That Bill C-3, in Clause 15, be amended by replacing lines 41 to 46 on page 9 and lines 1 to 5 on page 10 with the following:
“15. Section 37 of the Act is repealed.”
Mr. Speaker, I am here to discuss a very important amendment to Bill C-3, which is an act to amend the Canada pension plan and the Canada Pension Plan Investment Board Act.
In general terms the bill is a disappointment, not so much for what it includes, which is on the whole unobjectionable, but for what it fails to include. It fails to include measures that would make the management board politician proof, that is completely secure from political interference, and it also fails to ensure that the Canada pension plan money that is invested through the investment board--and we are talking about an amount that will eventually total something in the nature of $100 billion--cannot be used for any purpose other than maximizing the rate of return for the beneficiaries of the Canada pension plan, which is the only purpose for which pension moneys should ever be invested and not, for example, some of the proposals that have been made in the course of the discussion of this bill.
Pension moneys should never be invested for the purpose of industrial or regional development, or for the furthering of ethical as opposed to other types of investments. If we choose to make the decision, for example, that we want to forbid the investment in certain areas, we ought to make it illegal to invest in certain areas. We ought not to lower the rate of return that the Canada pension plan earns by restricting it from investing in these areas.
These were all proposals that had been made, some of them by the former minister of finance, the member for LaSalle--Émard, who was the author of the bill.
The amendment I am proposing today is designed to eliminate one of these limitations, the most important of the limitations, upon the invested returns that the Canada pension plan can expect to earn through its investment board. This is the provision that forbids more than 30% of the moneys invested through the Canada Pension Plan Investment Board from being invested outside Canada.
Let me explain the technical aspects of the amendment I am proposing. I have referred in the amendment, in section 15 of the bill, to another section of another bill. The way section 15 currently is worded, it makes a series of changes to section 37 of the Canada Pension Plan Investment Board Act, a prior act that was passed several years ago. Section 37 of the Canada Pension Plan Investment Board Act refers in turn to a section of the Income Tax Act which states that pension plans, whether they be corporate, union or registered retirement savings plans, are not permitted to invest more than 30% of their assets outside of Canada.
What I am proposing is to change section 15 of the act currently under consideration to now read, “Section 37 of the Act...”, that is of the Canada Pension Plan Investment Board Act, “...is repealed”, thereby removing the cap on the percentage that might be invested outside of Canada.
The reason for this is straightforward. The Canadian economy represents something between 2% and 3% of the total world economy. When a decision is made to restrict the percentage of the Canada pension plan moneys that can be invested outside of Canada, we make the decision to take that 70% of Canada pension plan money and require it to be invested in less than 3% of the world economy, and not, I might add, the fastest growing 2% to 3% of the world economy.
We make a decision therefore to reduce the rate of return that will be earned by that 70% of the Canada Pension Plan Investment Board money. To give a sense of just how significant this is, in committee I asked the chief actuary of Canada, who was appearing as a witness, what the rate of return would be on the three main components of the Investment Board moneys.
The three components are a series of provincial government bonds which earn, quite frankly, a very unsatisfactory rate of return, largely because of a sweetheart deal that was cut with the provinces by the government and the former finance minister in order to secure the support of the provincial governments. This ensures that they will get a preferential, extra low rate of interest on the bonds that they sell to the Canada pension plan. This will result in billions of dollars, which should go into the pension plan and eventually be paid out to Canadian pensioners, being taken out instead and given to the provinces to be used on whatever projects they see fit.
The second component is the money that will be invested internationally. The expectation is that we will get a reasonably good rate of return; about 5.5%. The moneys that are invested in the Canadian equities market are anticipated to get about a 4.5% return. On that component, which is something in the neighbourhood of $25 billion to $30 billion, we should get a 1% lower rate of return out of the total capital per year. In fact, measured by comparison to the 5.5% rate of return, we can see it is substantially lower. It is about a 20% lower rate of return every year, year after year compounding, and therefore this will result in literally billions of dollars lost permanently to Canadian pensioners.
In the end, this will result in either the Canada pension plan having to hike its premiums yet further to well over 10% in order to pay for these benefits; or it will result in Canada pension plan benefits being cut so that pensioners will not get the moneys that they were promised. It may not happen to the current generation of pensioners, or at least those who are fairly well on in their senior years, but it will happen to those who are expecting to retire, as I am, some 30 years from now. They will almost certainly find themselves with a reduced--