Mr. Speaker, before question period I was talking about the importance of the so-called cohorts of the Canadian economy and the existence of a significant population in Canada called baby boomers. Canada's baby boom population is the largest in the western world based on demographics. This means that in the Canadian context a huge portion of our labour force will be retiring within the next 20 years.
This will be the greatest change economically to our system in the lifetime of our country. Normally there is a level playing field between new workers coming into the workforce and other workers exiting the workforce. We are going to see a tremendous exodus of workers. This has been predicated by a number of things.
Some people have been saving for their retirement and have been looking forward to it. Other people have been forced to retire because of the mandatory retirement age in Canada which is an issue that is currently under debate. Needless to say, a lot of people between the ages of 55 and 60 see retirement on the horizon.
When people would come to my office wanting to discuss retirement, the first question I would ask them would be when they were going to die. The bottom line is that most people do not want to think about their mortality. Most people want to think they are going to live forever. This makes insurance companies rich because they know that is just not the case.
The simple reality is that people are living longer now compared to 20 to 50 years ago. Those years create quite a challenge for income planners and for people who are trying to make ends meet. For one thing we do not know what the inflationary factor will be. Currently, inflation numbers have been relatively low, but historically that has not always been the case. Those living on fixed incomes are always concerned about what is going to happen to their retirement income.
Today's debate is apropos. As I mentioned earlier, the Canada pension plan is one of the three pillars of our pension system.
The first pillar is the old age pension for which everyone is eligible regardless of whether they worked or not. Unfortunately it is income tested. Those individuals who are wealthy get a certain portion of that clawed back through the income tax system.
The bottom line is that everyone is eligible for the old age pension, the first pillar but there is also the guaranteed income supplement goes along with that. It basically ensures that most people will get at least something in the neighbourhood of $12,000 a year. Most of us recognize that $12,000 is significantly below the poverty line set for various provinces; I believe generally speaking it is about $20,000. Anyone living strictly on old age pension and the guaranteed income supplement will be under significant pressure economically.
The second pillar of the retirement plan is the Canada pension plan which we are talking about today. For many Canadians this along with the old age pension will be the only income that they will receive in their retirement.
I used to practise as an accountant. I can remember that a number of clients would come to me to file their income tax returns because it was the only way they could get what in those days was called the Ontario tax credit. I was quite surprised at the number of people who fell into this group and were trying to make ends meet on this very limited amount of income.
When we talk about poverty, many of us think about single moms and so forth who obviously do live in poverty, but there are many single women, many seniors generally who live in poverty in this country. It is really quite a shock and quite a shame. I always call them the silent poor. They do not stand outside Parliament waving signs and so forth and complaining. They hardly ever write to their members of Parliament. They seem to bear this as a charitable plight on our society, but these people are not receiving enough income to live in dignity.
We should always be concerned that the income level be reinforced. In fact, I have always been one who has supported increasing the guaranteed income supplement to ensure that some of those people have at least a little more money than they currently have.
Today we are talking about the second pillar which is the Canada pension plan. In order to get the Canada pension plan the individual must have worked, must have had contributory earnings. Many people have chosen to stay at home and are unable to access the Canada pension plan in the first place.
Be that as it may, the government realized that the Canada pension plan needed to be reformed a number of years ago. It took some very significant measures to ensure that the Canada pension plan would be sustainable, that is to say, there would be an income flow from that plan to people who were eligible to receive it.
One of the second parts of reforming the plan was to allow the Canada pension plan to go into market driven investments. Prior to that the Canada pension plan was lent back to the provinces. The federal government basically lent the money back to the provinces. The provinces then issued provincial government bonds and basically built most of the schools. As I understand it, most of the schools in this country came from Canada pension plan money.
The unfortunate aspect is that while some people would say that the provincial government debt was pretty secure, at the same time it also had a very low yield. With regard to this yield, some people ask what is the difference between 4% and 5%? Quite frankly, 1% of deviation on investment capital extrapolated over 20 or 30 years is quite significant.
It was realized that if the Canada pension plan was going to be sustainable, it had to be invested in other areas of the economy that would at least give us a fairly good rate of return. When I say a good rate of return, most investment managers try to balance their portfolios and put so much of their money maybe in fixed income government securities, investment grade rated corporate bonds, and then look at the securities markets. They look at the debt ratings. Moody's, Standard & Poor's, Dominion Bond Rating Services are some of the agencies that they use to ensure that these investments are secure.
The motion before us today talks about changing that criteria. It talks about adding another criteria and basically talks about generalities, something called Canadian values. I dare say that to think of the broad range in Canadian values, it would be very difficult to do that in a guidance system for an investment portfolio. Obviously some person's values whether it was to do with the steel industry or something else could be quite different from another person's. It is a very subjective argument about how we want the Canada pension plan to operate in the first place.
I go back to the history of the Canada pension plan and why it is set up the way it is. People generally thought there would not be enough money to sustain the plan and to ensure that people would get an adequate income from it.
It seems to me that the motion attacks the very assumptions that were made that established the board in the first place. It asks them to consider some other kinds of criteria which are not primarily related to return on investment.
Some people will suggest that using the return on investment as the sole criterion gets some strange results in the sense that presumably we may invest in industries that pollute or whatever the case may be. I suggest it is not the import of those people who are doing the investing; it is the import of government.
If the government sees illegal activity occurring within the economy generally, it is within the power of the government, whether it be federal, provincial or municipal, to regulate and to enforce pollution control and pollution abatement. There are various ways of doing that. There is no history, as I understand it, that the Canada pension plan has ever invested in illegal activities.
I believe that we have to reject this motion because it is certainly not predicated on the best interests of Canadians generally.
I go back to saying that with the money that is actually in the Canada pension plan, there is a trust established between the people of Canada and their government. The trust is that we will put the money in this plan, that it will be managed safely and appropriately but that at the same time there will also be a proper return on investment.
I go back to the pressure that is being created by the demographics of our nation. I just want to turn to the original motion of the NDP which talks about Canadian values. There is no more important value, I do not think, than people retiring and living in dignity. People worry that the money coming from the Canada pension plan may not be adequate enough, and most people would suggest it is not in any case. Even if the money were less adequate than it is today because of investment management decisions that we as a legislature superimposed on the Canada pension plan, it seems ludicrous that we would want to threaten those people who live on fixed incomes or who depend on money coming from the Canada pension plan, that we would be prepared to take more risk, or if not more risk, to take less return on investment.
An interesting study has been done on so-called ethical mutual funds. I am not complaining about these funds; I am just looking at the sole aspect of return on investment. There are a number of them and I have never heard of them because I am not interested. There is Acuity Clean Environment Balanced fund, Acuity Clean Environment Equity fund, Desjardins Environment fund, Ethical Special Equity fund, Ethical Balanced fund, Ethical Growth fund, and Ethical North American fund. The one thing all these funds have in common is that they are underperforming their own indexes within the mutual fund business; that is to say they are all underperformers.
The point I am trying to make is that twisting the arms of people who are managing the Canada pension plan, making them make decisions which are not in the best interests of the beneficiaries of those plans, who are Canadian citizens, is not in the best interests for the long term social values that I believe this country was founded on. I suggest that the whole motion by the New Democratic Party is a fallacy and it should be rejected by the House.