Status of Women Committee on Nov. 3rd, 2009

[Chris Forbes]

It's 7% of the private plans, yes.

[Candice Bergen, Conservative, Portage—Lisgar, MB]

So the remainder is regulated by the province. If changes are required, then, if I understand you correctly, the provinces would make that decision, or you would be suggesting changes to them. What is the relationship, then, between the federal government and the provinces so that we are not obviously, as a federal government, going out of our jurisdiction? Can you explain that to us?

Our goal is that we don't want to see people lose their pension and we don't want to see tragedies like we have seen recently, but I think we need to have a very clear picture of how much the federal government can do and what our role is. If you could explain that for me, that would be great.

[Jeremy Rudin]

Yes, I'd be glad to.

The jurisdiction decision as to which level of government is responsible for the regulation of a private pension plan depends, in the first instance, on what sector the employer is in. Certain sectors fall under federal jurisdiction, and then failing that, if it doesn't fall under federal jurisdiction, it depends on the location of the employer. Some employers have multiple locations, but I think there's a well-worked-out system as to who's in charge, and indeed the jurisdiction can, at times, be shared across certain provinces.

One aspect of the reforms that the Minister of Finance is proposing, which would have implications across the board for private pension plans, is a change to the tax treatment of the contributions that employers make to the funding of their pension plans. That's an Income Tax Act change that will be broadly applicable.

Other than that, the changes that were proposed by the minister would, in the first instance, only apply to federally regulated plans. That said, we do have a working group of federal and provincial officials on pensions. We share ideas. A number of provinces have gone through consultative processes similar to the process that the federal government has gone through, and there are reform agendas going forward in some provinces, not in lockstep, but informed by each other's experience.

[Candice Bergen, Conservative, Portage—Lisgar, MB]

When did some of these consultations begin with the provinces? Has it been recently, over the last couple of months, or over the last year?

[Jeremy Rudin]

The federal-provincial working group of officials on pensions was established two finance ministers meetings ago. It would be rude to whip out my BlackBerry to figure out when I first chaired one of those; it has been a number of months on an organized basis, but it's not as if we didn't have informal and bilateral discussions before that.

[The Chair, Liberal, Hedy Fry]

Thank you very much, Ms. Hoeppner.

Now Ms. Mathyssen.

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Thank you, Madam Chair.

Thank you very much for being here. I appreciate the expertise and the information you have brought. I do have some questions, though, and I'd like to address these to Ms. Schirle and perhaps Monsieur Ménard.

Ms. Schirle, you indicated that the pension gap would close over time because the wage gap is closing. Currently, you said it was 85%. We've heard, however, from the Office of the Chief Actuary, that the ratio is different from that. In fact, what we just heard was that the ratio of female to male average employment earnings stood at about 48% in 1966 and was about 71% in 2006, and the projections were that this ratio would increase to 84% by 2050. That's a huge differentiation. I am wondering why there is that contradiction. It seems to me that 2050 is a very long time off.

[Jean-Claude Ménard]

If I may, if I present this information by age group, the picture will be completely different. The ratio I alluded to was the ratio for the age group 18 to 69. That is the contributory period for the Canada Pension Plan. If I look at younger workers, the 85%, and in some cases even more than 85%, the gap between males is smaller if you are looking at a younger cohort than an older cohort. My ratio is the overall workers from 18 to 69.

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Ms. Schirle.

[Dr. Tammy Schirle]

There are a lot of measurement issues when people are talking about this ratio, and we have to be very precise on what we are talking about. I think Mr. Ménard would be talking about the ratio of annual earnings of women to men. That does look to be around 70% right now. That is perfectly true, and the trends he's talked about make perfect sense to me.

What I was talking about was the actual hourly wage, so if you took per hour what women are earning relative to men, that is at about 85%. The difference in annual earnings is in part what women receive as their hourly wage but also what they work in terms of hours over the year. On average, women are working many fewer hours than men are, so that gives them lower annual earnings than men.

When you look at the trends that both of us are talking about, the general trend is the same. We see a general increase in women's earnings or wages relative to men, but the precise number you place on that depends on whether you're talking about hourly wages or annual earnings.

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Those lower annual earnings impact the CPP, which is something we're concerned about, too.

Again we are back to numbers. For those who have private pensions, if I heard correctly, that seems to be in decline, and we know there have been some problems in terms of pensions in the private sector. I heard it has gone down from a 45% level to 38% among men, and from a level of 42% to 39% among women. If we extrapolate those figures, shouldn't we be concerned about the future of people depending on pensions, regardless of gender?

[Chris Forbes]

Without commenting on the statistics, I would go back to one of the points in my opening remarks about the third pillar, which is registered pension plans and the RRSPs. The whole point of that combined system is that if you have a registered pension plan or not, your combined ability to save through the registered pension plan and the RRSP is in total the same, whether you are self-employed or holding a registered pension plan. So you have that third pillar there, which should give people the ability to save as much whether they are in a registered pension plan or not.

I can't comment on the numbers that you used, but that would be my one comment.

[Louise Levonian]

The one thing I'd add is that the tax-assisted savings are savings outside of pension plans. Your principal residence is a form of savings. You have life insurance, which is a form of savings. There are all kinds of forms of savings other than your pension plan. The savings Mr. Forbes was talking about are tax-assisted savings.

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Then we're right back to the problem of those who cannot or do not take up the room in RRSPs.

We've heard from HRSDC that defined benefit plans are gradually being replaced by the defined contribution plans. I think we heard that again here today. I have a table here, and it takes a look at a defined contribution pension at two moments in time, and this would be a plan that was worth about $100,000. May 15, 2008, it was worth $7,659.20 a year, $638.26 per month. By February of 2009, that same $100,000 was worth $312.11 per month.

So there's clearly an issue with regard to pension security. That movement from the defined benefit to the defined contribution seems to be happening more and more. Should we not be concerned about that shift, because of fluctuations in market, because of uncertainty? People can't depend on that money any more.

[Jeremy Rudin]

It is certainly the case that within the space of registered private pension plans that defined benefit plans are smaller as the share of participation in defined contribution plans are rising. I think there are a variety of reasons for this, and there are a number of theories that are very difficult to sort conclusively. They certainly change the way risk is felt by the pensioners and what risk is borne by the employers. On the face of it, if one assumes the defined benefit plan will meet all its stated obligations, then the risk is essentially borne by the employer and reduced for the employee.

[The Chair, Liberal, Hedy Fry]

Thank you very much.

Now we'll move to the second round. Ms. Zarac.

[Lise Zarac, Liberal, LaSalle—Émard, QC]

Thank you, Madam Chair.

Mr. Forbes, how often are pension plans reviewed?

[Chris Forbes]

I was referring to the Canada Pension Plan.

[Lise Zarac, Liberal, LaSalle—Émard, QC]

Yes. How often is it reviewed?

[Chris Forbes]

It is reviewed every three years.

[Lise Zarac, Liberal, LaSalle—Émard, QC]

You stated that the changes for the next three years had already been studied. Did I understand correctly?

[Chris Forbes]

We just completed our three-year review in May. An announcement was made by the federal, provincial and territorial ministers of Finance. Bill C-51 contains the results of that three-year review.

[Lise Zarac, Liberal, LaSalle—Émard, QC]

Does that mean that there will be no changes for the next three years?

[Chris Forbes]

We will undertake another review in three years and another three-year report will be drafted.

[Lise Zarac, Liberal, LaSalle—Émard, QC]

Fine, thank you.

You mentioned that you fall under federal jurisdiction; therefore this is obviously for federal employees. On the other hand, you also stated that you work with other businesses and provide them with your expertise. Employers who contribute to a pension plan for their employees benefit from tax credits. This is advantageous for them. For employees, this is the equivalent of social benefits. Often they agree to not being given salary increases because they have a good pension plan.

I would like to call upon your expertise. How could we protect employees in private businesses?