Evidence of meeting #41 for Status of Women in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was retirement.
A recording is available from Parliament.
The Clerk of the Committee Ms. Angela Crandall
I have been advised that the Chair will not be able to attend today. We do not have a Vice-Chair either.
We don't have our chair or our vice-chair. Is it the will of the committee to proceed to elect an acting chair for the meeting?
Madame Zarac?
I have a nomination for Madame Boucher. Are there any other nominations?
Conservative
Sylvie Boucher Conservative Beauport—Limoilou, QC
I don't think I can act as Chair because I am Parliamentary Secretary. So, I think you should ask someone else.
November 19th, 2009 / 3:40 p.m.
Conservative
Alice Wong Conservative Richmond, BC
How about Mr. McCallum? He has a lot of experience in chairing, right?
Liberal
John McCallum Liberal Markham—Unionville, ON
Yes. Are we allowed to decline a nomination? I'm not a regular member of the committee.
Conservative
Alice Wong Conservative Richmond, BC
For chairing, it doesn't matter. It's a procedural thing, right? You have the most experience.
The Clerk
Let's deal with one motion at the time.
I have a motion for Mr. McCallum to be acting chair....
Conservative
The Acting Chair Conservative Dave Van Kesteren
Okay. I'd like to call this meeting to order. This is meeting 41 of the Standing Committee on the Status of Women, and we are continuing our study of women and pension security.
Before I continue, I'd like to acknowledge and welcome our Russian delegation from the presidential administration from Russia. Welcome.
I understand that you are a public administration reform program on a gender study tour. Welcome. We're very pleased to have you with us, and we're very glad that these issues are being taken seriously not only here in this country but in your country as well. I hope your stay here is very pleasant, and I hope we can mutually learn from each other.
We are also very pleased to have witnesses from the Confédération des syndicats nationaux—did I say that right? They're on the video, so that's Madame Claudette Carbonneau and Nathalie Joncas, the actuary.
As well, from the Fédération des travailleurs et travailleuses du Québec, we have Danielle Casara. Welcome. We have Marie-Josée Naud, the union adviser for the education department.
We would ask that you give your presentation. We also ask that you give us about ten minutes. Try to keep it within that timeframe, and then we will begin our first round. Who would like to begin?
We'll have the video conference folks start first, s'il vous plaît.
Go ahead.
Claudette Carbonneau President, Confédération des syndicats nationaux (CSN)
First of all, I want to thank you for giving us this chance to appear. We would like to share our views on women and pensions, and also suggest a number of possible improvements. In preparing our presentation, we looked at this issue in terms of, first of all, private or supplemental pension plans, and second, public plans.
As regards supplemental private pension plans, it is clear to us that the best pension plans are defined benefit plans. Large corporations, particularly in the industrial, public and parapublic sectors, generally have this type of plan.
Women have a significant presence in the public and parapublic sectors. In the private sector, however, they often hold jobs in small service companies, which are not large enough and have too few employees for a defined benefit plan to be feasible, even though this type of plan is better, in our opinion.
The legislative framework that applies to defined benefit plans is extremely complex. A small business has neither the means nor the resources to create such a plan. Thus a majority of women working in the private sector are covered by defined contribution plans—or no supplemental pension plan of any kind.
Current laws make it difficult to introduce industry-wide plans. Indeed, the federal government held consultations on that issue last March, and we were asked what our interest was in inter-enterprise plans. I would like to give you an overview of the representations we made at the time.
We pointed out that, at our last convention, we undertook a review of pension systems, the idea being to reflect on ways of ensuring that our members had an adequate level of retirement income. Inter-enterprise plans were identified as one very promising solution. They allow a large number of small companies to get together to create a sufficient critical mass for economies of scale with respect to management and administration costs. Furthermore, it is then possible to introduce defined benefit plans in circumstances where it would otherwise be extremely difficult to do so.
Day care services and centres provide an extremely interesting example of that in Quebec. They were able to introduce a plan that covers 1,400 small companies, each of which has about 30 employees, thereby making it possible to set up a very attractive pension plan for 50,000 women workers, since the vast majority of them are women.
Before the introduction of that plan, there were only a handful of plans in place in these companies that were building up capital. By bringing all of the companies operating in that industry under a single plan, it was possible to set up a “final earnings” type of defined benefit plan. Even though women workers may have to change employers in the course of their career, they very often stay in the same industry. Ultimately, they are able to retain their accumulated benefits. This was possible in particular because the government of Quebec has lifted certain restrictions under the Quebec Supplemental Pension Plan Act to make this type of plan feasible. In my opinion, this is an option you may want to look at.
Furthermore, our major proposal in this area is that there be mandatory retirement plans, with employers being obligated to contribute. I would remind you that, as things now stand in Canada, there is no law forcing employers to set up a pension plan. Despite considerable effort on the part of unions at the bargaining table, the percentage of workers covered by pension plans has never exceeded 40%.
We also know that other OECD countries have better systems of protection—systems that are far more generalized. Although steps could be taken to increase the number of company plans or set up industry-wide plans, it is clear, in our opinion, that a major change is needed in the structure of pension plans, as was the case in Australia, and soon will be, in England.
Companies must be forced to contribute towards retirement for workers, male and female. That requirement could take the form of mandatory industry-wide plans, or provincial plans that allow employers with equivalent or better plans to opt out.
In that regard, the CSN believes that the government of Canada should pass legislation recognizing the right of all wage earners to be covered by a pension plan, and requiring that all employers make a minimal contribution. The parameters of such an approach could be determined jointly by union organizations, employers and governments. Those are some of our suggestions with respect to private plans.
In terms of public plans, a number of observations are in order. Overall, women have less coverage under private plans. In addition, on average, they have less income than men; they derive more income from public plans. For people 65 years of age and over, public plans provide 47% of their total retirement income. However, that income represents 56% of women's total income at retirement, compared to 39% for men.
If we are talking about women in retirement, we clearly need to look at the public plans, including Old Age Security, the Guaranteed Income Supplement or the federal CPP. We support the suggestion that the Guaranteed Income Supplement be increased. That would be one way of improving the situation of women in retirement. It would particularly help the poorest women, who may not be in a position to benefit from an industry-wide plan.
As regards the public plans, it's important to remember that women have periods of work interspersed with other events. Private retirement plans, like public plans, do not reflect that reality. On average, women retire when they're older, because they have not accumulated adequate retirement income.
In that regard, a number of corrective measures should be considered, particularly ones that will reflect changes in family structure. We are no longer dealing with traditional families. Fathers take a more active role in caring for children. We believe that public plans should consider the way the new generations decide to structure their family and personal lives. The calculation of the pension benefit should take into account periods where parents are caring for their children. And that consideration should not relate solely to the birth of a child, but also be extended to other periods, such as when a child is ill or when older parents require care, and so on.
I also want to point out that, even though women have a greater presence in the labour market, they continue to be the ones with the greatest responsibility for caring for sick children and aging parents. Adjustments are definitely required in that area.
Our final suggestion with respect to public plans would be that benefits paid out to surviving spouses actually be paid to the right person. As far as we are concerned, the right person is not the last legal spouse, but rather, the person who is responsible for the children. The current structure must be brought up to date in that regard. Today's families no longer resemble the ones that existed 20 or 30 years ago. Thought must be given to this new reality.
We will be able to provide further clarification on these points during the question period, with the help of Ms. Joncas, who is an actuary.
That completes my presentation.
Conservative
The Acting Chair Conservative Dave Van Kesteren
Thank you very much.
We have a new arrival. We're very pleased to see Monica Townson here. However, we will continue in the order we intended.
We'll go to Fédération des travailleurs et travailleuses du Québec. Whoever would like to begin, please do.
Danielle Casara Vice-President, Fédération des travailleurs et travailleuses du Québec
First of all, the FTQ would like to thank the Committee for giving it this opportunity to appear today to express our views on women and pension security.
The FTQ is the largest central union body in Quebec, with more than half a million members, one third of whom are women. As a result, the FTQ represents the largest number of unionized women workers in Quebec. It is also the most representative union body, in that our members work across the full spectrum of economic sectors, including for the federal government. Together we have developed expertise in the area of pension plans, both public and private. We have been part of every single one of the struggles that resulted in improvements to pension plans in Quebec.
Over the years, the FTQ has become more and more active in this area, holding meetings with affiliated unions and training sessions, in order to mobilize our members around this important issue. The FTQ is also involved at the political level and regularly makes its views known by presenting briefs at parliamentary committees or lobbying politicians on this issue.
The FTQ is appearing today to reflect our view that public plans must be maintained and enhanced, rather than cut back, given that they are already too modest. The FTQ noted with dismay that Bill C-51 passed with lightning speed. We can only deplore the lack of extensive public consultations on the proposed changes and the insidious manner in which cuts to the Canada Pension Plan, or CPP, were slipped into a budgetary type of bill.
Furthermore, now that Bill C-51 has passed, there is a greater probability that the Quebec government will also start cutting the Quebec Pension Plan, especially in relation to people who retire between the age of 60 and 65. We think it is important to highlight the fact that the financial status of the Quebec plan seems to be even more precarious, as a result of demographics and a less robust labour market than in the rest of Canada, which means that the Quebec government may have to increase contributions in order to ensure its viability.
As stated by the Minister of Finance last May, as part of the triennial review of the plan, the CPP “[...] remains on a sound financial footing”. That is why they “[...] agreed that the contribution rate would remain unchanged at 9.9% of pensionable earnings”.
In light of that, we are extremely concerned about the lack of transparency surrounding the work led by Mr. Jack Mintz, who is to present his report at the next annual meeting of the Finance Ministers in December in Whitehorse. That group has the mandate—and you know this better than we do—to propose a new vision to Finance Ministers of what the Canadian retirement system should look like based on the current reality. We would therefore like to use our remaining time to share our thoughts on what the Canadian retirement system should look like, particularly from the standpoint of women.
In terms of goals, the Canadian retirement income system should ensure that all women have a decent minimum income, that they are able to maintain their standard of living during retirement and that this income will be protected from inflation, particularly considering the fact that, as a result of their family responsibilities, women more often end up leaving the labour market or slowing down. In any case, women already earn less than men do right from the outset.
For the FTQ, the key to proper coverage for women is improvements to public plans, which alone can attain the objectives cited above, especially considering women's high level of dependency on public plans. Indeed, on average, women derive 54.4% of their retirement income from public sources, compared with 38% for their male counterparts. For additional information, you may wish to look at the table appended to our brief.
In a nutshell, women need public plans. The last 40 years have shown the limitations of a system that relies on the voluntary participation of employers in supplemental pension plans, or on the capacity of all taxpayers, whatever their income level, to save enough for their retirement. In actual fact, according to statistics published by the QPP, the coverage rate of supplemental pension plans in Quebec is stagnant at about 40% of all workers. We know that a very small minority of taxpayers—the most wealthy ones—are alone in claiming the lion's share of the RRSP tax deduction.
The most significant reform that could be introduced would involve increasing the CPP/QPP replacement rate, which is currently 25%, ideally to 50%, as proposed by the Canadian Labour Congress. That change would be capitalized and be implemented gradually over a period of 30 to 40 years.
Because the CPP/QPP coverage rate is almost universal, in the short term, this reform would raise the income level of women in retirement. There is no doubt that current provisions related to the care of children under seven and the non-inclusion of the lowest income years for the purposes of calculating the pension—15% which will soon be 17%—should be maintained and should apply to this new component. The FTQ is also in favour of raising the amount of maximum pensionable earnings from 100% to 125%, or even 150% of the average industrial wage, so that an enhanced CPP would cover a larger proportion of the working population.
Incidentally, the positive effect of this approach would be to significantly enhance income security prospects, on retirement, of workers with non-standard jobs, the majority of whom are women, as you know.
For the FTQ, any expansion of CPP/QPP should involve defined benefits, but certainly not defined contributions, and even less so a voluntary contribution plan. We are of the view that only a public defined benefit plan would guarantee women income security over their lifetime, the risks of which would be assumed by successive cohorts of plan contributors.
On that specific issue, the FTQ shares the opinion of Mr. David Denison, President and Chief Executive Officer of the CPP Investment Board, who recognized the major weaknesses of a defined contribution plan, and I quote:Contributors would be individually subject to market risk during their contributory years, and especially to the prospect of not having enough savings to ensure an adequate level of retirement income if they reach retirement age after a period of poor investment returns, such as we have recently experienced;Likewise, contributors would individually bear the risk of outliving their savings; andThe task of explaining investment options and investment performance to millions of individual account holders would be demanding and could still fail to generate suitable investment choices and outcomes.
Having said that, if it was decided to increase the CPP/QPP replacement rate, the FTQ would, in principle, have fewer objections to the idea of introducing a voluntary contribution component to the CPP/QPP, as a means of complementing the 50% replacement rate that would be guaranteed under CPP.
Beyond the benefits for all working women, we expect that the gradual introduction of this measure would mean less pressure on those employers who sponsor supplemental pension plans, as these plans would play a reduced role in terms of future service at least, because of the higher replacement rate under the public plans.
If the FTQ's preferred option were to be selected, we think it would be necessary to enhance benefits under the basic plans during the transition. For example, the Canadian Labour Congress is recommending that the Guaranteed Income Supplement be increased by 15% so that no senior has to live in poverty. Indeed, the FTQ wants to commend the federal government for raising the income exemption from $500 to $3,500 for GIS. However, we believe that exemption should not be limited to employment income, but rather, apply to all income.
We would also like to point out that, for a Quebec woman taxpayer over the age of 65 with an income of between $17,000 and $21,000, a $1,000 withdrawal from her RRSP currently results in a reduction in the GIS amount and increased taxes and contributions of $800, leaving her only $200 net after all is said and done, which is hardly likely to encourage someone to save for retirement.
In conclusion, the FTQ shares your concern with respect to the importance of ensuring that the Canadian retirement system provide income security and respect the dignity of Canadian workers who retire. We would just reiterate our strong preference for extensive public consultations in Canada with respect to potential solutions, and we resolve to make an active and constructive contribution to that consultation process.
Thank you very much for your kind attention.
Conservative
Monica Townson Consultant and Research Associate, Canadian Centre for Policy Alternatives
I'm sorry I was late. My plane was delayed by fog in Toronto.
Consultant and Research Associate, Canadian Centre for Policy Alternatives
I was given eight minutes to speak to you. During that time, it would be impossible to give you a comprehensive view of the issue of pension security for women.
Ten minutes? Thank you.
Conservative
The Acting Chair Conservative Dave Van Kesteren
Forgive me for interrupting. I should add, before I forget, that the last witness mentioned a chart and apparently that is only in French. The clerk has told me that at the next meeting we'll provide that chart for the rest of the members as well.
Madam Townson, please proceed.
Consultant and Research Associate, Canadian Centre for Policy Alternatives
I was just going to say that I have looked at some of the testimony of previous witnesses and I think they have given you a very comprehensive view of both the pension system and the statistics relating to women in particular. So rather than repeat what they have said or give you another version of that, what I'd like to do is concentrate on what I think are the key issues relating to women and pension security.
I should say here that I'm an independent consultant and a researcher on social policy issues. And although I'm a research associate with the Canadian Centre for Policy Alternatives, the CCPA does not take a position on women and pension security, so what I'm going to say represents my own views and not those of the organization.
There are three key reasons why women's concerns about pension security are different from those of men.
First of all, women's average earnings are generally lower than those of men. And that means that pensions that replace a small percentage of earnings are probably not going to be adequate for an income in retirement. For example, as you know, the Canada Pension Plan provides a retirement pension that's equivalent to 25% of the contributor's average annual lifetime earnings, up to a maximum of $908.75 a month. But the average monthly retirement pension being paid to men who retired in May 2009 was $564, and for women it was only $391. In other words, women are getting less than 40% of the maximum benefit. That difference, of course, reflects the fact that many women have spent less time in the paid workforce over their lifetimes than men have, but in particular it shows that women have lower earnings than men.
While it would certainly help women, improving the replacement rate of the CPP--which you've just heard from the FTQ representative and probably from others--would still be an earnings replacement plan. That means that those with lower earnings would receive lower pensions from the plan.
Secondly, women have a different pattern of paid and unpaid work than men do, and this has to be taken into account in the design of retirement income systems. The first tier of the retirement income system—that's OAS and GIS—is intended to do that, but unfortunately, the maximum benefit that an individual can receive from OAS and GIS combined is well below the poverty level.
The objective of this part of the system is to provide pensions for those who have had only limited involvement in paid employment as well as to supplement earnings-related benefits for those who have inadequate employment-related pensions. OAS is paid to individuals. It doesn't depend on labour force participation and it doesn't depend on the earnings of a spouse. It gives women a pension in their own name and it respects women's economic autonomy.
Let me just say here that l'm struck by the fact that some witnesses who have appeared before you have suggested that the way to solve the pension security issue for women is to improve benefits for women in their so-called traditional roles as wives and mothers. In other words, the implication is that women could achieve pension security only through attachment to a man. I think that's a problematic approach.
Some witnesses have suggested giving women higher pensions when their husbands die, and they've proposed that women who don't participate in the paid workforce should somehow be squeezed into the earnings replacement part of the public pension plan, the CPP, even though they don't have any earnings to be replaced.
The so-called “pensions for homemakers” proposal has actually been around for more than 30 years. At the time of the last great national pensions conference in 1981, better pensions for women was a key item on the agenda, pushed at that time by Monique Bégin, who was Minister of Health and then responsible for pensions, and pensions for homemakers was a hot topic then. But the world has changed, as we all know, and I think we need to base proposals on today's reality and not what it might have been 30 years ago.
The reality today is that 82% of women in the main child-bearing years--that is, ages 25 to 44--now work outside their homes. The design of the CPP ensures that women are not penalized if they take time out of the workforce to have children or to remain at home or even to work part-time while their children are young, because the CPP rules allow them to exclude those years when they had a child under the age of seven from the calculation of their average earnings on which their retirement pension will be based. But we need to extend the same consideration to those women who are forced to retire early to care for frail elderly or family members with disabilities. What I think we need here is the implementation of a caregiver dropout, which would accommodate the unpaid work that those women do, because they need better pension security too.
The third point is that women tend to live longer than men. That means that the funds they need to accumulate to provide a lifetime income will be larger than those of men and that inflation indexing to protect them against the erosion of their benefits is particularly important. Some of the proposals that have come up in the past have suggested getting rid of indexing. It would be particularly difficult for women if that were done.
As I think you've heard, only 38% of Canadians—that's 38% of men and 39% of women—belong to a workplace pension plan. As well, only 31% of people who are eligible to contribute to RRSPs actually do so. Currently--these are 2007 figures and slightly different from the ones you heard from the FTQ just now--women seniors get 28% of their income from the first tier of the pension system, which is OAS and GIS. Senior men get 18% of their income from that source. In fact, more than 48% of the income of women aged 65 or older comes from government transfers. Clearly the public pension system is vital for the financial security of women in their old age, and I don't expect that to change.
As we all know, more women than ever before are in paid employment, but perhaps what some of us don't always recognize is that 40% of women's jobs are what we call “non-standard jobs”—that is, they are part-time, contract, and seasonal work, employment through temporary help agencies, self-employment working on their own, or multiple jobs with a series of different employers to make ends meet. Many of these jobs are poorly paid, without benefits such as pensions, and there is little or no job security. Women's lower incomes make it difficult to save for retirement on their own through RRSPs. All of this, of course, is going to be reflected in the kinds of incomes women can expect to get when they finally leave the paid workforce.
So it seems to me that the best hope for improving pension security for women lies in looking at improvements in the first two tiers of the retirement income system—that is, public pensions such as OAS, GIS, and the CPP.
Thank you.
Conservative
The Acting Chair Conservative Dave Van Kesteren
Thank you.
Our first round will be seven minutes. We'll begin with the Liberal side.
Mr. McCallum, you are first up to bat.
Liberal
John McCallum Liberal Markham—Unionville, ON
Thank you very much, Mr. Chair.
I would like to welcome all our witnesses today. Thank you very much for being with us this afternoon.
I could perhaps begin by addressing the point raised by Ms. Carbonneau, which is that the majority of women tend to work in small companies and in the services industry, where there are fewer opportunities to receive a pension and where there is not much chance of saving for retirement. Many Canadians have explored the idea of increased supplements under the Canada Pension Plan and the Quebec Pension Plan.
From a Canadian point of view and particularly from women's point of view, am I right in thinking all of you are in favour of some kind of expansion of the Canada or Quebec Pension Plan? If so, would you think it should be voluntary or compulsory? What scale of increase would you have in mind?
And last, if you don't have subsidization across generations, then any increase in the CPP won't benefit retirees for quite some years to come. So such a change would not benefit very many people who are, say, 50 or 55 plus. Is that the kind of reform you have in mind?
Perhaps I could invite each of our three groups to comment on that series of questions.
Ms. Townson.
Consultant and Research Associate, Canadian Centre for Policy Alternatives
I can respond to that question.
As far as I know, there are currently two proposals to expand the CPP, one of which you heard from the FTQ. It has been spearheaded by Bernard Dussault, who was a former chief actuary of the CPP. He's referring to it as a universal pension plan. It would involve expanding the replacement rate of the CPP over a 40-year period, which, of course, as you correctly point out, would not benefit those who are close to retirement now. His proposal is based on the fact that the CPP Act requires any changes to the plan to be fully funded. It would phase in increases in contribution rates over a very long period of time and would eventually provide a benefit that is approximately 70% or so of the person's pre-retirement earnings.
The option that I would personally favour is the one that's being proposed by the CLC, which is to double the replacement rate of the CPP from 25% of average annual earnings to 50%. They're suggesting it be phased in over a seven-year period. People who are currently retired would not benefit, of course, but it would provide a better pension much more quickly than the longer-term version.
CLC argues that people would be prepared to pay a little more into the plan. The contribution rates would have to increase, of course, but the increase would be phased in over time. I think it would be mandatory by definition, because the CPP is a mandatory plan. That's the option I would favour.
Liberal
John McCallum Liberal Markham—Unionville, ON
The main difference is a phase-in of over 40 years versus seven years.
Consultant and Research Associate, Canadian Centre for Policy Alternatives
I think that's probably a significant difference there. There are other bits that you could tweak, for example, by basing it on a much higher level of earnings than is now the case.
Liberal
John McCallum Liberal Markham—Unionville, ON
Right, but I'll focus on the 40 years versus seven years.
Somebody 55 or 59, as I am, would really like the seven-year thing, but does that not mean that if you go with the CLC plan, the younger people, the people in their twenties and thirties, are subsidizing people in their late forties and fifties? They've already done that once in the past. I'm not sure, in terms of fairness, if you want to have a massive transfer of subsidy from the young to the baby boom generation.