Status of Women Committee on Nov. 17th, 2009

[Alice Wong, Conservative, Richmond, BC]

I have several other questions and also a remark for Mr. Laporte.

You mentioned the fact that some people don't have the income and therefore are not eligible to pay into the registered savings plan. Are you aware of the fact that a new recommendation is already in effect, as of January 1, that people do not need an income to pay into a tax-free pension plan, for $5,000 a year? Anybody in the family who is 18 or older can pay into that. Are you aware of that measure?

[The Vice-Chair (Ms. Candice Hoeppner), Conservative, Candice Bergen]

Excuse me. Could you answer that question very quickly? The time is up. Thank you.

[Jean-Pierre Laporte]

Yes, I am very aware of how the tax-free savings account rules work.

[Alice Wong, Conservative, Richmond, BC]

It would help the pension.

[The Vice-Chair (Ms. Candice Hoeppner), Conservative, Candice Bergen]

Thank you very much.

Ms. Mathyssen.

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

Thank you very much.

I appreciate your being here. This is a very complicated issue and your expertise is certainly appreciated.

I'd like to begin with Monsieur Laporte.

I was following you up to a point. You were talking about a voluntary or extra pension plan in connection with shoestring businesses that might not necessarily be able to provide a pension plan for employees. You indicated people who are earning minimum wage, and then you talked about how, in the event that the business had a good year, it could be compelled to pay a bonus into the employee pension plan.

I wasn't quite following. I wonder if you could explain that again.

[Jean-Pierre Laporte]

Sure.

The idea is that if you are in a small business and you can barely make the payroll in paying minimum wage, typically you would not be a candidate for a registered pension plan. You would not even offer a group RRSP, or you might where it is only employee contributions and you administer it on behalf of the members.

So the supplemental CPP would allow those types of companies to say that they, the employers, would not contribute anything because they just don't have the money, but that they would collect whatever contributions the employees want to make. Instead of putting the contributions into their personal RRSPs, the employees would put them into this plan and the employer would collect them for the employees and remit them to the Receiver General. They might also reserve the right, if they have a good year, to voluntarily pay a bonus into those accounts as a bonus from the company.

There are plans out there called deferred profit-sharing plans that work roughly along those lines. This supplemental CPP reform is flexible enough to allow that type of structure as well as the ongoing regular contributions.

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

I wondered how you could ensure that in a good year this bonus was paid.

I also wondered, if people are indeed earning minimum wage, how they could hope to contribute to such a plan with such a very confined income. How could they manage to make that contribution?

[Jean-Pierre Laporte]

That is a very good point. Everyone always says that you can't draw blood from a stone, and that is a real problem when incomes are so low that it may not even be economically efficient to be saving. It might be better to pay down debt or do other things with your money rather than put it into a tax-sheltered plan.

Nevertheless, the supplemental CPP is such an advantage over existing products because there are no fiduciary obligations placed on the employer. They can't be sued for poorly administering the plan. The economies of scale alone could generate probably at least a 2% risk-free rate of return. So it's as if you went into the market and got a 2% product with no risk.

If you can contribute even 1%, the fact that you get your money administered on such a scale means that you end up with a higher real return on your money than you would anywhere else. If you were to put 1% in an RRSP, in a mutual fund that's invested in equities, the company would charge you a fee of 2% to 2.5%, so you would actually be wasting your money. These economies of scale would actually generate wealth. That's why I talk about the $10 billion. This is money that would go into your pockets instead of the pockets of financial institutions.

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

I believe in this committee we heard that those charges, in terms of administering an RRSP, could be as much as between 35% and 45% over a 40-year period, which is quite staggering. It makes one wonder why anyone thinking rationally would invest all of that money, if they had it, in an RRSP.

[Jean-Pierre Laporte]

It's not all RRSPs. If you invest your RRSP moneys into exchange-traded funds, or bonds, or GICs, you would not be paying those types of management expense ratios. If you are in international equities especially, you would be in that range. It depends on the company, and I don't want to make any generalizations, but there is a Harvard study out there that has looked at the fees charged across the developed world, and Canada ranks at the very top.

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

That's very interesting.

Madame Lizée, I have a question for you. You talked about the concern you had about the increased penalty for early retirement, and we see that in Bill C-51. I wondered if you had a concrete proposal, any idea about how we could encourage people to retire later without penalizing those who retire early. Was there something you had in mind in regard to that?

[Ruth Rose-Lizée]

Naturally, once there starts to be a labour shortage, people who are considering retirement, especially women between the ages of 55 and 64, see their activity rate increase swiftly.

It should be pointed out that there is already an actuarial reduction of 6% per year. So there is already an incentive in the rules governing the CPP or the QPP, which means that some retirements are delayed. On the other hand, we realize that so many people lost money from their RRSPs or their employer's plan that Freedom 55 is not possible for them. They must continue to work. It is mainly the employers' interest in keeping their experienced, senior workers that will make a difference.

[The Vice-Chair (Ms. Candice Hoeppner), Conservative, Candice Bergen]

Thank you very much.

We will now go to our five-minute round of questions and answers, and we'll begin with Madame Zarac.

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

Thank you very much.

My question goes to Ms. Rose-Lizée. You mentioned that it is important to avoid creating tax shelters for people with money. The committee is studying this subject for the very purpose of ensuring that women will have an adequate pension fund.

You tabled a detailed brief with the Department of Finance and you consulted more than 14 women's groups. I would like you to tell the committee about the impacts on women who retire without an adequate pension fund. What is the impact on these women?

[Ruth Rose-Lizée]

Fortunately, in Canada, there is a guaranteed minimum income for seniors, which is made up of OAS and the Guaranteed Income Supplement.

According to certain figures, in Quebec, 53% of women are so poor that they are still entitled to the GIS, whereas this applies to only 43% of men. In general, the average income of elderly women is 62% that of men. As we get older, we have additional expenditures. The poorest people are primarily those who live alone, because they must pay the rent all by themselves. After having paid the rent, many seniors do not have enough money left to feed themselves properly. This is also due to the fact that they are isolated, because they don't have enough money to go out and be active in the community. When they retire, women are often much more alone than men. This is because men die earlier and because it is much easier for men who lose their wives to find a new spouse than for a woman to do the same.

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

Thank you.

Mr. Laporte, Mr. Yuen and Ms. Sohier proposed the creation of a new plan as a solution. Ms. Rose-Lizée seems rather to advocate the improvement of existing plans. I suppose that both of these are good solutions, but we need incentives. The more people save, the more they will have a nest egg for their retirement.

However, because we know that women have lower salaries and less money to invest in long-term plans, what type of incentive would be required to ensure such a balance in pensions?

[Martine Sohier]

We advocate adding another layer to the existing plans in Canada and Quebec. The incentive could perhaps be to add a minimum contribution on the part of the employer. This could encourage employees to contribute more.

As I said earlier, this would not be required of employers who already offer a plan that corresponds to what we would require as minimum contribution. We are talking about 1% or 2% on the part of the employer. For small employers, this can be quite a bit, but at the same time, it can encourage people to save. We know that if this incentive to save does not exist, then people won't save; that is a proven fact. Even if we try to educate people in the long term, part of the population will discount the importance of saving. So I believe that the incentive should be a minimum contribution on the part of the employer to this plan.

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

Here is a question for all of you. What is the percentage of responsibility? Globally, we are talking about the government, the employer and the employee, so whose responsibility is it? How should it be shared? I don't think that it is a sole responsibility. How should it be divided fairly?

[The Vice-Chair (Ms. Candice Hoeppner), Conservative, Candice Bergen]

Ms. Zarac, your time is up, so maybe we can have that answer in the next round.

We'll go to Ms. Brown, please.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

Thank you, Chair.

I'm new to this committee and this is the first time that I'm sitting in, but I do have some comments and a couple of questions I would like to ask.

First of all, my comment would be that small and medium-sized enterprises that are now tasked with the responsibility of pensions would look on this as another tax on their business. I find it very difficult as a business owner to look at this and say that it's just another imposition on a business to have to collect funds or to have to administer funds. My fear would be that small and medium-sized employers would turn to their employees and say, “You're now independent contractors, because it's easier for me to manage my business in that fashion than it is to now have to administer another fund.” I think this is something that needs to be taken into real consideration.

Mr. Yuen, I wonder if you could tell us this. What is the annual average pension contribution in Canada today?

[Terence Yuen]

Are you talking about private pension plans, or in total?

[Lois Brown, Conservative, Newmarket—Aurora, ON]

On pensions as they stand in Canada, either from public contributions or private enterprises, is there an average that you can give us?

[Terence Yuen]

There's no average, because it varies, depending on what type of plan you have. It's very different between DB and DC and what types of arrangements you have with your DB plans. When you're talking about contributions, are you talking about employer contributions or are you talking about employee contributions?

[Lois Brown, Conservative, Newmarket—Aurora, ON]

I'm talking about employee contributions.