Evidence of meeting #116 for Public Accounts in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was accounts.
A video is available from Parliament.
4:55 p.m.
Conservative
The Chair Conservative Kevin Sorenson
Thanks very much.
Thank you, Ms. Yip.
Mr. McCauley will have the last time segment for today. Then we'll have to go to the vote.
4:55 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Great. Thanks.
Mr. Rochon, I'm impressed with your memory that you would know exactly what table number that was earlier.
4:55 p.m.
Voices
Oh, oh!
4:55 p.m.
Conservative
The Chair Conservative Kevin Sorenson
Mr. McCauley, I'm very impressed with Mr. Rochon for a number of reasons.
4:55 p.m.
Voices
Oh, oh!
4:55 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
You mentioned that if you retired, you would do etc., etc. If you cashed out early, you would use a different discount rate for your cash-out for your pension than the government's actually using for their long-term liabilities for their anticipated return on it post-2000, would you not? And if so, why?
4:55 p.m.
Deputy Minister, Department of Finance
If I cashed out early, it would affect the total actuarial value of my pension benefit over the course of the rest of my life.
5 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
If you took the paycheque, my understanding is that it's—
5 p.m.
Deputy Minister, Department of Finance
It wouldn't necessarily affect the actual....
If I cashed out early, yes, I'd have to think this through.
5 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
If you cashed out early and took the money and ran, the discount rate used to determine your portion would be a different discount rate, a more generous discount rate, than that used for the anticipated return.
We're short on time, so let me get back to—
October 31st, 2018 / 5 p.m.
Auditor General of Canada, Office of the Auditor General
Mr. Chair, something you need to understand when you're dealing with pensions is that, as Mr. Huppé explained earlier on, at a point in time you predict what the cash flows are going to be. Based on how many people are in a plan, when they are going to retire, and what their salaries were, the actuaries can put together an estimate of how much cash is going to be paid out over the next 50 or 70 years, or whatever. That estimate of cash doesn't change no matter what the discount rate is. That estimate of cash is the estimate of cash.
When you then say we're paying these amounts of money out over many years, how much is that worth today? That's when you have to decide what discount rate you use. There can be many different discount rates. The discount rate we've been talking about is a discount rate for accounting purposes, and the accounting standards say for accounting purposes here is how you set the discount rate.
When you're talking about cashing out, you are talking about a solvency basis, essentially. If everybody decided today to cash out, you would use a different discount rate, because you're changing the cash flow. Would people cashing out today use a different discount rate? Yes, they would, but that's not the assumption that is used for accounting and to set the discount rate for accounting.
5 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
I have one last question. I want to get back to post-2000. I understand we're using the anticipated rate; it's technically an arbitrary rate. How are you deciding that, and what vetting do you get for that? You said that if PSAB comes up with a new recommendation on how we should look at our liability and our discount rate, it could be $40 billion or $50 billion higher. How are you accounting for that risk, and what could the bad risk be? What could we end up with on the books, if it is a change in the discount rate?
5 p.m.
Comptroller General of Canada, Treasury Board Secretariat
Obviously, if we would align to a change in standards, and, yes, it would have an impact on the liability. We haven't made that analysis, and we can't say what the actual rate would be. I can't say it's going to be $40 billion or $50 billion, but I agree there would be an impact on it, and we would align to any changes in the standards, if they decided to go that way
5 p.m.
Conservative
5 p.m.
Conservative
The Chair Conservative Kevin Sorenson
I'm sorry, we're out of time. We have to get to the votes.
I want to thank everyone for coming. We're going through three large volumes. Thank you for your ability to help us wade through them. If there are other answers or questions that were posed, and you would like to give us more information on some of those, please send them to our clerk and our clerk will take care of them.
The meeting is adjourned.