Thank you.
Evidence of meeting #94 for Government Operations and Estimates in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was plan.
A recording is available from Parliament.
Evidence of meeting #94 for Government Operations and Estimates in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was plan.
A recording is available from Parliament.
11:35 a.m.
NDP
The Chair NDP Pat Martin
Thank you, Mathieu. That concludes your time.
We'll now go to the Conservatives.
Mr. Gourde, you have five minutes.
11:35 a.m.
Conservative
Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC
Thank you, Mr. Chair.
I want to thank the witnesses for being with us this morning.
Mr. Ménard, earlier, you explained that the number of years during which a beneficiary could draw on the pension plan had gone up. Basically, those who retired before 2012 could receive benefits at 60 years of age. You said it was possible for them to receive benefits for 20 years after turning 65, so until the age of 85. Can people expect to receive benefits for about 25 years?
11:35 a.m.
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
Yes, exactly. Those who retired at 60 will receive benefits for an average of 25 years.
11:35 a.m.
Conservative
Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC
My next question is for Ms. Gowing.
When a pensioner dies, does a portion of the pension benefits always go to the spouse? Is it 50% or 60%?
11:35 a.m.
Director, Pensions and Benefits Sector, Treasury Board Secretariat
Do you wish to have an explanation of survivor benefits?
When an individual passes away, there are survivor benefits for the spouse, and child benefits as well.
11:35 a.m.
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
And the amount is...?
11:35 a.m.
Director, Pensions and Benefits Sector, Treasury Board Secretariat
It's 50% of the amount of the benefit at retirement.
11:35 a.m.
Conservative
Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC
There is no time limit, even if the spouse is 20 or 25 years younger than the participant. That means that the benefits for the same employee could be paid out for 45 years.
11:35 a.m.
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
I would like to add a piece of information, if I may. What you're saying is true. The actuarial report contains an assumption. Again, it's an average, because the total cost is evaluated using averages. On average, the surviving spouse is three years younger than the plan participant. So yes, the spouse will receive benefits for a slightly longer period of time because of their age, but a scenario like the one you're describing would still be the exception.
11:35 a.m.
Conservative
11:35 a.m.
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
Yes.
11:35 a.m.
Conservative
Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC
The potential is there.
My next question is for Mr. Leroux.
You said that you invested in real estate, publicly traded companies and private companies. Is it more complicated with private companies? Is it more direct with large companies and small ones?
11:35 a.m.
Vice-President, Policy Portfolio and Asset Liability Management, Public Sector Pension Investment Board
There is a certain level of complexity. And that is why we developed our own expertise internally. It's important to be very familiar with the management of organizations. That gives us an edge. We have much tighter control over investments. As I said in my statement, we expect to receive illiquidity premiums, in other words, a slightly higher return than if we had simply invested in public assets.
11:40 a.m.
Conservative
Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC
So you hold shares in private companies.
11:40 a.m.
Vice-President, Policy Portfolio and Asset Liability Management, Public Sector Pension Investment Board
Yes.
11:40 a.m.
Conservative
Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC
Sooner or later, be it in 15, 20 or 30 years' time, you will have to resell those shares, under the terms of your contracts.
11:40 a.m.
Vice-President, Policy Portfolio and Asset Liability Management, Public Sector Pension Investment Board
That's right.
11:40 a.m.
Conservative
Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC
You will resell those shares to the company itself or other parties.
11:40 a.m.
Vice-President, Policy Portfolio and Asset Liability Management, Public Sector Pension Investment Board
That's right.
11:40 a.m.
Conservative
Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC
Does it work fairly well? Is the return higher than the market rate?
11:40 a.m.
Vice-President, Policy Portfolio and Asset Liability Management, Public Sector Pension Investment Board
That is the case.
Since these companies' shares are not public and are not traded, the return on the investment should be higher because, as an investor, we are assuming a greater risk since we're dealing with illiquidity. We expect to receive a higher return.
11:40 a.m.
Conservative
Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC
They aren't easy to sell off quickly, but eventually, that will be necessary.
11:40 a.m.
Vice-President, Policy Portfolio and Asset Liability Management, Public Sector Pension Investment Board
The thing to understand about illiquidity is that, if we decide to sell, we couldn't do it tomorrow morning as though it were the stock market. It takes some time. We have to find a buyer and follow certain steps. That doesn't mean they can't be sold, just that steps have to be taken and the right buyer has to be found. It's a rigorous process.
11:40 a.m.
Conservative
Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC
It can be a way for those companies to obtain funding for five or ten years, in the medium term, basically. Selling their shares to a pension fund gives them liquidity to grow their business and make strategic investments.