I can point out to the members who are making jokes that members of this House have a special pension plan that is set up to provide more generous benefits than those provided through the Canada pension plan. That of course is a consequence of the fact that we get to choose our own pension plan, whereas Canadians must live with whatever we give them. It seems to me that we ought to give them the best rate of return possible.
A woman who is aged 65 today and who has a 50% chance of living to be 90 will depend on the CPP to pay her benefits 25 years from now. If the pension plan is not secure and those rates are not guaranteed, she may very well find herself at 90 years old facing a cut in her pensions.
Could this happen? It already has happened. The former finance minister, the hon. member for LaSalle—Émard, actually did cut Canada pension plan benefits very slightly, but he did it nonetheless, when he was making his first run of changes to this plan several years ago.
There are a number of problems with the decision to put restrictions on foreign content for Canada pension plan investment moneys. One is, as I mentioned, a lower rate of return. A second one is a higher rate of risk. When we put all our eggs in one national basket we face currency risk. If the government continues to allow the value of the Canadian dollar to fall, and it seems to be a pattern that we have seen from the government, then we can expect to have the Canada pension plan pay substantially lesser returns than it would have. That is not calculated into the actuarial projections.
We can expect to see transaction costs. When we have a very large fund like this one working away in a single small market as a huge component of that market, it automatically bids up costs when it attempts to purchase into equities in that market. When it attempts to sell, it drives down the price. It automatically therefore suffers a substantial penalty. How much of a penalty? The curious thing is that when I raised this question in committee, the ministerial officials had not done any research on this topic. This very important factor is not taken into account in costing out this program and the rate of return. In other words, that 4.5% rate of return, which is already inadequate, is in fact illusory.
Something else happens. Because a plan like this is predictable in the amount of money that goes in and the amount of money that comes out, and we can look at actuarial tables, it is possible for other investors to predict when it will put money in and when it will take money out. They can, as the expression goes, “game the system”. They can plan to take advantage by holding back on assets when there is an attempt to buy in by flooding the market and making themselves buyers when the plan is tempted to sell out. That will result in still further reductions in the rate of return on the plan. This also is not taken into account.
As a final point I would like to note that despite the attempt, which I assume was designed to ensure that moneys would be captured within the Canadian capital market under this legislation, that is not what will happen. In fact, what will happen is that better informed investors that would have made wiser investments in the Canadian economy will be forced out by these large sums of money, and the result will be that no more money will go into the Canadian economy and it will go in in a less informed way.