Status of Women Committee on Nov. 24th, 2009

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

Thank you, Madam Chair.

Welcome, Ms. Kaegi. If I understand correctly, you said that, especially in the case of women, the Canadian government should ensure that they have a decent income, that they can maintain their standard of living and that they are protected against inflation during retirement. Is that correct?

[Gerda Kaegi]

I didn't say standard of living. I think what I said was we should ensure they're not below the low-income poverty line. They shouldn't be in poverty.

On the inflation issue, Statistics Canada did an analysis about four years ago that looked at the different inflation effects on different segments of the population, and they found that the seniors' population, the older population, had a somewhat higher inflation rate than other demographic groups in the population. And we're saying, unfortunately, that it may be too complicated, but the indexation of OAS and GIS is based on the consumer price index and not the real inflation that older people face.

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

Thank you.

Do you think it is necessary to go through the public plan in order to give women a decent retirement income? There are all sorts of reasons for that, including the ones you gave. We are talking about the lowest wages and the slew of reasons why women, in particular, will never have a decent pension plan. Those who are already being heavily penalized will continue to be throughout their retirement.

Do you agree that this needs to happen in the public plan?

[Gerda Kaegi]

Yes. That indeed is what we are recommending. We think it is the only way to go.

Private pension plans can be wound up. Private pension plans and pensioners go to the end of the line in the bankruptcy of their employer or the shutting down of their employment place. The public plan, so that the burden is carried by everybody in the community, is a far better and far safer way to go.

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

On that subject, a number of stakeholders have talked to us about increasing the replacement rate from 25% to 50%. But you say that is not necessary. However, if we want to improve the public plan, that could become a key component of reform, which would make it possible for women to have access to a decent retirement pension, at the very least, through the public plan.

You said it, defined benefit pension plans are the best way to go. Would you be in favour of turning the Canada Pension Plan into a defined benefit pension plan?

[Gerda Kaegi]

Yes, we would. Defined benefit plans are clearly the better way to go.

We have noticed over the years that women have benefited from this. They have become the majority of workers in the public sector, and that's where you're going to find union negotiated defined benefit plans. Those are the most secure plans, as we have seen during this current economic downturn in our society.

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

As for the replacement rate, various witnesses have talked to us about going from 25% to 50%. Earlier, you seemed to think that that was not necessary.

I would like to hear your thoughts on that. Improving the public plan is a real head-scratcher. If we change it to provide defined benefits, another increase would be needed, an increase from 25% to 50% in the replacement rate. The witnesses we heard from did not say that it would happen overnight, but that it would happen over a certain period of time.

[Gerda Kaegi]

Actually, what we recommend is an increase in the cap to $60,000. That would make a difference. You could phase that in, because the current cap is very low compared to how incomes have moved over the past number of years.

If you move to $60,000, 25% isn't bad. It would be wonderful if we could go to 50%, but at least move the cap higher. That would make a huge difference.

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

You also talked about protecting pension plans. Many pensioners have been seriously affected by the current economic crisis.

Various stakeholders talked about the fact that we should have pension legislation to protect pension plans at the federal level. Do you agree with that?

One last thing. You mentioned creating a guaranteed annual income plan. Could you elaborate on that?

[Gerda Kaegi]

The last point is one that's been around a long time. The example we use is the Ontario pension insurance plan. It is very limited, but at least it protects workers where companies have gone bankrupt. I'm thinking of many of the workers in the lumber industry, Nortel, you name it; their pensions are at risk. They're at the back of the line in terms of claims on the assets of the company. The Ontario plan protects up to $1,000, which is better than nothing, but it's not a lot if all you have is $1,000 on top of what you have left in your old age security.

So, yes, we believe there should be a federal government insurance plan based on the model of Ontario, but we would hope it could be at a somewhat higher limit.

[The Chair, Liberal, Hedy Fry]

Thank you very much.

Madam McLeod.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you, Madam Chair.

Mr. Desnoyers brought up a few points that I am actually very interested in hearing more thoughts about. First, on your comments around the inflation index, could you tell me again, was that based on some work done by Statistics Canada? Has there been some ongoing work? Are there some reports that might be readily available?

[Gerda Kaegi]

I forgot to answer the question on his plan on the guaranteed annual income.

I couldn't find any current information. What I have is a report that came out in 2005, where Statistics Canada reported the inflation rate between 1992 and 2004, and they were looking at the average inflation rate for seniors only households. I'm trying madly to look at where you would look for it. I have a long “http” line, and I could try to fax it or e-mail it to one of the staff of the committee tonight, if you like, if that would be any help.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

That would be excellent. Thank you.

I'll ask my next question. You talked about RRIFs. I didn't realize that at 90 you had to be completely out of your RIFF. I know we have raised the age. Now it is 71 instead of 69, where you have to start accessing those savings. Could you speak a little more in terms of that particular issue?

[Gerda Kaegi]

The government decided, in its wisdom, many years ago when the RRIFs were brought in that given the fact that there were tax benefits that came along for people who had the money to contribute, there would be an end point to it, because the goal was not to preserve assets for inheritance; it was to provide, as I understood it, income for older people as they aged. The issue is, if a RRIF is to be wound up at 90, and women are younger and live longer, what happens to them if they live to be 95, 96, 97? For us that is an issue. We have a concern.

By the way, there is something, if I may add, that we have discovered anecdotally. Many men are not designating their spouse as the beneficiary, whether it is their CPP or their RRIF. We are now starting to alert women: you had better ask; you had better find out what your husband is up to.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Actually, that comment you just made is quite stunning to me. That is something we do need to--

[Gerda Kaegi]

It was to us.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

We need to find out if that's happening, because it would be very concerning if you had a partner and you're not the designated beneficiary.

Let's say someone had an RRSP and died before retirement. The government takes their share of the taxes from that. I don't see why the government would make you move it so that it doesn't go to estates. If it was still in an RRSP, it would have to be paid out in tax benefits. That requirement “by 90” is something that's interesting to me.

[Gerda Kaegi]

I think it should be looked at, given the changing demographics and the huge growth in that older population.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

I found it interesting that when you looked at CPP you were talking about going to $60,000 plus indexing. A number of witnesses have talked about moving it from 25% to 50%. Intuitively, you would think that the 25% to 50% would support more low-income folks. Has there been any analysis of the cost of your suggestion? What would its impact be in contributions?

[Gerda Kaegi]

I'm sorry, I didn't bring that material with me.

One of the key things to remember is that the 25% of $47,000 is very small. Yes, if you move to half of $47,000, it's higher. On the other hand, if you start at 60 and keep indexing over the longer term, we think that would be more beneficial. We're prepared to agree to go higher than 25%, but if you move the cap higher, you would in the longer run increase the pension incomes of older people.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

You mentioned the calculations that have been done. If you have the calculations on the costs of that proposal, would you send them to the clerk?

[Gerda Kaegi]

The one on the index? Yes.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

I know that the Parliamentary Secretary to the Minister of Finance has done round tables. Were you part of any of those conversations on pensions and pension reform?

[Gerda Kaegi]

No, we were not invited. We participated in the Ontario Pension Commission.