Evidence of meeting #15 for Veterans Affairs in the 44th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was pension.
A recording is available from Parliament.
Liberal
Darrell Samson Liberal Sackville—Preston—Chezzetcook, NS
I thank you for that answer.
Many of the witnesses shared with us that they didn't hear about this during their retirement session or preretirement session, if you want. Most of them found out about it afterward.
Can you confirm that this is being shared with members prior to their retirement, and to what extent? I got the feedback that most of them were not aware of it.
BGen Virginia Tattersall
In terms of the information that we communicate to our members, they have available via the pension website—which is managed by the pension centre, PSPC—information about the pension. That pension information is set up by whether they served before 2007 or after 2007, if they are married or if this is about a death. The information is organized in a way to permit them to get to an answer.
There is in the frequently asked questions—because I had it verified—a link with respect to a question about marriage after 60.
That's only one part of the information that members will get. There are second career assistance network briefings that are done about pensions, where this would be an issue that is raised. There is information about pensions in the transition guide. Now that we have the Canadian Armed Forces transition group, that is provided to members as well. There's a bulletin that has been distributed—
Liberal
Darrell Samson Liberal Sackville—Preston—Chezzetcook, NS
Okay, thank you. I wanted to share that, because a lot of them were saying that it was an issue.
Mr. Crabtree, you indicated that the fund is based on the pooling of risk, etc. Are there other funds where the survivor receives the money they put aside? You indicated that in this case, they don't.
Are there funds that you're aware of that pay back the monies that were invested if the survivor passes first?
Executive Director, Pensions and Benefits, Treasury Board Secretariat
I'll defer a bit to our colleagues at Veterans Affairs.
If you're speaking generally to pension plans across Canada, there are different forms of pensions, which provide different types of guarantees in benefit payouts, both for members and survivors. They're more or less consistent with what the public sector plans offer though. There are different forms that provide, as I said, some forms of guarantees. Often, those guarantees come in the form, much like our optional survivor benefit, of a reduced payout initially.
Liberal
Darrell Samson Liberal Sackville—Preston—Chezzetcook, NS
I know my time is up.
You said Quebec, the municipal and Ontario.... Are they getting back 100% of what they put in?
Executive Director, Pensions and Benefits, Treasury Board Secretariat
No, it's also a pooled risk set-up there. It's always a trade-off. It's always risk pooling. The payouts are dependent on how long people live. It's very individually dependent.
Liberal
The Chair Liberal Emmanuel Dubourg
Thank you, Mr. Crabtree.
Ladies and gentlemen, as agreed, we're going to take a 10‑minute break. We will return for the final round of questions, which will be initiated by Mr. Frank Caputo.
It's exactly 3:11 p.m.
At 3:21 p.m., Mr. Caputo will have turned on his microphone and he can begin.
With that, I will suspend the meeting for 10 minutes.
The meeting is suspended.
Liberal
The Chair Liberal Emmanuel Dubourg
Ladies and gentlemen, we are back in session.
I yield the floor to Mr. Frank Caputo for five minutes.
Conservative
Frank Caputo Conservative Kamloops—Thompson—Cariboo, BC
Thank you. I may not need all five minutes here.
Mr. Chair, I'm going to finish up with Mr. Crabtree. I see that MP Blaney is jumping up and down, but I don't know what she could possibly be trying to say to me.
Mr. Crabtree, I really want to make sure I understand this, because this has been a huge issue. I'm going to summarize what I perceive your message and your evidence to be, and then could you please confirm whether or not I got it right?
If I have it right, when a veteran contributes on behalf of their spouse.... We really should say “when a veteran and their spouse contribute” because it's the two of them. Let's say when they contribute that $2,000 a month for a total of $96,000 over the course of four years, if I understand it correctly, that $96,000 is essentially—forgive my language—almost like hedging a bet, if you will, saying that, in the event they perish, that $96,000 will go to pay me, would it be, $2,000 a month for the rest of my life or however much is to be paid?
Is that accurate?
Executive Director, Pensions and Benefits, Treasury Board Secretariat
It's half of what the survivor benefit is, I believe. It's 1% instead of 2%, so it's half.
Conservative
Executive Director, Pensions and Benefits, Treasury Board Secretariat
In that example, it would be.
Conservative
Frank Caputo Conservative Kamloops—Thompson—Cariboo, BC
In that example, you're paying $2,000 a month in order to potentially get $1,000 a month for the rest of your life in the event the veteran perishes.
First, do I have that right?
Executive Director, Pensions and Benefits, Treasury Board Secretariat
That's correct, and I will add a precision, which is that it's half of their unreduced pension as well, because often plans—early retirement, CPP, etc.—can be reduced, so it's probably more than half. Anyway, for simplicity we will say it would be half, and you have that right.
Conservative
Frank Caputo Conservative Kamloops—Thompson—Cariboo, BC
I have enough trouble with numbers, so, yes, let's just leave it at that. Some actuary has come up with this, if I understand it correctly. In order to not bankrupt the pension fund, this is the way it has to be.
Is that right?
Executive Director, Pensions and Benefits, Treasury Board Secretariat
Again, these are members' funds, so all members contribute and they risk-pool together. Someone is actuarially calculating what the cost is projected to be for the plan on average, and they're trying to offset this to be neutral to the plan.
Conservative
Frank Caputo Conservative Kamloops—Thompson—Cariboo, BC
Theoretically, somebody, as MP Wagantall said, could—it may be wiser—take that $2,000 a month and invest it at, say, 6% or 7%, and at the end of the day they have their principal plus that. That's a decision they ultimately have to make, but they're guaranteed, in that case, not to lose any money. They just might not get anything in the event that the veteran passes first.
Executive Director, Pensions and Benefits, Treasury Board Secretariat
That's effectively a fair statement. Again, when we're looking at this as an actuarial calculation, they're trying to assume very much what this will cost the plan, and that's kind of looking at another alternative with a set of assumptions about what you could get as a return for these funds, etc., but yes, it's a defined benefit versus kind of a defined contribution. You're basically trying to lock in a set amount of money here if you're going to keep it aside and not reduce your benefit through an optional survivor benefit, but if the survivor goes on to live 15 years and save longer than what was anticipated in this calculation, they in theory could make much more money under the optional survivor benefit than they would have had they put this money aside or if they put the money aside and lost money in the markets.
There's a bit of uncertainty. It's maybe not gambling exactly but it's uncertain, yes.
Conservative
Frank Caputo Conservative Kamloops—Thompson—Cariboo, BC
I'll take it one step further then, again, just so I'm clear. Let's say a veteran and their spouse decide to put in the 50% at $2,000 and that veteran passes after six months, so only $12,000 has been contributed. Would it stand to follow then that the surviving spouse would then receive, let's say, $1,000 a month for the rest of their life?
Executive Director, Pensions and Benefits, Treasury Board Secretariat
That's correct. Again, it depends on what the member opted for—30%, 40% or 50%. Assuming it's 50%, that's what they would get for the rest of their lives.
Conservative
Frank Caputo Conservative Kamloops—Thompson—Cariboo, BC
I'll summarize then. Your point, if I have it correctly, is that there are risks in everything. In this case, lets's say you take 50% of your pension and you die after six months, it was the greatest investment you could have made, because you paid $12,000 and the survivor got $1,000 per month for the next 30 years.
The flip side of it is that, if you pay into that for 25 years—you start at 65 and live to 90—you see zero of that. In that case, it's really the worst investment you could have made, because you have put money aside and see no interest and no return on that.
Do I have a fair summary there?
Executive Director, Pensions and Benefits, Treasury Board Secretariat
It's accurate, but I will also point out that it is the same for the entirety of all defined benefit pension plans. I could pay in as a member for my entire life. I could have a spouse and we both pass away within a few years of my retirement. I would have paid in hundreds of thousands of dollars and received nothing in return.
It is the formula and the nature—
Conservative
Frank Caputo Conservative Kamloops—Thompson—Cariboo, BC
I see my time is done. I'm sorry, MP Blaney.