Madam Speaker, Bill S-3 proposes to update the Pension Benefits Standards Act, a law through which the federal government supervises private pension plans.
Canada's system of retirement income has three pillars. The first pillar is the basic old age security paid to all seniors together with the various supplements paid to low income seniors. This first pillar will soon be undermined by the proposed seniors benefits which will result in effective marginal tax rates approaching 70% for some seniors from the combined effect of existing tax rates and the 20% clawback on family incomes above $26,000.
Retirement savings experts are already telling middle income Canadians over the age of 50 to be wary of savings in RRSPs because what they save now will be most likely eaten up in higher taxes later. This creates a direct disincentive for Canadians to do what is right and that is to save for their own futures and for their retirements.
The second pillar consists of the employment based Canada and Quebec pension plans. Under the government's reforms to this pillar Canadians will have to pay more to get less.
The third pillar includes retirement savings such as RRSPs and employer pension plans. The government has moved to restrict access to RRSPs by freezing contribution limits and forcing seniors to mature their RRSPs two years earlier.
The legislation deals with the other part of the third pillar, employer pension plans. Most employer pension plans are governed by provincial law, but 500,000 Canadians belong to the 1,000 plans that fall under federal law.
Ten years ago the Progressive Conservative government overhauled the Pension Benefits Standards Act, the law that covers those plans. Significant changes were made to the minimum standards that plans must meet in areas ranging from survivor benefits to information disclosure. The bill before us updates that act.
The goals of the bill are to improve the way that plans are governed, to improve Ottawa's ability to step in when plan administrators do not appear to be following sound financial practices to set up rules for the withdrawal of pension surpluses. It will also allow Ottawa to enter into supervisory agreements with provincial regulators through the Canadian Association of Pension Supervisory Authorities.
Unlike other recent changes to our system of retirement savings, the only parts of the bill to generate even minor controversy are the provisions that pertain to the withdrawal of pension surpluses. Pension fund managers are concerned that the surplus and the wind-up provisions in the bill are weighed heavily against employers.
However, the bill is not particularly controversial. There has been some controversy over the introduction of some government bills in the Senate, a practice which has fallen into disuse in recent years.
Without getting into a debate on Senate reform, if bills are to be introduced in the Senate, Bill S-3 is especially the kind of bill on which the Senate can do solid work before sending it on to the Commons. This is particularly the case given the combination of the technical nature of the bill, the expertise of those on the Senate Committee on Banking, Trade and Commerce in the area of corporate governance and the non-partisan spirit of co-operation with which members of this committee approach such legislation.
To not optimize the collective skills, wisdom and experience of these senators is an affront to the Canadian taxpayer. We do have a Senate. The senators on this committee have demonstrated prowess, ability and expertise in these areas. I would remind my colleagues in the Reform Party that to not optimize this expertise would be denying Canadian taxpayers another level of deliberation on this type of important legislation.
It is an approach that we could use here from time to time when we look at legislation, especially legislation affecting areas of corporate governance where there is a significant amount of institutional knowledge in the Senate.
The Senate banking committee has made six substantive amendments as a result of the testimony it heard from officials and from outside witnesses. The Senate amendments further clarify the rules to be followed when an employer wants to withdraw from the pension surplus. It struck a provision that would have given the Superintendent of Financial Institutions the ability to decide if a particular allocation of a surplus was fair, as the issue of fairness should be left to the employees and employers to be settled, not to a public servant.
It also improved a process for allocating the surplus in cases where a company goes bankrupt or winds down. It is very important that we protect individuals when a company is faced with the types of dramatic downsizing and corporate readjustments that have occurred over the past few years. The legislation will help improve that process.
Those amendments were developed by opposition and government members in the Senate, working in a spirit of co-operation with the officials. A spirit of co-operation might be something that we should try to duplicate in the House periodically when we are working on legislation as important as this legislation.
At the end of the process finance officials conceded that the bill had been improved by the contribution of the Senate. Our colleagues in the other place have done well on this rather technical bill. That does mean that we do not have to do our work or that we do not have further work to do.
I look forward to the committee examination of the bill and to further improving it through contributions by the House.
