Mr. Speaker, it is a pleasure today to speak to Bill C-25, the pooled registered pension plans act.
Canada's retirement system is based on four pillars. The first is the OAS-GIS, the Canadian social safety net for seniors. The second pillar is the CPP, Canada's mandatory public pension plan with defined benefits. The third is the tax-assisted private saving options, such as RRSPs, registered pension plans and the TFSAs. The fourth is private assets, such as a house or the equity people may have in their home, which they may try to downsize at some point to better fund their retirement.
I thank my colleague, the member for York West and the Liberal critic for seniors and pensions, for her exceptionally beneficial and important work and analysis on pension issues over the last several years. Through her hard work, she has developed and helped present to this Parliament and to Canadians a well thought out optional voluntary supplemental CPP that would be superior to the PRPP for a number of reasons, which she has helped explain.
First, a defined benefit plan as opposed to a simple PRPP plan with defined contributions would provide Canadian retirees with that extra degree of security despite market fluctuations. It would also make it voluntary and portable and, unlike the PRPP, it would provide lower administrative costs so that more of one's investment could end up benefiting one's retirement rather than going to ridiculously high fees, which are a real challenge in Canada, particularly with some of the mutual funds. In fact, offering a voluntary supplemental CPP option would create more competition for the PRPPs in terms of fee structures. One of the benefits in having a voluntary supplemental CPP, which I do not think has been adequately considered by this House, is that it would help keep fees low in the PRPP system and for those plans.
The reality is that the Canada pension plan itself has a very low fee and low cost structure administratively. It is diversified in terms of asset class, it is diversified geographically and it is diversified by sector of investment. It is professionally managed. As a result of decisions taken by the Chrétien government and Paul Martin as finance minister back in the 1990s, they helped ensure the fiscal and prudential strength of the Canada pension plan for decades to come. In fact, we have the strongest public pension in the world as a result of those decisions. Also, the decision to invest in public markets through a prudent, professional plan was taken at that time.
It was interesting to hear the Prime Minister last week in Davos taking credit for the prudential strength of the Canadian pension plan. In fact, I believe he, along with the National Citizens Coalition, the Canadian Taxpayers Federation and the Reform Party at the time, fought every step of the way those decisions taken by the Chrétien government which enabled Canada to have one of the strongest pension plans in the world. However, that did not stop the Prime Minister from taking credit for it. Next he will take credit for the oil and gas under the ground in Alberta and the oil under the water off Newfoundland and Labrador, although we all know that was Danny Williams, but I digress.
In terms of Canadians' financial situation right now, it is important to realize that Canadians have record levels of personal debt. On average, there is $1.53 of debt for every $1 of annual income. The Conservatives actually made the situation worse with their first budget in 2006 when the current finance minister recklessly followed the U.S. model and introduced 40-year mortgages with zero down payment. That was the same finance minister who had inherited a $13 billion surplus but raised government spending by three times the rate of inflation and put Canada into deficit even before the downturn.
Today, with an aging population, historically high debt levels and low savings rates, it is clear that the government must make Canada's retirement income system a priority so that seniors are not left out in the cold.
The first pillar I want to speak to is old age security. Old age security was introduced in 1952 by a Liberal government. It was then followed by the GIS, the guaranteed income supplement, introduced by a Liberal government in 1967. The OAS and the GIS have formed a key part of Canada's social safety net. This has been a defining element in terms of Canadians' social values and reflects the dignity that we believe seniors ought to retire to. Ensuring that the government sets aside enough money to pay for the social safety net has always been a priority.
The amount we spend on OAS does fluctuate with our demographics. Last year the federal government spent 2.37% of Canada's GDP on OAS payments. Twenty years ago, in 1992, spending on the OAS reached 2.72% of Canada's GDP. In 2030, spending on the OAS is expected to reach 3.16% of GDP. Ensuring that we have enough money to pay for these increases is a matter of priorities, of planning and of making decisions based on evidence as opposed to making decisions based on ideology.
Back in the nineties, the Conservative government of the day tried to cut the OAS by scrapping the guarantee that OAS payments would keep up with inflation. This was done after they had promised not to touch or reduce Canadian pension benefits. A 63-year-old, Solange Denis, told Prime Minister Brian Mulroney at the time:
You made promises that you wouldn't touch anything... you lied to us. I was made to vote for you and then it's goodbye, Charlie Brown.
We will all remember that pivotal moment. The Conservatives, ultimately, reversed their decision on that and listened to seniors across Canada, like the Canadian Association of Retired Persons and other organizations representing seniors and grassroots across Canada. Canadians stood up and defended themselves against that cut at the time.
Last week, the Prime Minister signalled that his government was considering increasing the qualification age from 65 to 67 for OAS benefits in Canada. We need to think about who would be impacted by this and whether it is fair. According to tax returns filed in 2009, the latest information available from the CRA website, more than 40% of seniors receiving old age security had an income of less than $20,000 per year. Furthermore, over half of the OAS money went to seniors earning less than $25,000 per year. Therefore, increasing the qualification age for OAS disproportionately hurts those Canadians who are most vulnerable, seniors living at or below the poverty line.
By increasing the qualification age for OAS from 65 to 67, the Conservatives would be taking away up to $30,000 from each of our most vulnerable senior citizens. These cuts to OAS would disproportionately hurt the poor, especially older single women. OAS cuts would force these seniors onto provincial welfare rolls and put seniors' drug coverage at risk as provinces only provide certain drug coverage to seniors receiving the GIS supplement. If people do not qualify for GIS, they do not qualify for drug coverage. We can only think of the unintended consequences of these changes on poor seniors.
The Conservatives are trying to download all these costs on to the provinces, with provincial treasuries having to pick up the tab or just do without. It is the same with the Conservative's jail agenda, billions of dollars of federal money but also billions in costs imposed on provincial governments, without any consultation, negotiation or discussion with provincial governments.
It is also important to look back a couple of years when the Conservatives cut the OAS to prisoners in Canadian penitentiaries. At that time, the human resources minister spoke of cutting off OAS for prisoners serving a sentence of at least two years. She said, “Canadians who work hard, who contribute to the system, who play by the rules deserve government benefits such as Old Age Security”.
It is interesting now to take those words forward and see that the Conservatives are now treating senior citizens like prisoners. They are treating senior citizens today, people who have worked hard and played by the rules, like they would treat prisoners.
It is bad enough that the Conservatives follow an ideologically rigid and ineffectual tough on crime agenda that will not work, but where will this tough on seniors agenda get Canada? I look forward to questions.
