Mr. Speaker, I am pleased to say a few words to on Bill C-3, the Canada pension plan. At the outset, there is really nothing major in the bill that would necessitate our opposing it. Progressive Conservatives will be supporting the bill. I am delivering these remarks today on behalf of my colleague, the member for Kings—Hants, who is unable to be here. He is on Her Majesty's business elsewhere.
The purpose of the bill is to consolidate management of all CPP investments under the Canada Pension Plan Investment Board. It will no longer require the CPP to hold a cash reserve equal to three months of benefits and the bill will also make various technical amendments. As I said at the beginning, I do not believe that there is anything major in the bill that would prevent us from voting for it.
The Canada pension plan is an important cornerstone of the future retirement savings plans of most or all Canadians and certainly is one that is supported broadly by a range of Canadians. Canadians support not only the notion of a secure government pension plan but also one that maximizes their retirement income.
Generally, Canada's system of retirement savings has three main pillars. The first is universal old age security and the low income supplement. Second are the earnings based Canada and Quebec pension plans. Third are the private retirement savings and pension plans.
The Diefenbaker government initiated the work leading up to the 1966 introduction of the CPP. Progressive Conservatives have traditionally viewed the CPP as a fundamental part of Canada's social safety net, an obligation that government must honour.
More than 2.8 million Canadians outside Quebec receive retirement benefits of up to $9,345 a year depending upon how long they contributed, and their employment earnings. Special benefits are also provided for persons with disabilities, widows, widowers and orphans. The Quebec pension plan is quite similar in that regard.
For three decades, the CPP was a “pay-as-you-go” plan. Premiums only provided a fund equal to two years of benefit. By 1997 there were only $40 billion in the fund, while the cost of promised future benefits totalled $600 billion. Without changes, premiums would rise to 14.2% of pensionable earnings by 2030.
In 1997 Ottawa and the provinces agreed to two major changes to the CPP. The first was to increase premiums more rapidly than previously planned, but they were kept at 9.9% in 2003, which was the equivalent of $4.95 for employees and $4.95 for employers. That equalled an $11 billion increase in annual premium revenues. The plan is sustainable over the long run at next year's rate and all Canadians will receive the benefits they have been promised. That of course is a very good thing.
Second, changes were made to the way benefits were calculated reducing slightly the pensions of new beneficiaries, reducing the death benefit and making it much harder to get disability benefits.
Third, new funds flowing into the CPP funds will be invested in the marketplace and managed by an arm's length agency, the CPP Investment Board. Previously funds not immediately needed to pay benefits were loaned to the provinces at the rate paid by the federal government on its long term bonds.
Under current numbers, contributions to the plan will exceed benefits until 2021. At that point some investment income will be used for some CPP benefits. By 2010, CPP assets will equal $142 billion. By 2050, they will approach $1.6 trillion. Therefore, by the turn of this decade the CPP will be by far the largest investment vehicle in Canada.
The CPP actuary says that the changes in the bill will increase returns on CPP assets by $75 billion over 50 years. This reflects both the higher returns of a more diversified portfolio and a reduction in the amount of money that earns lower returns as part of the cash reserve.
This movement of the Canada pension plan beneficiary pool toward capital market is one that will in the long term benefit Canadians and improve their retirement incomes. Notwithstanding what has happened in the last year or two in the capital markets, by and large the return last year on the Canada pension plan, compared to most mutual funds and investment portfolios in the last year, was actually fairly good.
Relatively good changes in accountability structures are made to the board's governance provisions with this bill. The CPP investment board's governance model is built on two fundamental principles. First, the investment professionals must be able to make their decisions without political interference. That could only be a good thing. Second, there must be full accountability and reporting to Parliament, the provinces and the people of Canada. That could only be a good thing as well.
The legislation seems to be carefully crafted to effect accountability while ensuring a certain level of independence. Whether it actually plays out that way will be seen as years go by. Time will tell. However, it is a very good start in the right direction.
For example, the legislation requires the board to have a sufficient number of directors with proven financial ability or relevant work experience. Why the standard would be anything lower really is not an issue. In fact, that should be the minimum prerequisite.
How the directors are appointed is a departure from the traditional practice for crown corporations. A committee appointed by federal and provincial finance ministers nominates candidates and the federal minister selects candidates from the committee's nomination list, in consultation with the provinces. However, at the end of the day the appointments will come by way of a final recommendation from the finance minister, only to be rubber stamped by an order in council. That may or may not produce the very best people. Let us hope it does.
The bill is a step in the right direction and as a result future boards will consist of professionals with accounting, actuarial, economic and investment credentials. They will be experienced in the private and the public sector and will bring to the board table informed opinions on public and private sector governance.
There are other legislative measures to ensure transparency and accountability. The board will also appoint external and internal auditors who will report directly to the audit committee of the board. Despite these powers, government can check on what is being done with the public's money. Indeed, the federal finance minister is required to authorize a special examination of the CPP investment board's books, records, systems and practices every six years. Perhaps there might have been some utility in the suggestion of performing examinations much more frequently.
Our political and public accountability is especially important at a time when some Canadians might be worrying about equity markets.
The Canada pension plan has to be invested for the long term. Good portfolio management expertise will prevail with the right quality of people at the management level. That is one of the reasons why it is so important that the board of the Canada pension plan be chosen very carefully. They are doing very important work.
We have had and continue to have significant concerns about the way the government makes orders in council appointments. The correlation between Liberal Party contributions and an appearance in the board's order in council appointments is somewhat unsettling to say the least.
The degree to which this level of partisanship can threaten the potential quality of a board is very important.
When we are talking about the future retirement incomes of Canadians, it is absolutely essential that the individuals on these boards be beyond reproach and that they be chosen by absolutely no partisan influences. I hope the two latest appointments, Germain Gibara and Ronald Smith, do their jobs exceptionally well as Canadians expect them to do. Hopefully there is no reason to believe that they will not do a very good job.
Furthermore, the government has to take a look at other ways to address Canadian retirement planning right now. We are just a few years away from seeing a significant reduction in the number of Canadians who are actually working and paying taxes, along with a significant increase in the number of people who will be drawing pensions.
Therefore, the government should heed the finance committee's report and the Progressive Conservative's dissenting report, both calling for an increase in the RRSP contribution limit. That is one way in which we can defer taxes to the future as people withdraw from these RRSPs. Also, the increase in RRSP contribution limits would give Canadians an opportunity to shelter more income today than they would otherwise be able to do.
While Bill C-3 does address some much needed governance, housekeeping, administrative and technical issues, the bill does not turn its attention to any substantive change in pension policy that would actually help alleviate some of the financial pressures currently being experienced by many of our elderly, one of our most vulnerable groups in society.
In addition to addressing the structure of the CPP, the government might have done well to address some policy questions concerning seniors and how their GSI, guaranteed income supplement income, private savings and CPP are currently being administered under the all the present federal schemes. I know our party would want to make sure that the elderly in Canada do not suffer due to rigid policies and misguided principles or bureaucratic holdups.
Speaking of the guaranteed income supplement, it was just today that I had a call from a senior in the St. John's area who was appalled at a story coming out of Quebec about a senior who did not know that in order to actually receive the GIS, the guaranteed income supplement, that one actually had to apply for it. I think it was in today's Globe and Mail and the Ottawa Citizen . In other words, it is not automatically sent unless one applies.
When a senior finally does apply, the mother of all injustices kicks in. If the person qualified, say three or four years ago, Ottawa will only retroactively pay for one year, even though the person might have qualified for the benefit three or four years ago but did not know about it and therefore did not apply.
A parliamentary committee has discovered that about 380,000 people are eligible for the guaranteed income supplement but that they do not receive it because they did not apply for it. That is heart-rendering. The most needy in our society would certainly have to be people who are eligible for the guaranteed income supplement but 380,000 of them did not apply for it, saving the Government of Canada $3 billion.
As I said, once they apply, the mother of all injustice kicks in, in that Ottawa will only pay them retroactively for one year even though they might have qualified for the supplement three or four years ago.
These are very important points. We support Bill C-3. Hopefully the government will pay a little bit of attention to the last issue I raised about the guaranteed income supplement because seniors are the most vulnerable in our society and they need a co-operative federal government, a government that will look at the policy and say that it needs to be adjusted and changed because it is costing the seniors of our society dearly.