Status of Women Committee on Nov. 17th, 2009

[Ruth Rose-Lizée]

I was speaking about giving money directly to mothers. Often, a man and a woman have children together and then separate. The man may find a new spouse, and should he die, the children's mother will not receive the survivor benefits. They will go instead to the new spouse, even if the union has only lasted four years and they have never had children together. She may even already be receiving a pension from another spouse, which is funded to a large extent by other taxpayers. And all that is a result of simply having lived together as a couple. It could be given to those who had the children.

Some European countries have systems that work that way, including France, Germany and Sweden. I could also forward this information on to Ms. Cool.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

That would be very helpful.

Mr. Laporte, could you expand a little bit further on support to women who are not in the workforce as we know it, but who are at home? How we can most effectively work to provide some recommendations for pension benefits there?

[Jean-Pierre Laporte]

The problem lies in the Income Tax Act, which says that you cannot have a pension plan unless there is an employment relationship, meaning T4 income. If you have someone working in the home, someone who is not remunerated, that person is shut out from the whole registered pension plan world. One quick fix is to scrap this antiquated rule and simply allow women who work in the home to participate in a pension plan.

The question is, where are they going to find the money to put into the pension plan? That is a broader problem, but at least if they have access to the plan, they can save for their retirement. Right now they're completely shut out; they have to rely on their spouse's pension, if he or she has one, and survivor benefits.

The supplemental CPP is not a silver bullet; it's just one way of tackling the problem. However, under that scheme, deemed earnings could be used, or there could be a lump sum amount, similar to what you have for tax-free savings accounts right now, with a maximum for each year that is indexed to inflation. They could say that you could save up to, let's say, $5,000 in the supplemental CPP, and that builds up every year. You could at least create a pension stream for yourself.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

I'm out of time, but that's what I was going to ask: whether those could be--

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

Thank you very much.

Go ahead, Monsieur Desnoyers.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

Thank you, Madam Chair.

Welcome everyone.

My first question is for Ms. Sohier.

You spoke about poverty among elderly women, about the fact that a woman's life expectancy is longer than that of a man, and about protecting pension plans for women. These are questions that we all want to address. In fact, we want to be able to make recommendations to improve the situation of women with respect to the CPP. We were discussing private plans. You referred to transportable models, and in addition, provincial and national plans. However, this was not completely clear.

I imagine that contributions will come more or less from everybody. We know that women's situations do not permit them to contribute very much to plans, including RRSPs. You and many others have spoken of a lack of job security, part-time work, and so on. You are putting forward interesting solutions, but are they feasible?

[Martine Sohier]

We believe that one of the easiest solutions to implement would be to use the Canada Pension Plan. In order to not put an additional burden on future generations, we would opt, of course, for a defined contribution scheme. Everyone could contribute to it, even those who are not linked through employment, as was mentioned earlier. Those individuals with a lack of job security nevertheless have an employer. We could think about asking these employers to make a contribution, even if it is only 1% or 2% of the employees' salaries, which would help them put away funds for their retirement.

Of course, a rate of 1% or 2% will not mean very significant amounts, but it is a start all the same. In our example, we referred to 4%. Half of this contribution could come from the employer and the other half from employees. Based on our projections and economic considerations, that could amount to additional replacement income of between 12% and 20% at retirement. It is a modest amount, but it will help to improve people's retirement.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

It is not much, indeed. Especially since defined benefit schemes, particularly in Canada, have dropped in value quite significantly due to the current economic crisis.

My next question is directed at Ms. Rose-Lizée.

You spoke a lot about Quebec. You referred to the Régie des rentes du Québec, and the CPP, but they are two completely different entities. I always say that things are different in Quebec from the rest of Canada, given that we have child care and pay equity systems in Quebec.

You also referred to Bill C-51 which was introduced by the federal government and which deals with the budget implementation. There were a couple of sentences about the Canada Pension Plan slipped into it. Also, you said you tabled a document for the Quebec National Assembly in which you are calling for certain things, and you did likewise at the federal government level.

Could you elaborate on this?

[Ruth Rose-Lizée]

Indeed, the Quebec Pension Plan and the Canada Pension Plan are two separate systems, except that, in general, they try to coordinate themselves and contain the same provisions.

Bill C-51 contains a major cut. There were four measures in this bill. However, the measure that concerns us is the one that seeks to increase the actuarial adjustment from 6% per year to 7.2% per year for people who retire before age 65.

Quebec made a similar proposal in its consultation document this summer, and we suspect that the province intends to do the same thing with the Quebec Pension Plan. It should be recalled that any amendment to the CPP must be adopted by the parliaments of two-thirds of the provinces representing two-thirds of the population.

We hope that there will be a bit more discussion than what has taken place to date. We are convinced that these measures will affect women more than men. I have not yet had the time to conduct the same type of analysis on the CPP as the one I did on the QPP, because I am having a great deal of difficulty finding the right figures. But I will forward them to Ms. Cool.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

You state that the federal government, in Bill C-51, wants to impose cuts that will impact on women substantially. I understand that you fear that the Quebec government is going to do the same thing. You also talked about votes: two-thirds of the provinces representing two-thirds of the population.

When you refer to these votes, they don't affect Quebec because, given that the Régie des rentes is a separate creature, Canada does not have a voice on that topic. However, the CPP must indeed be accepted by two-thirds of the provinces representing two-thirds of Canadian citizens.

I would like you to tell me a bit more on this subject.

[Ruth Rose-Lizée]

The proposal comes from the Department of Finance of Canada, which consulted the departments of finance in each province and territory. So in a sense, there has already been preliminary approval on the part of the provinces.

As concerns enhancing the Canada Pension Plan, we can see that two-thirds of the provinces includes Quebec, if you carefully read the texts concerning the CPP.

Of course, Quebec does not represent one-third of the population, so it does not have a veto, but it is still part of the consultations. What Bill C-51 says is that henceforth, changes may be made by regulation. In this case, there would be approval by two-thirds of the provinces, but this would exclude Quebec.

So indeed, Quebec would also have to legislate separately.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

So the QPP is definitely a separate creature from the CPP. Is that correct?

[Ruth Rose-Lizée]

Major changes have been made in recent years by mutual consent or by negotiation between the provinces and Quebec, which carries a certain weight in these negotiations.

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

Thank you very much.

We will go on to Mrs. Wong, please.

[Alice Wong, Conservative, Richmond, BC]

Thank you, Chair.

First of all, I'd like to thank everybody appearing here today as a witness. My questions are addressed to the two of you who came from Watson Wyatt Worldwide.

As you know, in January the government launched a lengthy consultation to improve the legislative and regulatory framework for federally regulated private pension plans. Also, a few weeks ago our minister, Minister Flaherty, announced several reform proposals that came out of this consultation. I have three questions relating to that, and then you can use your time to see how much you can contribute towards those three questions.

First of all, can you comment on and explain your involvement in this process?

Second, in your consultation paper you also recommended that employer contribution holidays be limited. In my understanding, this was one of the recommendations that the Minister of Finance took into consideration. I would like you to expand on this, please.

Third, can you outline and comment on the other measures that the reform proposal package included?

[Martine Sohier]

With regard to your question about our involvement, to my knowledge I don't think we are involved.

You also mentioned the contribution holidays issue. I had a hard time understanding the question, so would you mind expanding on it a bit?

[Alice Wong, Conservative, Richmond, BC]

I think you did present a consultation paper, didn't you?

[Terence Yuen]

Yes, we did.

[Martine Sohier]

That was not with the new consultation, though.

[Alice Wong, Conservative, Richmond, BC]

No, that's in the consultation paper. That's the one probably Mr. Yuen would be more familiar with.

In your consultation paper, it's actually your idea--your company's idea--that employer contribution holidays be limited, right? That's why I want you to explain.

[Martine Sohier]

I don't have this consultation paper. I apologize; I don't have it in front of me, so I cannot really comment on everything that's in there, but in general you need to be careful with contribution holidays.

You're talking about a defined contribution plan. In a way, it may create unstable contribution patterns, and taking contribution holidays may eventually create the need for greater contributions. In the new model, we're proposing stable contributions for the employer, so that you don't disrupt the pattern of contributions. You stabilize the contribution pattern, so that if you contribute every year, you then can systematically accumulate pension savings for your members.

I don't know if that answers your question or if you have a further question to that effect--and what was your third question?

[Alice Wong, Conservative, Richmond, BC]

My third question asked you to outline and comment on the other measures that the reform proposal package included. It's out there, and I know that your company has submitted a consultation paper. You probably would like to see how much of your recommendation is actually in it.

[Martine Sohier]

Again, I apologize, because I don't have this consultation paper in front of me. I didn't think that was the object of this discussion, but I'm more than pleased to comment in general.

At Watson Wyatt we believe we need to come up with new, flexible, innovative arrangements. We don't believe the burden should be only on employers. Some employers are small and do not have the capacity to actually come up with and implement a defined benefit plan, which can turn out to be a mini-insurance company over the long term. We've seen that in our country and we've seen it in other countries. Sometimes the obligation of a pension plan becomes larger than the company's assets themselves, and that can create a big burden on the company for generations to come.

We believe that the pooling of risk is key in setting up new arrangements. Pooling of risk means that you take a group of members and bring them together into a pension plan. That's the object of our paper here; it's what we call a target benefit. By setting a defined benefit target, you aim to get to a certain level of pension.

You may not get there, and we know defined benefit plans are facing issues with their financial positions right now because of the current economic situation. We know that a target is a goal that you should have, but it may not mean that you get there, and members need to understand that they also need to be flexible in terms of getting a certain level of pension and also having the flexibility to sometimes reduce benefits if you cannot achieve your target.

We believe you need to set up new arrangements like that so that risks are pooled among members. By getting a group of members together, you can pool longevity risk, as well as some investment risk, among generations.

[Alice Wong, Conservative, Richmond, BC]

Are you aware that in some college pension plans--and that's not federal, that's provincial--people who take time off on unpaid leave can actually opt to contribute the employer's portion as well? That is the provincial college pension plan. Is that the idea you're looking at?

[Martine Sohier]

Yes, although you need an employment relationship in that circumstance. What we're saying is that we need to go beyond that, because some women have interrupted periods of work and don't keep the relationship with their employer; therefore, they are not linked to any pension plan. We're suggesting implementing a large fund so that women in these situations could actually continue to contribute and, as you mentioned, could contribute the amount that they would have contributed into another plan, as well as maybe more, beyond what they can, to perhaps replace the portion that the employer could contribute.