Finance Committee on Nov. 14th, 2016

[Michel Millette]

Yes.

[Michel Montambeault]

Yes.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Ms. O'Connell.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you, Mr. Chair.

Thank you for being here.

Canada is not necessarily in a unique situation financially in terms of the economy and pressures, workforce, and things like that. Just out of curiosity, are there other G-7 countries that are also looking at enhancements to CPP? I'm assuming it's not just a Canadian phenomenon that people are not saving enough. Are there other countries that are doing this as well and talking about it, that you know of?

[Glenn Purves]

I'll just point out a couple of things. First, we've had a lot of calls from the U.K. and from OECD countries that have similar systems, and including the IMF, asking us about the measures that have been taken and looking into the design of the enhancement and so forth.

Canada is unique in the sense that 41% of our retirement savings are privately funded and there's a portion that is on the public side that is less than the average for the OECD. So this would bring that portion up a bit. From a design standpoint, certainly we're getting calls about how we're pursuing this. I think there are questions also about the design of the CPP, in general, not just the enhancements.

In terms of how we're calibrating the enhancement, how we're working with the provinces, the process there has been of interest as well.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you.

This is just to clarify, because sometimes we get lost in some of the technicalities. That is the job of this committee, frankly. But for the public listening, what does this actually mean in plain language? We know that future generations are going to benefit the most from this in particular. But if a young person were to receive the full 40-year contribution, what would be the difference if we didn't do this? What's the average pension that somebody would receive, forgetting if they have their individual contributions or whatnot, versus with this enhancement? What does that average then change to in terms of the amount they would receive per year?

[Glenn Purves]

In terms of the amounts we're talking about, I think the sheet we handed out has some of that information. It provides, in table 1, the augmentation, the incremental CPP retirement benefits, by earnings and number of contributory years. This gives you a sense of the kind of additional income Canadians could benefit from, depending on their constant annual earnings and their contributory years.

If you look at our backgrounder, we do also talk about those who are at risk of not saving enough for retirement. It does lower those thresholds considerably doing this enhancement.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

One of my biggest concerns, frankly, is not necessarily even the design of this. With regard to these enhancements, what conversations are you having with the provinces and territories to ensure that they then don't reduce some of their other income supports? For example, one frustration we'll sometimes hear from constituents who might be receiving some type of disability support from Ontario, let's say, where I'm from, is that it's reduced because they get some other federal enhancement. Obviously, with something like this, you really don't see the full payout until you retire.

What's being done to work with the provinces and territories to ensure that these enhancements don't then reduce some other income support that might be needed prior to retirement in the provincial jurisdiction?

[Glenn Purves]

I'll answer that in two ways. First, as Monsieur Montambeault mentioned, we do have a CPP committee. This is a regular group of federal but also provincial officials who speak on a regular basis on CPP issues. This enhancement has consumed a lot of time with respect to this committee's purview over almost the past year and more. From that standpoint, we continue to have these dialogues with them on issues that deal with CPP enhancement but also just the base CPP. With the release of the 27th actuarial report, that triggers a triennial review that's looking at CPP in its entirety—all its provisions, its ancillary benefits, its contribution rates—and making sure it's sustainable.

Through that committee and through ongoing ministerial engagement, we will continue to have dialogue with our provincial and territorial counterparts on issues that are pressing for them on the CPP side. Outside of that, we continue to have dialogue as well on other areas of income support, because the provinces provide their own elements of income support as well as the federal side.

[The Vice-Chair, Conservative, Ron Liepert]

With that, we'll move on to Mr. Duvall for three minutes.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Thank you, Mr. Chair.

I want to pursue this drop-out period. Is there any actual reason why the child-rearing and disability drop-outs cannot apply to the expanded CPP? Or is this a political question?

[Glenn Purves]

No, I think it has to do with the focus of the enhancement. The view of the CPP enhancement is not...and perhaps it's the reason why I'm having difficulty with your line of questioning.

From a Canadian standpoint, you're still going to benefit from a host of measures under the CPP core. I think as Marianna had outlined, there is a host of benefits there. The focus of the enhancement has very much been on income replacement. I hate having to keep coming back to this, but that is really the objective of this enhancement, to increase the income security of retiring Canadians going forward.

Marianna had mentioned some statistics just on the child-rearing side. Keeping in mind that this enhancement takes place over many years, if there is a view down the path, through these triennial reviews, that there have to be changes made to take into account issues, then that's the time to look at these issues through those triennial reviews. We will keep stock of these issues and the calibration that we have with respect to the enhancement and the base CPP as it goes forward. But for the purpose of the decision taken in June, the focus was on the income replacement side.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Mr. Purves, the previous government, when they made adjustments to the CPP, made increases so that if you wanted to retire early the percentage went up. I think it's now 35% if you take it at the age of 60. It used to be 30%.

[Marianna Giordano]

It's 36%.

[Scott Duvall, NDP, Hamilton Mountain, ON]

It's 36%. So one of the things I was wondering about is people are complaining that we're not doing anything now for the people who are retiring. As they're going forward, nothing is going to help them. It's all going to help the people going forward, say, 10 or 15 years from now.

Was there any cost that was done to put that back down to 30%? Could it be done?

[Marianna Giordano]

There was no cost done to look at the actuarial factors when they were increased in 2009. They were increased to bring them to neutrality, to ensure it's neutral to the plan. So if you take your retirement earlier we pay it for a longer period of time. Therefore, you are receiving the same amount in the plan for which you've contributed. If you take it later, if you delay it as well, we've increased our actuarial factor to 42%. So you take it for a shorter period of time but you will be receiving more. It's a neutrality. There is a provision in the legislation that requires that these actuarial factors be looked at every third triennial review.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Okay, but it hasn't been looked at, it wasn't brought up, right? That's what I'm hearing.

[Marianna Giordano]

This wasn't part of the enhancement discussions, no.

[Scott Duvall, NDP, Hamilton Mountain, ON]

So that wasn't brought up and the actual child-rearing wasn't brought up.

I have one last question.

[Michel Montambeault]

I would just say that the 27th actuarial report that we just released has reviewed the actuarial factors, and they are still cost neutral to the plan. But they were reviewed in the 27th actuarial report just recently.

[Scott Duvall, NDP, Hamilton Mountain, ON]

But not to the enhancement.

[Michel Montambeault]

To the enhancement it's the same factors as under the base CPP.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Okay. That's a different answer. I'm glad you clarified that.

Bill C-26 has provisions pertaining to the insufficient rates section of the current CPP act. This section deals with what happens if the actuaries show that the contributions flowing to the CPP are insufficient to fund the benefit. Can you describe what happens if the same pressure came on to the expanded portion of the CPP?

[Glenn Purves]

Under the legislation it's the same provisions. But through regulations, effectively, that will follow, there will be additional context provided on solvency standards and so forth.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Okay. Thank you.