moved 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.
Mr. Speaker, I am pleased to open debate on Bill C-25, An Act relating to pooled registered pension plans and making related amendments to other Acts.
As hon. members are aware, our government understands the importance of a secure and dignified retirement for people who have spent their lives building a better and more prosperous Canada for all of us. This legislation would take Canada's retirement income system one step further by helping more Canadians realize their retirement goals.
PRPPs, an acronym people will hear many times over, refers to pooled registered pension plans. I will outline how PRPPs will help millions of Canadians save for their retirement, but first I will provide some context as to why our government is introducing this new low cost and accessible retirement option. Just because Canada's retirement system is strong does not mean it cannot be improved. That is exactly what will happen when the House passes Bill C-25.
In the wake of the 2008 financial crisis, concerns related to retirement income adequacy and pension coverage began to emerge. In response our government took action and established a joint federal-provincial research working group in May 2009. This working group conducted an in-depth examination of retirement income adequacy in Canada.
The working group concluded that overall the Canadian retirement income system is performing well. It is providing Canadians with an adequate standard of living upon retirement. However, the report also found that some modest and middle income households may be at risk of having insufficient savings once they retire.
Of particular concern is the finding of declining participation in employer-sponsored registered pension plans. The portion of working Canadians with such plans has declined from 41% in 1991. As well, Canadians are not taking full advantage of other retirement savings tools such as registered retirement savings plans. For example, currently there is $600 billion in unused RRSP room in Canada. While aggregate RPP and RRSP participation rates for middle and higher income earners are quite high, the research nonetheless indicates that a portion of Canadians is not saving enough.
With these findings in hand, our government went to work on behalf of Canadians. Over the past two years our government's commitment to a stronger retirement system has taken me to every province and territory and countless communities across this country. In my travels I have consulted with Canadians. I have met with our provincial and territorial counterparts. I have held discussions with owners of small and medium size businesses as well as self-employed Canadians. Today's legislation is the culmination of these consultations.
In short, PRPPs are an innovative, new, privately administered low cost and accessible pension option to help Canadians meet their retirement goals. They are particularly significant for small and medium size businesses. They will enable owners and employees alike to have access to a large-scale, low cost private pension plan for the very first time.
Professional administrators will be subject to a fiduciary standard of care to ensure that funds are invested in the best interests of the plan members. By pooling pension savings, PRPPs will offer Canadians greater purchasing power. Basically, Canadians will be buying in bulk. Achieving lower prices than would otherwise be available means Canadians would have more money left in their pockets when they retire. The design of these plans will also be straightforward to allow for simple enrolment and simple management. Finally, they are intended to be a largely harmonized process from province to province, which will further lower the administrative costs.
Overall the design features will remove many of the traditional barriers that might have kept some employers from offering pension plans to their employees. It is my firm belief that this will lead to a greater willingness for small and medium-size businesses to offer PRPPs to their employees. That is crucial because, incredibly, just over 60% of Canadians do not have a workplace pension plan to date.
With PRPPs, participation will be encouraged by automatic enrolment of employees into a PRPP where their employers offer one. Automatic enrolment will encourage regular saving in PRPPs by making participation the default choice for employees who do not actively make a decision to opt out. Canada's Minister of Finance decided to proceed with the PRPP framework precisely because it was considered an 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 registered pension plan.
If the NDP had its way, it would increase the payroll taxes on small and medium-size businesses when it suggested doubling the CPP contributions. At a time when Canada's economic recovery is still fragile, imposing a job-killing tax on job creators is simply irresponsible. PRPPs would be an efficiently managed privately administered pension plan that would provide greater choice to employers and individuals and would promote pension coverage and retirement savings.
Once the provinces administer their PRPP legislation, the legislative and regulatory framework for PRPPs will be operational. This will allow PRPP administrators to develop and offer plans to Canadians and their employers. Working together with the provinces, I am confident we can get these important new retirement vehicles up and running for Canadians in a timely manner.
It is important to remember that PRPPs do not stand by themselves. They are part of a bigger picture. They are part of Canada's retirement income system. We must remember that our system is based on a balanced mix of public and private responsibility. It is also a mix of compulsory and voluntary vehicles that provide the basic minimum pension for Canadians, ensure a minimum amount of earnings replacement for all Canadian workers and offer an additional opportunity for voluntary retirement savings. The system both supports and draws upon the strength of a sound financial sector and complements our overall economic objectives of creating jobs and stimulating economic growth.
The success of this model rests on its three pillars. The first pillar is made up of the old age security, or the OAS, and the guaranteed income supplement, which provide a basic minimum income guarantee for seniors. These programs are funded primarily through taxes on Canadian workers. Our government is committed to ensuring the retirement security of Canadians. That is why we have to ensure that programs like the OAS and the GIS remain sustainable so they will be around for Canadians in the future.
The second pillar is the Canada pension plan and the Quebec pension plan. These are mandatory publicly-targeted benefit pension plans which provide a basic level of earnings replacement for all Canadian workers. There are currently 16.5 million workers contributing to CPP and QPP, with these programs paying $44 billion in benefits per year to 6.5 million beneficiaries. The CPP is the centrepiece of Canada's pension system. I am proud to say it is fully funded, actuarially sound and sustainable for the long term.
The third pillar of Canada's retirement system includes tax-assisted private savings opportunities to help and encourage Canadians to accumulate additional savings for retirement. This includes registered pension plans and registered retirement savings pension plans. In total the cost of tax assistance provided on retirement savings is currently estimated at approximately $25 billion per year.
All in all, these three pillars support each other in a way that is effective and also fair.
The introduction of the PRPP is only the latest example of our government's commitment to ensuring that Canada's retirement system continues to deliver for seniors.
Since 2006, our government has increased the age credit amount by $1,000, increased it by another $1,000 in 2009, doubled the maximum amount of income eligible for pension income credits to $2,000, introduced pension income splitting and introduced the age limit for maturing pensions and RRSPs to 71 years from 69 years.
In budget 2008 we introduced the tax-free savings account, which is particularly beneficial to seniors. It helps them meet their ongoing savings needs on a tax efficient basis after they are no longer able to contribute to an RRSP.
In budget 2011 we announced a new guaranteed income supplement top-up benefit for the most vulnerable seniors. Seniors with little or no income will receive an additional annual benefit of up to $600 for single seniors and $840 for couples.
Overall, since coming to office, our government has provided over $2 billion in additional annual targeted tax relief to seniors and pensioners.
Our government has a proven track record when it comes to ensuring that Canada's retirement income system is the best in the world. By introducing PRPPs, we are taking that system and making it stronger. This is something of which Canadians can truly be proud.
PRPPs would build on our commitment to improve the retirement income system in our country. This new private sector pension vehicle would improve the range of retirement savings options available to Canadians. PRPPs would provide a low cost retirement savings opportunity for hard-working Canadians, who currently do not have access to a workplace pension plan.
It is my hope that the provinces will follow our government's lead and introduce PRPP legislation on a timely basis. The many businesses and employees who I meet with fully support PRPPs. They believe, and I think the provinces appreciate this, that their governments should work together to deliver results on their priorities. The PRPP is a prime example of what we can do collectively to accomplish for Canadians when we do act together.
On that note, I encourage all hon. members to support the bill and ensure that Canada's retirement income system continues to be the envy of the world.
