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.
Vice-President, Communications and Government Relations, Public Sector Pension Investment Board
No.
NDP
NDP
Irene Mathyssen NDP London—Fanshawe, ON
Thank you, Mr. Chair.
Again, thank you for your expertise.
I want to switch to more of a human relations kind of question.
In the brief, you've indicated, Madam Gowing, that of the 565,125 members, 313,652 are active contributors. We know there is downsizing going on in the public service, and I'm assuming that of the 12,000 to 13,000 jobs that will be eliminated, a number of those would be younger and contributing members of the public service.
How does that impact, first of all, the liabilities you've calculated? Second, what effect, if any, does it have in terms of the anticipated contributions? Has that work been done?
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
We don't have a precise number on the demographic composition of the downsizing currently under way. What we do have, however, is a projection of these contributors, and according to the most recent report, we are projecting about 300,000 contributors in 2016-17. That's the number we have in the actuarial report. As such, the liabilities are both related to these contributors and the pensioners, the disabled, the survivors, and their children who are receiving benefits.
NDP
Irene Mathyssen NDP London—Fanshawe, ON
When you were doing your calculations, you didn't have any concerns. Are you still on target?
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
We don't have precise numbers, but I'm ready to say that in 2014, in the next triennial report for the public service, we will take this into consideration and have more precise numbers in that.
NDP
Irene Mathyssen NDP London—Fanshawe, ON
We'll certainly look forward to that.
Again in terms of human resources, with regard to the changes that have been made, we're now going to have a two-tier system with respect to pensions and benefits for those who are hired after January 2013. Was any concern expressed about the impact of having a two-tiered system in regard to human relations—I guess the impact on the employees—knowing that an employee hired before the deadline has a different pension plan than one hired later? Was there any concern in that regard?
Director, Pensions and Benefits Sector, Treasury Board Secretariat
No, there wasn't really any concern. One of the things that we have noted over the years is that a person coming into the public service is older now, so to give them the opportunity to build up a longer service with us and reach the 30 years, age 65 is the consideration.
NDP
Irene Mathyssen NDP London—Fanshawe, ON
Why is it that they're older? Is it because a certain life experience is helpful in entering the public service? Do you look into that kind of human reality?
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
I think it's just a reflection of what is happening in the Canadian population. When you look at the composition of workers aged between 20 and 69, we have seen a shift to older workers. Right now the average age of a new person in the public service is 34. Ten years ago it was 32. Another ten years before that it was probably around 30 years of age. So it's just a reflection of the global aging that is occurring in the general population.
Director, Pensions and Benefits Sector, Treasury Board Secretariat
I think it would also be important to note that the new individuals coming in after 2013 are paying a different rate, to take into account a lower rate for their pension plan because they are going to age 65.
NDP
Irene Mathyssen NDP London—Fanshawe, ON
Finally, in the briefing notes from you, Mr. Leroux, you talk about the expectation that PSP investments will continue to be strong, with positive inflows of capital until at least 2030. That date struck me as rather interesting because we've heard a lot of gloom, doom, and predictions of a collapse in regard to so many seniors. There will be 9.8 million by 2036, as compared to 4.8 million now.
I recognize that it's the general population, but the fact is that there's this strong growth, this positive inflow, in terms of the public sector, so it seems to me that those predictions of doom and gloom may be a bit exaggerated. The course we're taking in regard to the future of pensions in this country may be rather overreactive than reasonable in regard to the numbers and the facts that you're presenting.
Vice-President, Policy Portfolio and Asset Liability Management, Public Sector Pension Investment Board
Briefly, this reflects basically how the liabilities are expected to grow over time. We do rely on numbers and projections provided by the office of the chief actuary.
Jean-Claude, do you want to comment?
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
Yes. A decision was taken to finance service after 2000. That means that even if it's an old plan, to some extent it's a very young plan for services after the year 2000, which means that in terms of cashflow, the contributions coming in are expected to be higher than the benefits—not the total benefits, but the benefits related to years of service after 2000. These contributions will be higher than these benefits until at least 2030 and maybe 2032.
Conservative
Ron Cannan Conservative Kelowna—Lake Country, BC
Thank you, Mr. Chair.
Thank you, lady and gentlemen, for an excellent presentation.
Following up from Ms. Mathyssen, I have a news alert: we're all getting older. The reality is that this is the demographic in Canada, but I guess it's like a fine Okanagan wine; we're getting better with age. Our workforce is in many cases working longer or living longer, so it's helping in that respect.
I have a couple of questions. One is to Mr. Leroux. First of all, you talked in your opening comments about the size of the pension fund. Is it one of the top three in Canada by size?
Vice-President, Policy Portfolio and Asset Liability Management, Public Sector Pension Investment Board
In terms of size, I believe we're number three?
Vice-President, Communications and Government Relations, Public Sector Pension Investment Board
No, we would be number five or six.
Conservative
Ron Cannan Conservative Kelowna—Lake Country, BC
Okay.
Both Ms. Mathyssen and my colleague Peter Braid talked about trends within the industry. Mr. Ménard, you mentioned the trends. Maybe you could talk about industry trends from the private to the public sector. Either yourself or Ms. Gowing talked about how the pension plan is still very generous compared to what's happening within the industry and the private sector. Maybe you could compare the public and private sector and what's happening.
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
Well, the story is different, I would say.
Every year now, we are releasing on our website a fact sheet page on registered pension plan coverage. In that two-page fact sheet you can see that about 87% or 88% of public sector pension plans continue to be covered by defined benefit pension plans.
If you look at the private sector, and indeed if you look at the overall coverage first, about 6 million workers are covered by an employer pension plan, which is about 40% of the labour force. If you look at the trend now between defined benefit and defined contribution plans, you see that in the private sector about 24% of workers are covered by an employer pension plan.
It has been stable for the public sector, but it has decreased for the private sector.
Conservative
Ron Cannan Conservative Kelowna—Lake Country, BC
Thanks for that comparison, because Chrysler announced on Friday that in both the U.S. and Canada they are moving to defined contributions, so there is a two-tier system happening within the private sector as well, which is of concern to some of the folks and a reality of what is happening in the industry.
I know that my colleague, Minister Menzies, has worked very hard also in coming up with another alternative for the private sector to try to come up with a registered pension plan. From your perspective, have you had any input in that, in the consultation process?
Chief Actuary, Office of the Chief Actuary, Office of the Superintendent of Financial Institutions
I didn't have any input on this. This initiative is called the pooled registered pension plan.
I have two observations to make. I would say the first is that size matters. Indeed, I think Bill Morneau released a report for the Ontario legislature and said in his report that in order to achieve efficiency, or in terms of returns, any fund lower than $40 billion might incur expenses that will be detrimental to the plan members.
To some extent, this idea, this planned pooled registered pension plan, is to permit all Canadians to pool their assets, to put their retirement savings together, and then achieve, first, better returns, and also lower administrative expenses.
Conservative
Ron Cannan Conservative Kelowna—Lake Country, BC
So about $40 billion in Canada is the break point. Is that what you're saying?
