Is that agreed?
House of Commons Hansard #69 of the 41st Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was plan.
House of Commons Hansard #69 of the 41st Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was plan.
The House resumed consideration of the motion that Bill C-25, An Act relating to pooled registered pension plans and making related amendments to other Acts, be read the second time and referred to a committee.
The Speaker Conservative Andrew Scheer
Five minutes remain for questions and comments following the speech by the hon. member for LaSalle—Émard.
Are there any questions or comments?
Resuming debate. The hon. member for Vancouver East.
Libby Davies NDP Vancouver East, BC
Mr. Speaker, I am pleased to have an opportunity to speak to Bill C-25, which is the pooled registered pension plans.
I will begin by commenting on the remarks made by the Minister of State for Finance during the debate earlier this morning and again in question period in response to one of his own member's questions on this bill. He said that they were doing a great job on pensions and helping seniors. I was surprised to hear the minister of state say that Bill C-25 would be accessible. He kept stressing that it would be accessible.
When we look at the bill and the proposal the Conservatives have, there is absolutely nothing accessible about it. How can something be accessible when one cannot afford it? How can something be accessible when to go ahead with this kind of savings scheme would be to put one's money at risk in very volatile markets? How can it be accessible to the 1.6 million seniors who are considered to be living in poverty, as estimated by the Canadian Labour Congress? I was very surprised to hear the Conservatives describe this proposal as something that is accessible.
I was further surprised when the minister of state remarked that currently in the RRSP plan there is, I think he said, $600 billion room for people to make contributions into RRSPs and that this would be a great opportunity to do that. Surely that begs the question as to why Canadians are not taking up what already exists under RRSPs if there is $600 billion tax room available that they could use individually. The answer is that most Canadians cannot afford to make RRSP contributions or, if they can, they are concerned about the security of their money, whether it is in various kinds of stocks, mutual funds and so on. Therefore, they have not been taking up that so-called room in RRSPs.
Mr. Speaker, getting back to Bill C-25, I want to make it clear that this so-called pooled registered pension plan would not guarantee an actual pension. There is also no guarantee about how much money would be left when people retire if they had been able to afford to put money into such a plan.
As we read through the legislation, it becomes clear that the risks of such a plan are borne entirely by the individual who is making the contribution, as well as the employer, if he or she decided to make a contribution.
We should also be aware that this so-called pension plan that has “accessibility” would be managed by for-profit financial institutions, like banks, insurance companies and trust companies. There would be no caps on administration fees or costs.
This so-called plan, which is no plan at all, from the Conservative government would push people into the marketplace. It is basically saying that if people can afford it they fend for themselves. That is the basis of the government's plan here today.
We should be very clear that this proposal would not require matching contributions from employers. It also encourages hard-working Canadians to basically gamble on failing stock markets.
I find it quite incredible that, on the basis of public policy, a government would come forward with this proposal and say that it is the answer to the severe pension problems we have. It wants to just shuffle everybody off and tell them to go in the marketplace and see if it will fix it for them.
We know that is clearly not the case. For everybody who watched their RRSPs plummet over the past year or so, they know how risky it is to have their savings tied to the stock market and how risky it is for their retirement.
I also want to illuminate the bigger picture. We heard the Prime Minister's speech in Davos, Switzerland, last Thursday about a fix for a generation, which he mentioned several times. I would say that it is more like a rip-off for generations to come.
One of the cores of that speech was his musings about how the Conservatives would tackle something that is very basic to Canadians, which is our old age security system. I find it quite reprehensible that we have a government that could make clear choices about economic performance and about how tax revenue is collected and where tax revenue goes and yet it has made clear choices and had the gall to announce those choices in Switzerland to a bunch of billionaires. The government did not even have the guts to be in Canada to roll out its plans. It did not have the guts to say it in the election.
We have a government, as we learned from the Davos speech, the “fix it for a generation” speech, that now plans to take aim at the old age security system and our pension system. The opening shot is the proposal that we have here today.
By contrast, the NDP has done an enormous amount of work studying, researching and analyzing what does need to be done to ensure pension security for Canadians who are already in retirement or Canadians who are planning to retire and are quickly approaching that age.
I want to pay tribute and thank the member for Hamilton East—Stoney Creek for the amazing work he has done in bringing this issue forward. He has very doggedly, time after time, whether it is in question period, in bills he has proposed for the NDP and brought forward in the House, in the forums he has held across the country or in speaking with seniors organizations, made it clear on our behalf, on something that we all support, that the NDP has brought forward a very comprehensive plan for retirement income security.
We would not leave people out in the cold. We would not leave people to the vagaries of the marketplace. We would not say to people that they might have to get a bit older before they can collect their old age security. Our plan is based on income retirement security that is fair, equitable and, most important, affordable.
The member outlined earlier this morning the plan that works in our country, and that is the Canada pension plan and the Quebec pension plan. We would increase it to a maximum of $1,920 a month. We would ensure that it would be sustainable and that Canadians would get a fair and decent retirement pension.
We would also amend the bankruptcy legislation to ensure that pensioners and long-term disability recipients would be at the front of the line, not the end of it, of creditors when their employers entered court protection to declare bankruptcy. How many cases have we heard in the House of seniors who have worked hard over the years and paid into their pension plans only to see them go up in smoke because of bankruptcy proceedings? They found out that they were at the very bottom when it came to seeing some justice from the system such as it exists now. We have put forward legislation to correct that situation.
Finally, we have made it very clear that we would increase the guaranteed income supplement, the GIS, to a sufficient level of about $700 million a year to lift every senior out of poverty in Canada immediately. Again, this is something that is affordable, realistic and it is the right kind of public policy decision to make at this time.
In debating the legislation today, we have to be very clear that we have a Conservative government that likes to make announcements in front of its billionaire elite supporters in Davos, Switzerland. It likes to put forward proposals that drive people into a marketplace situation, saying that they should go out there and fend for themselves, but if their savings get wrapped up in some kind of volatile market and they lose it, that it is not its problem.
That is not our approach. We do not want to see income inequality grow in our country. What was announced at Davos was nothing more than a further step to huge corporate interests such as we have seen with the corporate tax cuts. We have to be very clear for Canadians that there is an alternative. We do not have to be driven by this kind of agenda. I hope Bill C-25 is the beginning of a massive campaign to show that Canadians will not allow their pension system to be tampered with.
Other prime ministers have tried to do this. Other Liberal and Conservative prime ministers tried to get in there and make changes and they heard the wrath of Canadian seniors, who are a very organized group. I hope today the bill will be the first opportunity to mount a campaign as to what we see as an attack on public services, on our public pension system and on seniors who are some of the most vulnerable in our society.
We have to say no to the idea that it is just about the marketplace and yes to sound public policy decisions that are fair, equitable and affordable. That is what the NDP has put forward.
Brian Jean Conservative Fort McMurray—Athabasca, AB
Mr. Speaker, the member easily criticizes the government in relation to what our proposed plan is, or what she expects it to be. I am curious as to what the NDP plan would be. We have heard the NDP continuously suggest spending and more spending, billions upon billions of dollars.
Where will that money would come from? Sooner or later it has to come from somewhere and somebody has to pay the bill. What is her suggestion relating to the large demographic we have? It looks like by 2030 there will be three times the yearly expense for these program. What proposal is her party coming forward with in this regard? It is spending more money. Sooner or later somebody has to pay for it. Who is going to pay for it?
Libby Davies NDP Vancouver East, BC
Mr. Speaker, I am happy to answer that question because it gives me an opportunity to bring forward very solid information about how the NDP has proposed that we pay for something like raising the GIS.
I will begin with January 1. This year alone we will see a corporate tax cut of $3 billion. I forget the exact number, but I think we have had over $60 billion since 2004 in corporate tax cuts. The loss of public revenue that the Conservatives have perpetuated and brought forward is driving their agenda and they are now saying that we have to have cuts. We know that it is about looking at where the revenue comes from and where the expenditures go.
All the proposals that the NDP have made for pension reform that would produce better access, fairness and be more equitable are based on affordability and on an ability to pay. Our tax system should be based on ability to pay. It should be progressive. The idea that we can just shave off the top and say that the bigger one is the less one has to pay is wrong. That is what is robbing our system and driving these cuts. We have to stand up to that, as I think Canadians will, and say that it is completely unacceptable.
Hélène LeBlanc NDP LaSalle—Émard, QC
Mr. Speaker, I want to thank the hon. member for Vancouver East. I know her social democratic convictions. She explained quite well in her speech the problem with the program we are currently discussing. I would like her to say a few words about the current situation with women in their golden years.
Libby Davies NDP Vancouver East, BC
Mr. Speaker, there is no question that women face a disproportionate share of living below the poverty line. Many women worked but they did not necessarily contribute to the Canada pension plan. Therefore, the whole issue of unpaid work or wages is very big. There is a huge gender difference in terms of income equality in our country.
The government's proposal is just really pie in the sky in terms of telling people to go out and have a ball, invest money in stocks and in their own plan. It completely misses the point in terms of the tens of thousands of women who survive on old age security and the guaranteed income supplement and who maybe made contributions to the Canada pension plan.
The previous Liberal government supposedly said that there should be gender analysis of legislation, although it really did not seem to live up to that. That kind of thing has now gone completely by the wayside. It really requires that kind of examination because it would then show that seniors who are women are having a much more difficult time.
This brings me back to the point that it is just so reprehensible that we have a Prime Minister at a conference in Switzerland musing about his big agenda, which I think most people find incredibly scary. Our job here is to ensure he does not get away with it.
Chungsen Leung ConservativeParliamentary Secretary for Multiculturalism
Mr. Speaker, I am honoured today to add my voice in support of today's debate on pensions and retirement income security.
I have been a small business owner in Canada for 20 years. I have also worked for larger corporations. Therefore, I think I should have some knowledge of retirement and what it means.
Contrary to what the hon. members of the NDP may choose to believe, our government continues to work with all stakeholders to improve the security of retirement benefits in Canada. Promoting the retirement income security of Canadians is an important goal of the Government of Canada. We will continue to ensure that our policies, programs and services meet the evolving needs of Canada's workforce and retirees. We recognize the contribution seniors have made, and continue to make, to our nation.
In the wake of economic shocks from beyond our borders, Canadians are concerned about the long-term viability of their pension plans. We are listening to their views on how we can leverage Canada's financial sector advantage to strengthen the security of pension plan benefits and ensure the framework is balanced and appropriate. We are working toward a permanent, long-term solution to protect the pensions of Canadians.
In our effort toward greater retirement security for Canadians, our government is building on the inroads already made to strengthen the framework by federally-regulated private pension plans.
In 2009 we consulted Canadians from coast to coast on these earlier initiatives and subsequently introduced a number of significant changes based on the advice of individual Canadians. Our action included ensuring that an employer fully fund benefits if the pension plan was terminated.
Since taking office in 2006, our government has also introduced several important improvements to the tax rules for registered pension plans, that is RPPs, and registered retirement savings plans, also known as RRSPs. For example, the age limit for converting RPP and RRSP savings into a retirement income vehicle was increased to 71, from 69. Changes were introduced to allow more flexible phased retirement arrangements under a defined benefit RPP. The surplus threshold above which employer contributions to a defined benefit RPP must be suspended was increased to 25%, from 10%.
Let us talk about the pooled registered pension plans.
These private pensions plans already benefit from Canada having one of the soundest financial sectors in the world. With Bill C-25, our government would harness this advantage and further strengthen Canada's retirement income system.
Similar to my colleagues on this side of the House who have already spoken on the subject, let me say that pooled registered pension plans, or PRPPs, would mark a significant step forward in advancing our retirement income agenda and would be a vital improvement to Canada's retirement income system.
The emergence of the PRPPs is the culmination of a journey that began in December 2010, when Canada's finance ministers agreed on a framework for the introduction of PRPPs. This collective approach was taken because PRPPs were considered the most effective and appropriate way to target those modest and middle-income individuals who might not be saving enough for their retirement, in particular, those who currently do not have access to an employer-sponsored RPP, registered pension plan.
There are a number of factors that contributed to this decision by the finance ministers, including declining participation in employer-sponsored RPPs. The proportion of working Canadians with such plans has declined from 41% in 1991 to 34% in 2007.
Some Canadians may also be failing to take full advantage of the discretionary savings opportunities offered to them through individual structures like the RRSPs. Participation in RRSPs reached a peak of 45% of the labour force in 1997, before levelling off to 39% in 2008.
While aggregate RPP/RRSP participation rates for middle and higher-income earners are quite high, research nevertheless indicates that a portion of Canadians may not be saving enough.
PRPPs would address this gap in the retirement income system by providing a new, accessible, large scale and low cost defined contribution pension option to employers, employees and the self-employed. They would allow individuals who currently may not participate in an employer-sponsored pension plan, such as the self-employed and employees of companies that do not offer a pension plan, to make use of this new option.
This is especially important for millions of small business owners and their employees, who will now have access to large-scale, low-cost pension plans for the very first time, with professional administrators working to ensure that funds are invested in the best interests of the members.
Since these plans will involve large pooled funds, plan members will benefit from the lower investment management costs associated with the scale of these funds. Essentially, they will buy in bulk.
This sentiment is echoed by Dan Kelly, the senior vice-president of legislative affairs for the Canadian Federation of Independent Business, who believes that PRPPs will help deliver on the promise of a lower cost alternative for small business owners and that the pooled feature should allow lower costs than traditional pensions as there will be a much larger group in the pension vehicle than in traditional arrangements.
Similarly, the president of the Canadian Bankers Association, Terry Campbell, agrees that:
PRPPs will make it possible for small and medium-sized businesses to offer to their employees registered pension plans that will be simple to administer. As well, PRPPs will allow self-employed individuals to participate in private sector pension plans for the first time.
The design of these plans will be straightforward. They are intended to be largely harmonized from province to province, which will also facilitate lower administrative costs and portability. These features will remove barriers that might have kept some employers in the past from offering pension plans to their employees and that prevented employees and self-employed individuals from participating in large-scale pension plans.
Moving forward, we understand that Canadians want their governments to work together to deliver results for them, and the PRPP is a prime example of what we can accomplish for Canadians when we do.
The bill before us today, the PRPP act, represents the federal portion of the PRPP framework and is a major step forward in implementing PRPPs.
In addition, the tax rules for PRPPs have been developed by the Government of Canada and were released in draft form for comment on December 14, 2011. The tax rules for PRPPs will apply to both federally and provincially regulated PRPPs.
Once the provinces put in place their PRPP legislation, the legislative and regulatory framework for PRPPs will be operational, thereby allowing PRPP administrators to develop and offer plans to Canadians and their employers.
As Frank Swedlove, the president of the Canadian Life and Health Insurance Association, stated:
[the PRPP] is a great opportunity to make a fundamental difference in the landscape for pensions in Canada and we hope the legislation reflects that opportunity.
Once implemented, PRPPs will be a key element of the third pillar of Canada's retirement income system, which provides tax-assisted vehicles to help and encourage Canadians to accumulate private savings for retirement. PRPPs will complement and operate alongside RRSPs and employer-sponsored RPPs.
As I noted at the outset, we have already taken significant action to strengthen the existing elements of this pillar, like RPPs and RRSPs.
RPPs are sponsored by employers on a voluntary basis and can be either defined contribution or defined benefit plans, with employers, and often employees, responsible for making contributions.
RRSPs are voluntary, individual, defined contribution savings plans. Employers may provide a group RRSP for employees and may remit a share of contributions on behalf of their employees.
Contributions to RPPs and RRSPs are deductible for income for tax purposes, and investment income earned in these plans is not subject to income tax. Pension payments and withdrawals are included in income and are taxed at regular rates.
The cost of tax assistance provided on retirement savings is currently estimated at approximately $25 billion per year in foregone revenue for the federal government, and about one-half that amount in foregone provincial revenue.
Of course, tax-assisted private savings works hand in hand with the other pillars of Canada's retirement income support system. That includes the old age security, OAS, and guaranteed income supplement, GIS, programs, which provide a basic minimum income guarantee for seniors; and the Canada pension plan, CPP, and the Quebec pension plan, QPP. These are mandatory public targeted benefit pension plans that provide a basic level of earnings replacement for all Canadian workers.
We have a solid and inclusive system, but our government is continually looking for ways to improve it. The road ahead will likely include more discussion between Canadians and government at all levels. As these issues are complex, we cannot force a decision without understanding the long-term implications for both Canadians and the Canadian economy. We need to get this right, and so far I firmly believe we have.
Over the past two years, our government's commitment to a stronger system has taken my colleague, the Minister of State for Finance, to communities across the country, consulting with Canadians, engaging in challenging the opposition parties in constructive dialogue, discussing key considerations with business and labour groups and receiving valuable input from some of the most respected experts in the retirement income field.
Passage of this legislation being debated today will mean that we have made real progress as a result of these efforts. It is not just the Government of Canada that understands this. B.C. finance minister Kevin Falcon recently stated:
The province supports an initiative where people currently without occupational pension plans are able to take advantage of a low-cost option.
Working together, I am confident we can get these important new retirement vehicles up and running for Canadians in a timely manner. We have the support. According to Tom Reid, senior vice-president of group retirement services at Sun Life Financial,:
The PRPP legislation is an important, much-needed and well-targeted reform to Canada’s retirement system. It reflects an equitable balance of responsibility among individuals, employers and government that is key to the success and sustainability of our world-class pension system.
In addition, the Canadian Taxpayers Federation's federal and Ontario director Gregory Thomas called the PRPP legislation good for Canadians planning for retirement and for taxpayers. He stated:
Canadians will be able to save more for retirement with this new pension plan. People saving for retirement will enjoy lower costs and more flexibility throughout their working lives.
Through the cross-country consultations, Canadians made it clear that this is an issue too important to get wrong. While our government is determined to make it even better, I should stress that Canada's retirement income system has already been recognized around the world by experts like the Organisation for Economic Co-operation and Development, the OECD, as a model that succeeds in reducing poverty among Canadian seniors and providing high levels of replacement income for retired workers.
While the OECD has reported that the Canadian poverty rate in the mid-2000s among seniors was at 4.4%, one of the lowest rates in the OECD compared to the OECD average of 13.3%, the poverty rate is defined as 50% of the medium income in our country. The average income of Canadians aged 65 years or over is about 90% of the average income of all Canadians, which is the third highest of selected OECD countries.
Canada's seniors have worked hard to build a better country for future generations and today's workers should be given every chance to follow in their footsteps. Our record shows that our government is committed to the financial well-being of Canadian seniors, as well as many Canadians who are currently still working to realize their retirement dreams. They deserve not only our respect but also our support to allow them to enjoy their later years after a lifetime of contributing to our society.
The PRPP is the latest in a range of government measures providing them with just the support they need. I would therefore encourage all members of the House to vote in favour of this bill and join the government in building an even stronger retirement income system for the future.
Charmaine Borg NDP Terrebonne—Blainville, QC
Mr. Speaker, my question is for the hon. member opposite. The government has presented a lot of half measures since the beginning of the session in September, and even in June. There are many small businesses and self-employed workers in my riding. When they heard about this bill, they were excited at first. However, when they read the bill, they realized it was a savings plan and not a pension plan or a retirement plan. It is a savings plan, like the one for students.
How does this government expect low-income individuals to put money aside, as this program requires? It is not a solution. It is a half measure.
Chungsen Leung Conservative Willowdale, ON
Mr. Speaker, there are no half measures. A pension plan is a pension plan. It provides an option for the employee to contribute to a plan that will grow in the absence of taxes on capital gains or income. Therefore, it is essentially a deferral of income from the savings. There is an array of things and this government is providing the employee a choice. There is the CPP and the RRSP. Those who are lucky enough to be employed by a company that provides a registered pension plan will have that, too. However, keep in mind that some plans are not portable, with the exception of the RRSP, which is a self-funded plan. This pooled pension plan would be portable, universal and an additional vehicle for the employee to have a choice.
Kevin Lamoureux Liberal Winnipeg North, MB
Mr. Speaker, we in the Liberal Party look at retirement as an issue with many different facets. The biggest and most important issue of concern to Canadians is the guaranteed income supplement, and so forth. Following the Prime Minister's recent comments on increasing the age from 65 to 67, to putting in freezes, to the possibility of having cutbacks, there are discussions taking place today throughout Canada as seniors try to understand what the Conservatives' hidden agenda really is in regard to the whole government pension program.
I am wondering if the member would be able to provide some clear and concise commitments that would assure Canadians from coast to coast that those pensions and the amounts and the age at which people are eligible to receive pensions, that is, at age 65, will continue under the present government. Is he prepared to make that commitment?
Chungsen Leung Conservative Willowdale, ON
Mr. Speaker, we are still in a period of consultation on this.
For retirement a senior has to rely on an array of things. The OAS and the GIS and the CPP are government programs that we have inherited. We are trying to provide a better array of savings plans, including the tax-free savings account plus the proposed new pooled pension plan, to allow them greater options to save for their future. Probably one of the best pension plans for an individual is to invest in their own principal residence, but that is only one aspect of it.
Canadians are financially savvy and financially literate, and it would be a bonus to them to have these options to choose how they wish to retire.
John Weston Conservative West Vancouver—Sunshine Coast—Sea to Sky Country, BC
Mr. Speaker, the parliamentary secretary has established himself already as a well-known member of Parliament. He has gone across the country and has even been working internationally. Many of us, including me, knew him well before in his role as a prominent businessperson both in Canada and abroad.
I am wondering if he could put on his businessperson's hat for a second and give us a sound commercial analysis on why this approach would make sense for Canadians.
Chungsen Leung Conservative Willowdale, ON
Mr. Speaker, I thank my colleague from West Vancouver—Sunshine Coast—Sea to Sky Country for his accolades.
I have done business both in Canada and internationally. From the employer's standpoint, in order to provide working income for staff and to expand the company's market and to make sure that the business is a going concern, there are a number of factors contributing to that. First is a stable environment, and second a low cost tax regime, and third the ability to access capital. From that base the employer then builds a business.
Employees are key to any corporation. Money is easy to borrow. Employers never exploit their employees, at least not in the five or seven companies that I have built, so it is key that we ensure that we retain those employees. To retain those employees we need to offer them the employment security they need in order to work for a long time in our corporations.
Anne Minh-Thu Quach NDP Beauharnois—Salaberry, QC
Mr. Speaker, I would like to go back to something that the member opposite touched on when he spoke about the shared responsibility of employees, employers and the government, and the viability of the PRPP system being proposed by the Conservatives.
We find this system to be completely disconnected from reality for a number of reasons, mainly because the risks would be borne only by employees. They are being offered a plan that would produce results based on the market. We hope that the investment income will grow. However, we know that Australia introduced this type of plan and realized, 12 years later, that the plan was completely ineffective because management fees were too high and inflation was almost as great as income. This plan does not provide any guarantee that investments will grow in the end.
If all the risks are borne by employees, what responsibility will the government and employers have?
Chungsen Leung Conservative Willowdale, ON
Mr. Speaker, the government is providing three pillars in the retirement system for employees, those who are approaching retirement. There is the government portion, which is the traditional CPP-QPP, OAS and GIS. Then there is the individual portion which is the RRSP, and there are those who belong to a larger corporation. Only about 30% or 40% of Canada's population have those plans. That is the RPP.
We are providing another portion for those who are in small and medium size businesses which traditionally cannot go to a financial institution for a plan, because they only have three to five employees. For example, people in a private practice, such as lawyers, accountants, doctors, plumbers and restaurant owners do not have the ability to entice financial institutions to set up a registered pension plan.
With this pooled pension plan, the investment aspect is regulated to prevent the failures of the market of over-zealous managers. At the same time I think the costs will be pooled in such a way to manage it at a reasonable cost. Most of the pension plan costs run somewhere around 1% and 2%. That is a very reasonable cost.
Joe Comartin NDP Windsor—Tecumseh, ON
Mr. Speaker, I would ask the indulgence of the House to split my time with the member for Hamilton Mountain.
Mr. Speaker, it is important when addressing Bill C-25 that we set it in the context of what is being attempted here by the government and what is needed with regard to pension reform in this country. It is not only important to do that in terms of the historical context but also in the context of relativity to other jurisdictions and other nations.
In that regard, it is important to understand historically where we have come over the last 50 or 60 years with respect to government pensions or pensions partially contributed to by government. We have established a regime in that regard. We could study some of the reports and minutes of meetings issued during that period of time when the CPP was being established. It was quite clear at that time that an understanding was entered into that the CPP and the QPP which came after, would provide roughly 25% to 30% of what was needed to retire in dignity, and the rest would be provided by the private sector. At age 65, old age security would kick in and that would help to offset the balance. That is where it came from.
If we study that historically right up to the present time, another mechanism that was there, other than private pension plans, is the RSP. It has been a substantial failure in providing that level of security because of its lack of ability to attract enough funds and the inability of most Canadians to contribute significantly enough to an RSP in order to retire in dignity, that combined with the CPP and old age security.
That left the pension plans. As we have heard repeatedly this afternoon, and I am sure as this debate goes on we will hear it a number of times, there are too many Canadians who do not have access to private pension plans. We are at a stage in our history where the system is in need of major reform.
I will compare our status in this area with that of other countries. Across the border in the United States, its social security provides roughly $30,000 a year in Canadian dollars. The full amount of our CPP including the full OAS provides maybe $18,000 or $19,000. That is the context in which we are functioning.
Again, the vast majority of Canadians who are not covered by private pension plans have no ability to make that up and have to rely on RSPs.
What does the government do? Rather than looking at other alternatives, which I will come back to in a moment, it wants to continue with this mostly failed plan of RSPs but turn it into a pooled RSP. This is not just us talking. Even conservative think-tanks like the Fraser Institute have basically said this will not work. There is a list of reasons why it will not work. Let us start with the contributions.
There has been a committee functioning in my riding for what will be three years in May. It is looking at the need for pension reforms. Some members are from unions and others are from the private sector. They have been doing an analysis of what is needed in the way of reform. They have looked at this and have said that it will not move any significant additional dollars or people into the category of being able to retire with dignity in terms of their economic status and economic ability to pay their basic costs of living.
The reason for that is if people have the ability to contribute now, they are contributing to an RSP. Thirty-one per cent contribute and depending on the economic conditions in the country at the time, somewhere between 3% and 7% of that 31% contribute the full amount. The doctor or lawyer doing well financially will contribute the full amount. Even most people within the professions do not.
This begs the question, if they are not able to do that with their own RSPs which they control, why would they put it into this pooled plan where they are going to have to pay very substantial fees? This bill does absolutely nothing to control the amount the people accepting this money, anywhere in the financial sector, can charge in fees.
It is important at this point to juxtapose the reality of what we have seen in a number of these types of investments, the stock market, bonds, whatever, where there is a financial adviser controlling those funds. We have seen that the ratios of the fees are five to six times the fees and administrative costs for the Canada pension plan. That is the reality in Canada today.
Quite frankly, this one is so unattractive that the cost will probably be even higher, because it is so unattractive for a major financial agency, a bank or insurance company, to get into this market. The administrative costs are going to be extremely high because of the low participation. We are going to see huge fees, and this bill does nothing to address that issue.
Another point to look at is when it is that small investor who has some ability to put money aside in an RSP, it begs the question why the investor would do that after what we just saw happen in 2008. We can go back to the high-tech bubble of the late 1990s and any number of times I have watched this happen.
Why would people trust their money going into this pool where there are very few regulations when we have seen what has happened in the U.S. with the housing bubble burst and all of what we have found out as to how funds were handled in that regard? Why would people even consider, if they have these funds, putting them into a pooled registered pension plan as opposed to maintaining control and deciding how best their money could work for them?
For those reasons, it is simply not going to be of any use whatsoever. Bill C-25 is a smokescreen. The government wants to try to convince Canadians that the reform which is so badly needed in our pension system, whatever source there is, is being handled by this one plan, and it is not. It is not at all. It is not going to work.
Let us look at the alternatives for a minute. The expansion of the CPP is clearly one of the routes to go. I heard the last speaker for the Conservatives talk about the stability of the CPP and its ability to deliver and that it is not available for the small merchant. That is one of the reforms that is necessary. We could do that. There are very clear proposals that have come from a number of groups over the last two to three years about how to reform the CPP to attract those people, to give them access to the CPP. It is an expansion of it. The administrators of it say it is possible to be done.
That is only one example of what could be done. I see my time is just about up. There are other reforms that need to be made with regard to the CPP. For instance, priority under the bankruptcy legislation needs to be given to pension funds. The OAS needs to be increased as opposed to what we are hearing, that the government is going to take away benefits by increasing the age. The GIS that needs to be addressed as well.
There are plans out there that are obviously better than this bill which is a smokescreen and should be defeated.
The Acting Speaker Conservative Barry Devolin
Before we go to questions, it is my duty pursuant to Standing Order 38 to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Sudbury, Consumer Protection; the hon. member for Châteauguay—Saint-Constant, Royal Canadian Mounted Police; and the hon. member for Windsor West, Canada-U.S. Relations.
Joy Smith Conservative Kildonan—St. Paul, MB
Mr. Speaker, I have a lot of respect for the member for Windsor—Tecumseh. He is an extremely intelligent person in many respects. However, there are some considerations that I would ask the member to take a very close look at.
We will have more senior citizens than young people within approximately three years. That is what the demographics are showing. The number of Canadians over the age of 65 will increase from 4.7 million to 9.3 million over the next 20 years.
Listening to the parliamentary secretary and to the speakers who have stood on this side of the House, let us be clear, there will be no changes to the benefits seniors currently receive and any changes that are made would have a substantial notice and adjustment period.
As I listened to the member's speech, with the aging demographic, we also have less workers working toward those taxes. Is it not important to ensure that the OAS continues, but also that we look at the whole program to ensure that we have these very important programs sustained in Canada, not for 5, 10 or 15 years, but for the next 60 years?
Joe Comartin NDP Windsor—Tecumseh, ON
Mr. Speaker, the question of the member for Kildonan—St. Paul gives me the opportunity to raise the issue of the sustainability of the OAS.
Nothing has changed with regard to the sustainability of the OAS from where it first started to where it is now. This has always been carried by current funds. We have never had a reserve fund for the OAS in the history of it. What has changed with regard to the revenues that are coming in is the government has consistently said that it will give preference in the economy to certain groups and it will give large corporations major tax breaks. There have been over $100 billion so far and it will almost double before those tax breaks are finished.
If we take that out of the accounting column, on one side the expenses are continuing, the OAS expenses are continuing, and we are lowering the revenues on the other side. That is where the sustainability problems come. It has nothing to do with OAS; it has everything to do with policy decisions by the government with regard to tax breaks for the big corporations.
Kevin Lamoureux Liberal Winnipeg North, MB
Mr. Speaker, I wonder if the member could provide me some information in terms of the NDP policy. Whether it is the OAS, GICs, or CPP, all these are wonderful pension programs, we understand, in terms of where the Conservatives are coming from on this, which creates a great deal of concern, not only for Liberals but, I suspect, also for New Democrats and for the vast majority of Canadians.
Where I am a bit confused is in terms of what degree does the NDP, as a political entity, believe that an individual should be encouraged or the government should be providing any sort of incentive for individuals to participate in pension programs that go beyond those government programs, which in good part were formed by Liberal governments in the past.
Joe Comartin NDP Windsor—Tecumseh, ON
Mr. Speaker, most of our pension system came out of the CCF and the NDP proposals over the last approximately 80 years when we first started and were eventually picked up by other political parties and implemented.
With regard to the basic question, what he is asking is if people should plan for retirement and contribute to it. From any side of the House, we are all going to say, yes, we all should be doing that.
For those who are more vulnerable, those with disabilities, limited incomes, maybe a series of times when they were unemployed, there has to be a plan in place for government to be play a role there to assist them so they can retire in dignity because they have contributed to this society throughout that period of time. It is always a question of the details and to what degree, such as how much should government be doing, how much should the private sector be doing, how much should the individual be doing.
Bill C-25 does not address that in any realistically plausible way of being successful.
Chris Charlton NDP Hamilton Mountain, ON
Mr. Speaker, I am pleased to get a chance to rise in the House today to debate one of the most important issues of our times: pensions.
It is unfortunate that the Prime Minister and I fundamentally disagree about what those pensions ought to look like. In fact, judging by recent polling of seniors, there are not many Canadians who believe that the Prime Minister is on the right track when it comes to the income security of Canadian retirees. No wonder he waited until he was on the other side of the Atlantic to announce, in Davos, Switzerland of all places, that he would be cutting big chunks out of Canada's old age security system. So much for accountability to Canadians.
Thankfully, Canadian pensioners are much more savvy than the Prime Minister gives them credit for. They are not frail and disengaged. On the contrary, when it comes to their income security, they are ready to fight for what is right. After all, they have worked hard all their lives, they have played by the rules, but now everywhere they turn, every bill they open, they pay more and get less.
It is a well known fact that increases in the cost of living hit seniors disproportionately harder than any other segment of the population. When Statistics Canada determines the annual cost of living upon which adjustments are based, its basket of goods include electronics like iPods, plasma TVs and computers, which are all goods coming down in price and reducing the cost of living figures. However, they are also goods that seniors are not buying. The items they spend money on are essentials like heat, hydro, food and shelter, all of which are outpacing their incomes.
It is no wonder that the vast majority of Canadians are deeply worried about not having enough money to live on after retirement. They are worried about the solvency of their private pensions and the adequacy of both CPP and public income supports. Let us talk about each of those for a bit.
Record job losses, the decline of entire industries and the collapse of larger employers are throwing hundreds of thousands of hard-working Canadians out of work. Far too many bankrupt employers are leaving underfunded pension plans in their wake. Through no fault of their own, workers are now finding that despite their years of making pension contributions, they can no longer count on a secure workplace pension.
However, workplace pensions are just part of the problem because only one-third of Canadian workers have a workplace pension. Similarly, only one-third of Canadians contribute to an RRSP and those who have just watched billions in precious savings vaporize in the stock market crash of this last recession.
The current system is leaving too many people without the retirement savings they need. There is too much at risk and not enough security. Let us face it, for more than a generation, wages have failed to keep pace with the cost of living and most Canadians have not been able to save what they need.
The urgent question before us today is this. What is the best way to help today's workers save enough money for tomorrow? The answer to that is clearly not to be found in the Prime Minister's speech in Davos.
In the past, Canadians came together during crisis to create solutions, to minimize risk by sharing it. That is what we did when we created public health care and, yes, that is what we did when we created public pensions. However, not under this Prime Minister. Instead of looking to opportunities to strengthen our pension system, he said that the demographic pressures from our aging population, “constitute a threat to the social programs and services that Canadians cherish”. Instead of securing our pension system to ensure sustainable prosperity for seniors, he announced that he would limit spending on pension programs.
While no one is quite clear on what exactly he meant, there is a widespread belief that the Conservatives will raise the minimum age at which people become eligible for full old age security payments, from 65 to 67. However, what is clear from the same speech is that we can afford to ensure that Canadian seniors live in the dignity to which they are entitled. As the Prime Minister correctly pointed out in Switzerland, Canada is no Greece.
Government debt levels as a percentage of gross domestic product are low. The federal deficit is being reduced ahead of schedule. There is no fiscal crisis in our country. Funding OAS takes the equivalent of 2.4% of the GDP. It is among the lowest of OECD countries. Italy, by contrast, spends 14% of GDP on public pensions.
True, by 2031, as the wave of baby boomers reaches retirement age peaks, the OAS' share of GDP will increase to 3.14%, an increase of 0.73% of GDP from today's level. However, as UBC economics professor Kevin Milligan points out, an increase of 0.73% cannot be ignored, but neither is it disastrous. When the baby boomer bulge starts to recede, as it will from about 2020 on, spending on the elderly will start to decelerate on its own.
Clearly this attack on the OAS is nothing more than an ideological assault on public pensions. So what do we get instead? Pooled registered pension plans, the enabling legislation for which is before us in the House today.
Ostensibly designed to address the fact that modest and middle income households are at risk of under-saving for retirement, the Conservatives want to work with the provinces to create an option of pooled workplace pensions administered by financial institutions.
In other words, the Conservatives are encouraging families to gamble even more of their retirement savings on failing stock markets. It is a voluntary defined contribution plan that is run by wealthy financial institutions investing in tumbling markets. That uncertainty and volatility leaves families without any guarantees that their savings will be there for them when they retire.
As one critic of the bill so aptly put it, we must conclude that this is an agreement to do nothing except perhaps a handout to the financial services industry at the expense of the average Canadian.
Let us face it, we do not need to reinvent the wheel when it comes to pension security. We do not need Bill C-25. The best way to help today's worker save enough money for tomorrow is through an improved Canada pension plan. Over the next several years we must lay the foundation to double CPP benefits for the future.
The CPP has been proven time and again to be a safe, secure and efficient retirement savings plan. As the Prime Minister himself noted, the CPP is “fully funded and actuarily sound”. It is portable from job to job and across provinces. It keeps up with inflation and 93% of Canadians are already members.
Because the CPP operates independently from government, there is no cost to taxpayers. In fact, there is the potential for governments to save money over time.
Higher and more secure pension savings means seniors will be less likely to rely on income supports like the guaranteed income supplement or provincial and local social supports for medicine, housing and food.
The cost to workers and employers is manageable. Over seven years, CPP premiums would only have to rise by 0.4% each year of pensionable earnings.
We all need to save more for retirement and putting that little extra into the CPP makes more sense than investing in risky RRSPs, pooled or otherwise. It is safer, easier, in fact it is effortless, and it earns more.
It is time for the government to come clean. The Conservatives found $9 billion for prisons. They found $30 billion for fighter jets. They found $6 billion for more corporate tax cuts. However, they say they cannot find the money to protect the pensions of Canadian seniors.
Clearly this is not about money; it is about choices. I choose to invest in people. I choose to stand up for Canadian seniors and for retirement with dignity and respect.