two percentage points. It may be the case, depending on the person's salary.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Okay.

In addition to the impact on employment, have you measured the potential impact on the GDP, business investments, disposable income and private savings?

[Claude Lavoie]

Yes. The potential impact on the GDP and employment has been measured, and the information is in the backgrounder. I don't have the figures on savings with me, but I think we have some of those figures, along with the figures on investments.

Once again, the impact will be positive in the long term.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

You say the impact will be positive in the long term.

[Claude Lavoie]

Yes.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

What about the short term?

[Claude Lavoie]

In the short term, there will be some substitutions in the total savings. Retirement savings will increase. Obviously, there will be slightly less private savings and slightly more public savings to compensate, but there will be more retirement savings in total.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

However, private savings may decrease. According to certain C.D. Howe Institute estimates, for example, private savings may decrease by up to 7% in the long term.

[Claude Lavoie]

If people contribute to either their private pension plan or their registered retirement savings plan, or RRSP, they may slightly reduce their RRSP contribution because they will be contributing to the CPP. However, in the end, people will have more retirement savings.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Since I have only one minute left, I'll keep my question short.

Have you conducted an assessment on business investments?

[Claude Lavoie]

Yes. We have observed that the impact will be slightly negative in the short term and positive in the long term. However, I don't have the exact figures with me.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Okay.

I'll finish my remarks.

We know that, when we face a great deal of international competition and we must have all the necessary tools for businesses to make significant investments, the businesses need to receive proper support. We think the implementation of these new measures may have a much stronger negative impact than predicted because worldwide competition is shaping up to be much fiercer than the level anticipated in recent months.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Deltell.

Before you start your round of questioning, Mr. Duvall, I would like to ask a question.

Mr. Lavoie, on a number of questions you don't have the numbers with you. Could you provide those? I think they are in the backgrounder, but could you provide the committee on a follow-up with what the numbers to those questions are? I just think that's fair to committee members.