Evidence of meeting #45 for Finance in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was subamendment.
A video is available from Parliament.
Conservative
Liberal
The Chair Liberal Karina Gould
There was a previous subamendment about comparing other pension plans. This one is—
Conservative
Conservative
Greg McLean Conservative Calgary Centre, AB
All right. Thank you. I appreciate that. I was just trying to get some guidance from you on where I was straying beyond where I should be at this point in time.
We're just going to talk here about the only part of this, of course, that we need to worry about, which are the Canadian assets, the projected contributor and projected assets per beneficiary. This is the issue, of course.
You think about 1.3 children per woman at this point in time, which is hopefully going up, and those people contributing for a good portion of their lifetimes. Then you have the number of workers who need to come into Canada, and they're going to be contributing to a certain extent as well.
You've been in senior homes as well, Madam Chair, where you have people who have not contributed for their whole working lives or what would have been their working lives, and they're having trouble making ends meet. The issue now is how we deal with this from a per person perspective.
The reason I brought up comparable countries before is that there is that line of sight on what each person actually has as far as their pension availability going forward is concerned. It's quite clear in some other countries. That's the reason I brought up the relational aspect of this.
Getting this reported on by our pension plan and the actuaries who look at what it looks like on the go-forward basis is something that parliamentarians, in particular, should always have because, inasmuch as this Canada pension plan has arm's-length management, supposedly, we are looking at mandatory withdrawal from people's paycheques. The paycheque deduction, of course, is a contribution level that they have to withdraw every paycheque, and that's changing. Why is it changing? What does it mean for the viability of the pension plan going forward?
I think it is very important to have that. I think it also gives us an understanding of where the government might be in its modelling as far as inflation goes going forward, because everything is dependent upon the factors involved in the modelling. If the modelling is faulty and predicts that there's going to be low inflation forever and ever, then you can punch holes in that, and Canadians can see that the government expects there to be no inflation for the next 70 years. Maybe it's a faulty analysis, but these are the types of things that Canadians need to have some transparency on, such as what their pension contributions are getting them going forward and, on a per person basis, what that means.
A little more robustness in this is going to be instructive for the people who are preparing these, and there's also the necessity of making sure that we have a system that works for Canadians going forward.
The issue around changing the formula at this point in time, is, I think, distressing for a lot of financial professionals. It is something that says, “This was an unviable pension plan three years ago. The government had to increase the rate and have a surtax, and that made it viable.” Now we're coming back and saying, “Okay, it can be viable if we reduce the rate.” It's that bait and switch we're going through here with Canadians about the transparency of what their contributions get them at the end of the day. We need to make sure that it's quite clear, and the information needs to be available.
If the information about how we're modelling this is consistent with the way other assets are being modelled around the world—because there are all kinds of private sector corollaries that show what people will get from their contributions on defined benefit payment plans and that show your contribution and what you will be paid at the end of day and what goes into it—it's on an actuarial basis and we can have line of sight on the exact math.
One thing I always try to bring my colleagues back to is the math around these issues, and the math on these issues has to make sure that it goes around, at the end of the day—dollars in and dollars out. If the Canadian taxpayer is the one who's going to have to bail out a faulty pension plan going forward, it just makes us all poor. Let's make sure that we have a very clear perspective. The modelling matters because the inflation assumption is the factor that will determine whether this meets Canadian needs going forward.
If we have a high inflation projection, people are going to realize that the dollars they are putting in today are worth x minus inflation, for what it buys 10 years from now, when they're retiring, and that is, of course, a distress for everybody. We've seen periods of high inflation that weren't part of the actuarial analysis that was built into the viability model the chief actuary had, three years ago, when he said that the system was viable. These are things that shift under people's feet, but at the end of the day, the numbers matter.
As far as it goes for parliamentarians, our job is to look at those numbers. If we have a model, we can say that the system is viable at this contribution rate, based on the fact that people will get this amount back, and here's the inflation amount that we're building into that. Let's pretend it's at 5% inflation, which is a very high number from a real perspective, but if it turns out to be 10%, people will realize, “Oh, my buying power is going to be murdered with that rate of inflation the government's foisted upon us at this point in time. My pension plan that I'm contributing to will no longer sustain my life here going forward.” We have to make sure that's clearly understood by the people who are contributing to it and expecting not just a payment at the end of the day but a payment for their life's sustenance: the food, the rent and the care they're going to need in their senior years. That's the whole reason we have a pension. Madam Chair, you know that.
The nature of the Canada pension plan is something we brought forth, as a combination of nine provinces working together, with actuarial input, to ensure there was a viable plan for Canadians in their senior years. It started roughly. Initially, the people contributing were the ones paying for their grandparents, who were retiring at that point in time. It was transfer in and transfer out. We've tried to build it up over the years.
Market mechanisms are what determine the rate of return here. You can see those rates of return have been in an ever-building equity environment. Equities have gone up consistently for a number of years, with brief hiccups in 2000, of course, and 2008, and a brief hiccup in 2015, but not across the board. Think about what that means from a long-term perspective.
My colleagues on this side know that I was a portfolio manager before I came here. Having a line of sight on what you have going forward and what your expectation of returns is are very important. Measuring yourself against the market, as far as your performance goes, is a very important indication of how you are managing your client's assets, and I'm not sure that's evident here at all.
Having that clearer illustration, both of the amount per person, on a nominal basis, of what they're putting in, and on an inflation-adjusted basis.... I appreciate that it will be looked at by only less than 1% of the population. However, that less than 1% of the population should be around this table because it is our job to make sure that at the end of the day, these funds we're setting aside are serving their purpose and that Canadians' needs are being met with what they're going to be in the future. That's the whole nature of a pension plan.
With that, I think I've said as much as I can say on this, Madam Chair. I yield the floor. If you would consider that input, I think it would be instructional.
Conservative
Philip Lawrence Conservative Northumberland—Clarke, ON
Thank you, Chair. I appreciate your giving me the floor.
Because this subamendment deals with both nominal and inflation-adjusted dollars and real asset projections of the Canada pension plan, could we have the officials come up and just tell us how it's currently laid out with respect to the triennial report?
Liberal
The Chair Liberal Karina Gould
Thank you.
Are there finance officials, either here or online, who can answer that question?
I know we have Mr. Maxson and Mr. Baddeley here from the finance department. Are either of you able to address that question?
Senior Director, Employment and Education, Personal Income Tax Division, Department of Finance
Good morning, Madam Chair.
The official responsible for that is Mr. Stuart, who was having an issue with his microphone earlier. I don't know whether that microphone was accepted, ultimately.
Liberal
The Chair Liberal Karina Gould
Mr. Stuart's headset was not acceptable. He won't be able to respond because of interpretation.
Conservative
Philip Lawrence Conservative Northumberland—Clarke, ON
I want to be constructive here, so I'm willing to go on with some other comments.
Would Mr. Stuart or Mr. Countryman...? I believe they were the gentlemen who answered the question—
Liberal
Conservative
Conservative
Philip Lawrence Conservative Northumberland—Clarke, ON
In approximately...? That's really the focus of my questions.
Liberal
The Chair Liberal Karina Gould
I don't know how long it will take him to get here, but he is on his way.
If you'd like to yield the floor to Ms. Kronis, we can come back to you.
Conservative
Philip Lawrence Conservative Northumberland—Clarke, ON
According to the Standing Orders, which I'll just read here, I think we need to suspend.
Just give me one second and I will pull up the section in the Standing Orders.
I'm sorry. It's not the Standing Orders. It's the rules of practice and procedure. It says, “During the clause-by-clause consideration of a government bill, officials from the...departments concerned normally [remain] before committee as witnesses...in order to provide technical explanations of the effect of individual clauses of the bill and the technical implications of proposed amendments.”
I have a technical question. According to the rules, I'm supposed to have an individual. I would respectfully ask the chair to suspend until we can have either Mr. Stuart or Mr. Countryman. I'd be very pleased for either of them to attend.
Liberal
The Chair Liberal Karina Gould
I have a little update, colleagues.
The official in question will be another 30 to 45 minutes. Given that the Conservatives have caucus starting in four minutes, I want to see if there is UC to adjourn the meeting.
Conservative
