Mr. Speaker, I am pleased to rise here today to debate Bill C-445, An Act to amend the Income Tax Act (tax credit for loss of retirement income).
First, the bill is certainly worthy of study. It would provide a refundable tax credit to retirees whose pension funds had shrunk to the point that they would be unable to pay out what was promised to the retirees. The credit would be worth 22% of the amount lost from the pension fund payouts. For example, if their pension plans were reduced from $35,000 a year to $28,000, they would get a tax credit worth 22% of the $7,000 reduction. In other words, just over $1,500 would be their tax exempt amount.
There are few things that could be more nerve racking for people than being of retirement age and finding out that their pension plan would be unable to pay what they had expected that it would. What can they do at this point? If they are 70 years old, do they go back to work? For many Canadians this is not a realistic option. Instead, what they do is they lower their standard of living. They do not buy their grand kids the birthday presents they really wanted to give them. They move to a smaller home. They do not take vacations. They eat less food. In short, they take all the dreams they have had for their retirement years and make them all a little smaller.
Many seniors experience just this nightmare scenario when, in October 2006, the Prime Minister broke his solemn election promise not to tax income trusts. Many seniors relied on their regular, often monthly distributions from income trusts to help supplement their retirement income and lifestyle. Knowing this, the Prime Minister looked right into their eyes during the last election and promised that a Conservative government would never endanger that retirement income by taxing income trusts. Once he had their votes, however, the Prime Minister's interest in protecting the savings and investments of seniors disappeared.
On Halloween of 2006, he hiked taxes on income trusts by an astounding 31.5%. The resulting market losses over the next two days left the investment portfolios of Canadians $25 billion smaller. Since then, some seniors have had to adjust. They have been unable to enjoy the lifestyle for which they had worked and saved a lifetime.
As one analyst put it in the Saskatoon StarPhoenix:
It's a huge impact for seniors....If you worked 40 years to create that nest egg and in a short time you lose one-quarter of that wealth, it's like going back to work for 10 more years.
That is the government's record on seniors and retirement savings. I hope any member of the House who told a single voter that they would never tax income trusts knows just how much pain and how many sleepless nights they have caused in many households across the country.
As I mentioned earlier, there is a principle contained in Bill C-445 that I think we should all appreciate, helping to ensure that seniors have the support and income they need to retire with dignity. That is why I feel this bill merits further study.
That being said, I also have some concerns as to whether the bill's scope will be limited to the intent that the member for Richmond—Arthabaska has in mind. I have heard some concerns raised, due to the wording of the bill, that the tax credit might be available to almost every retired person who enjoys a defined benefit pension plan. They would do so regardless of whether their own pension plan had recently reduced the benefits that were promised to them under the terms of the plan. There is also a large matter of fairness that must be considered as we consider the bill.
Many millions of Canadians do not have the benefit of being part of a defined contribution pension plan. It is these people with no pension of their own whose tax money will act as a guarantee for the pension incomes of people who do in fact belong to such plans.
A third concern, as the bill now stands, is if it could create a disincentive for people or a company to contribute to their defined benefit pension plan. Why pay the full amount if the government will back up a portion of the plan? I imagine that this certainly is not the intent of the member for Richmond—Arthabaska. He is of course trying to help those who have honestly contributed to their own plan. Nevertheless, I could see some less scrupulous individuals or companies take advantage of these new measures. This will need to be examined in committee
As I mentioned earlier in my speech, there are few things more nerve-racking than having a pension reduced, especially in the years when it is impossible to return to the workforce to supplement that lost income. For that reason, I believe the bill merits further study. We should send it to the finance committee where members can determine if this is the best way to go about helping retired individuals whose pension benefits are reduced.
As I have also indicated, however, the bill raises many questions in my mind. I am not convinced that its scope will be limited to what is intended by its sponsor. I hope these concerns can be alleviated during further study of the bill and if amendments are required to improve the bill, I hope the sponsoring member would be amenable to accepting them.