In Debate: Second Reading, Bill C-25 (Pooled Pension Plans)
February 1st, 2012 - 7:41pm
The House resumed from January 30 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.
Ms. Irene Mathyssen (London—Fanshawe, NDP): Mr. Speaker, I am pleased to have the chance to speak to Bill C-25, an act regarding the pooled registered pension plan. Certainly there will not be many more of us who have this opportunity.
As members may have already noted, the plan would fail to adequately address the current needs of Canada's aging population. Seniors represent one of the fastest-growing populations in Canada today. The number of seniors in Canada is projected to increase from 4.2 million in 2005 to 9.8 million by 2036. With so many seniors retiring in the years to come, we need to have the social safety net in place now to avoid dramatic increases in the rate of poverty in the future. We need real pension reform, not a savings scheme that is dependent upon the ups and downs of the stock market. Canadians know all too well how ineffective and expensive that kind of savings plan is. Too many saw their savings crumble away as the markets took a nosedive. This is most definitely not how savings for retirement should be organized.
The CPP, when it was established in 1966, was set up with the assumption that individuals would also have workplace pensions and individual savings to complete their CPP benefits. For the average Canadian, real wages have failed to increase, making savings for retirement a virtual impossibility. More and more, workplaces have cut pension programs, leaving only about 25% of workers with a private pension plan.
This savings scheme that we have seen proposed by the federal Conservatives purports to address the pension savings shortfall, but fails to address the problems at the heart of the retirement savings problem in Canada.
For employees, a PRPP is like a defined contribution, or group RRSP. It is a savings vehicle, limited by RRSP limits and regulations, purported to allow workers to save for retirement, but it would not guarantee retirement security. PRPPs would be managed by the financial industry, the same crew receiving huge corporate tax breaks from the Conservatives. The PRPP is not a defined benefit plan. It would not provide a secure retirement income with a set replacement rate of pre-retirement income. It would not be fully transferrable. It would not be indexed to inflation and would not increase with the increasing cost of living.
It is noteworthy that employers, not employees, would decide contribution levels and it would not be mandatory for employers to contribute or match workers' contributions to these PRPPs. Without employers contributing, it would not really be a pension plan. In fact, employers who do not help their employees save for retirement could end up with a competitive advantage over employers who do. This would have a huge limitation on the effectiveness of PRPPs as a means to increase retirement security at all.
The proposed PRPPs do not guarantee low management fees, nor prevent the large management fees that eat up such a large portion of retirement savings now. In fact, there is only a promise that PRPPs will result in large pools of capital and that they might lower fees, with no guarantees or legislative results. Nothing in the PRPP proposals sets management expenses at levels equal to or lower than those of the Canada pension plan. As a result, CPP is still a better deal than PRPPs, not only because CPP is guaranteed and indexed but because it has much lower management fees.
The pooled registered pension plan would not help those who are struggling the most, the poor. The government's own advisory group, the National Seniors Council, in 2009 reported that, generally, most people did not experience dramatic declines in income when they turn 65, rather low income as for seniors is the result of the inability to accumulate assets over time. The council also argues that given their greater longevity, women are far more likely to be unattached in later life and at greater risk of experiencing low incomes. Indeed, women represented about three-quarters of the 179,000 unattached low-income seniors in 2006.
The National Seniors Council also points out that Canada's retirement income system, the OAS, CPP and private pension savings and investments, has helped reduced the incidence of low income among seniors and helped increase overall living standards. The OAS and GIS programs play a critical role in ensuring that seniors have a modest base of income. Still, a core group of seniors remain vulnerable: the unattached, recent immigrants, those with fewer than 10 years in the labour force and aboriginal seniors. The council points out that low income seniors spend most of their money on housing, food, transportation and health-related costs.
I have met with Canadian seniors and seniors organizations representing people from across the country. I have taken the time to listen to what they had to say and they are very concerned about access to health care, medicine, being forced from their homes and losing their autonomy. All of these things hinge on one simple thing, financial security. This current scheme, the one we have before us, does not provide security and without financial security, our seniors are left vulnerable to abuse and poverty.
Fixing our pension problem is not the only step we can take. We should provide education and financial literacy so Canadians can be better informed about planning for their retirement. To underscore that point is the 2005 report from the National Council on Aging. It found in a review of under-subscription to the OAS program and Canada pension plan that large numbers of eligible seniors had not applied for these programs. About 55,000 eligible people did not apply for their retirement pension. In 2004 alone, about 1,000 people made a late application for their CPP.
The council recommends that the federal government work to reduce the failure rate among people who are eligible for old age security and CPP benefits. It should also make public the number of eligible seniors who have not applied for the various benefit programs.
This is important because of the negative impact it has. Women are three times more likely to be late applying for CPP. Late applicants are also noticeably more numerous in Quebec, Yukon and the Northwest Territories, regions where there are more seniors living under the poverty line.
The fact is that late applications for CPP benefits causes serious consequences. Currently, a person who is late applying for his or her pension under the CPP is only entitled to 11 months of retroactive benefits, whereas the QPP provides up to 5 years of back benefits. The federal retroactive period for CPP is clearly insufficient and unfair because this program is based on employee-employer contributions. The money has been contributed and it should be available to the retiree.
The council therefore recommends that the federal government allow fully retroactive benefits, plus interest, when someone applies late under the Canada pension plan because it is a contribution-based program.
I will also say a few words about RRSPs, as they are much touted as a safe and valuable retirement savings plan. The National Council on Aging argues that people with low incomes actually derive no advantage from investing in RRSPs, an investment program that allows contributors to delay paying income tax until the invested amounts are cashed in. However, people with low income pay little or no income tax during their working lives anyway. If they are entitled to the GIS upon retirement, they will actually be penalized when they cash in their RRSPs, since these amounts will inevitably lead to a reduction in GIS benefits.
For example, a person receiving the GIS who cashes in a $1,000 RRSP could see his or her GIS benefit reduced by $527. Furthermore, those GIS recipients, who are among the 50% who pay income tax, will see a further reduction of $250. Finally, other benefits such as provincial-territorial income supplements or subsidized housing may be lost or reduced as well. The clawbacks discourage low income earners from making the already difficult effort to save.
Among people aged 55 to 64, 21% have no retirement assets and 32% have assets of less than $100,000. Seniors with no retirement income will receive maximum benefits from the government. However, those who have saved a little, about $23,000 in RRSPs, will have a significant portion of their assets confiscated by provincial and federal governments because both of these governments will recover the money through income tax and through reduced benefits paid out of their income tested programs.
This reality points to another, better way to assist low income seniors in gaining economic security. We must end the clawbacks. This would be a smarter investment and first step in eliminating poverty for seniors in Canada.
I would like to talk numbers now. The CCPA outlines the cost savings in investing in pensions. I think the House will find these numbers very interesting.
The federal government estimates that the net cost to the government of tax assistance to RRSPs, the third tier of retirement income, was $9.3 billion in 2005. This was projected to rise to $12.1 billion by 2010. The net cost of tax subsidies to registered pension plans in 2005 was $13.3 billion, projected to increase to $16.8 billion by 2010. Net cost is the cost in lost tax revenue by government for RRSP contributions. It is significant that the net cost in lost tax revenues of tax subsidies to registered pension plans and RRSPs in 2010, at $28.9 billion, is greater than the total cost of OAS benefits, estimated at $27.6 billion for 2009-10.
The CCPA, using data from Statistics Canada, points out that only 38% of employed Canadians have a workplace pension. It is also important to note that most Canadians who are entitled to contribute to an RRSP fail to do so. In many cases it would appear many of those eligible to contribute cannot afford to do that. Statistics Canada reports that 88% of tax filers were eligible to contribute to an RRSP in 2006, but only 31% actually made contributions. They used only 7% of the total contribution room available to them. In other words, there is now more than $500 billion in unused RRSP contribution room being carried forward.
Pension reform should reconsider the high cost of taxpayer subsidies to RRSPs and private pensions. A reduction of the tax subsidies to the third tier of the retirement income system would free up funds to improve benefits for CPP. A secure retirement for all Canadians would be ensured with $28.9 billion.
There are many among us who have concerns for the future and those concerns are entirely justified.
As I mentioned earlier, only 25% of Canadian workers have workplace pensions and nearly one-third have no retirement savings at all. More than 3.5 million Canadians are not saving enough in their RRSPs for what used to be called their golden years and 75% of workers are not even participating in a registered pension plan. Clearly the notion that retirement savings can be adequately accounted for through purchases of RRSPs does not work. Urgent government action is needed.
It should further be noted that private retirement savings are concentrated in a small percentage of Canadian families. According to Statistics Canada, 25% of Canadian families hold 84% of current retirement assets, while three out of ten families have no private pensions at all.
Seniors have worked hard all of their lives. They have played by the rules and now they simply want access to the programs and services that their hard-earned tax dollars helped to make possible. Every senior in Canada has the absolute right to income security.
In a series of polls conducts by the Canadian Labour Congress in 2004, 73% of Canadians polled said that they worried about not having enough income to live after retirement. The number of people who worried about income security had increased by almost 20% from two years before.
Canadians are worried about the solvency of their private pensions, the adequate nature of CPP and public income support and their ability to cope with what Statistics Canada confirms is a higher rate of inflation for seniors than average Canadians. We know life is getting more expensive. Those fears are well-founded. Right now, more than one-quarter of a million seniors live below the poverty line. Since the mid-1990s, the income of seniors has reached a ceiling and the gap between the income of seniors and that of other Canadians is now increasing.
According to the government's own National Advisory Council on Aging, between 1997 and 2003 the mean income of senior households increased by $4,100 while the average income of other Canadian households increased by $9,000. The situation is even more pronounced for seniors living alone. A life of poverty is most prevalent among women, those widowed, separated or divorced, recent immigrants, tenants, those without private pension coverage, and not surprisingly, those with low wages.
Senior women face harsh realities upon retirement. The poverty rate for senior women is almost double the poverty rate for senior men. In particular, unattached senior women remain very vulnerable. They make up 60% of seniors living below the poverty line. In 2003, according to a Government of Canada report, 154,000 unattached senior women lived in poverty. Poverty is a real issue for seniors. Income insecurity makes them vulnerable to abuse. Financial security equals autonomy.
New Democrats have concrete solutions to solving the pensions problem that faces Canadians. We would work with the provinces to bring about increases to the Canada and Quebec pension plan benefits with the eventual goal to double the benefits received. We would work with the provinces to build in the flexibility for employees and employers to make voluntary contributions to individual public pension accounts. We would amend federal bankruptcy legislation to move pensions and long-term disability recipients to the front of the line of creditors when their employers enter court protection or declare bankruptcy.
As government, we would increase the annual guaranteed income supplement to a sufficient level in our first budget to lift every senior in Canada out of poverty. Seniors are important to our party, so much so that our first opposition day in the House after the 2011 election was dedicated to asking the government to invest in seniors and raise the GIS sufficiently to eliminate seniors poverty in Canada. We did our homework and discovered that in combination with increases to the GIS set out in the June 2011 budget, the cost to taxpayers would be significantly less than $700 million. This is an intelligent, practical and affordable investment that would make a positive difference in the everyday lives of seniors currently living in poverty.
The argument that we as a country cannot afford to lift seniors out of poverty is preposterous. The most recent round of corporate tax cuts will cost the Government of Canada $13.5 billion over the next three years. A tiny fraction of this money would be enough to lift every senior in this country out of poverty. Canada is a rich and privileged country. Our wealth and prosperity are in no small measure the result of the lifetime of work done by Canadians who are or will be seniors. We absolutely must support these people because it is the ethical thing to do and, in practical terms, because they in turn support our economy and their communities and families. They contribute a great deal.
New Democrats are proposing an easy, affordable, targeted solution to a very real problem. As politicians, we have an obligation to make this happen. It is time that we abandoned partisan rhetoric and acted as one to stand up for seniors.
While I am very pleased that in June the NDP motion passed unanimously in the House and that all parties supported that initiative, the budget implementation bill and this Conservative pension scheme failed to take the NDP motion into account, despite its passing unanimously. The Conservatives seem to have conveniently forgotten their duty to the people they have pledged to serve. It seems that the government is only willing to pay lip service to democracy, as witnessed today, and to seniors struggling to make ends meet.
Canada does not need yet another voluntary, tax-assisted retirement savings program. It needs public pensions that provide all Canadians with a basic guarantee of adequate income that would protect their standard of living in retirement. Expanding the Canada pension plan would meet this objective. Improving the replacement rate of CPP retirement benefits would provide better retirement pensions to virtually all Canadians. A relatively modest increase in rates would achieve this.
The CPP covers all workers, including those who are self-employed. Its benefits would be guaranteed in relation to earnings and years of service. They would be indexed for inflation and fully portable from one job to another. This is the real solution, not the Conservatives' bogus pooled registered pension plan.
Mr. Pierre Poilievre (Parliamentary Secretary to the Minister of Transport, Infrastructure and Communities and for the Federal Economic Development Agency for Southern Ontario, CPC): Mr. Speaker, the hon. member talked simultaneously about two contradictory policy objectives. One, she said that we should bolster public pensions. Two, she said that we should raise business taxes. What does one have to do with the other?
The reality is that every public or private pension program in this entire country is deeply invested in the Canadian stock market. For example, Canada Post workers have a pension plan that has billions of dollars invested in banks and oil companies. In fact, the top five holdings of the Canada Post pension fund are all banks, insurance companies or oil companies. As of the spring, that fund had $200 million invested in TD Bank.
The benefits paid by these corporations to these pension funds are done entirely on an after-tax basis. That means every time business taxes are raised, the dividends paid to pension funds go down. Roughly half of the Canada pension plan is invested in equities of this kind. Again, only after-tax profits can be paid to the CPP on those equity holdings.
Why would the member want to raise taxes on the pension holdings of millions of unionized workers and Canadians who are invested in the CPP?
Ms. Irene Mathyssen: Mr. Speaker, it is very interesting and in fact I find it absolutely fascinating that the member would have the nerve to talk about the pension plans of postal workers when last June the government sought to gut those pension benefits.
If it is so secure, if this is such a good idea, why did the government take the pension benefits out from under the CUPW workers and legislate them back to work from a lockout, robbing them of their pensions, wages and dignity? I find it fascinating that he would have the nerve to even talk about this.
When we say increase contributions to the CPP, it is gradual and it is over time in terms of incremental and will not be felt.
The member talked about this being bad for business. I would say that a whole generation of impoverished seniors who cannot participate in the economy is likewise bad for business.
Mr. Kevin Lamoureux (Winnipeg North, Lib.): Mr. Speaker, yesterday our critic in the Liberal Party, the member for York West, did a wonderful job in terms of explaining our party's position.
To give a bit of a history, the Liberal Party, through prime ministers like King and Laurier, is the one that implemented the pension programs that we have today. I believe the Liberal Party is just as strong today as it ever was in terms of wanting to ensure that these critically important programs are going to be there and will be healthy going into the future.
When we talk about OAS, GIS or CPP, we are very much concerned with respect to recent announcements by the Conservatives and the impact on these important programs. We are going to fight for the integrity of these programs.
I ask the member, if provinces such as Quebec and others are asking for programs such as the one in this bill, which we would suggest needs major changes to make it better legislation, would the NDP have any problems with it going to committee?
Ms. Irene Mathyssen: Mr. Speaker, obviously this legislation should and must go to committee once it has passed second reading.
The only problem is that committees have been so limited. They have been hamstrung by the government. The government consistently refuses committees to sit in public. It is very selective in terms of to whom the government wishes to listen. This creates problems.
I have to confess I do not have a great deal of confidence in the democratic nature of what would happen to this bill in committee. I do not think we would we be heard anymore than we are going to be heard in this House. A closure motion has just been moved by the government. The government quite clearly is capable of undermining just about everything.
Mrs. Sadia Groguhé (Saint-Lambert, NDP): Mr. Speaker, I would like to thank the hon. member for her speech and ask her to explain to Canadians and this House why this bill does not in any way secure our retirement pensions.
Ms. Irene Mathyssen: Mr. Speaker, it has none of the attributes that the government insists it has.
It is voluntary for the employer to contribute. The employee may very well decide to make a contribution that the employer decides upon. The employer sets the amount of that contribution and the employer himself or herself may simply refuse to contribute. In addition, it is placed in the stock market. We know that in the last few years seniors have taken a beating in the stock market. Their retirement security has been much diminished. There is no indexing. There is no guarantee. There are management fees.
This is just another group RRSP. It has none of the benefits of the Canada pension plan.
Mr. Pierre Poilievre: Mr. Speaker, the Canada pension plan, which the hon. member seems to love so much, has $18 billion invested in Canadian equities. That means it holds large, profitable Canadian companies, the same kind of companies on which the NDP would raise taxes.
Will the hon. member explain how the CPP would make up the loss of money it would suffer if it raised taxes on the very businesses the CPP holds in its portfolio to the tune of $18 billion?
Ms. Irene Mathyssen: Mr. Speaker, it is interesting that we are back to tax fairness. If the government had any sense of propriety and tax fairness, it would not have given away $60 billion to the most profitable corporations between 2006 and 2011. It would not be giving an additional $13.5 billion in tax benefits to the same profitable corporations over the next three years, all the while telling Canadians, "Sorry, but you have to pay up. There have to be cuts. We are going to reduce your services. We are going to reduce the departments that provide you with services".
According to the Prime Minister, the government is going to reduce the security of the seniors of the future. We have heard musings about ending or reducing the OAS and GIS. The point is that Canadians across the country who have contributed all of their working lives are counting on those benefits. They have made that benefit possible and now they are being told, "Sorry. Too bad. It's going away".
If the government were really interested in the seniors of the present and the future, it would reform our pension system and make the CPP the centre stone by allowing increases to its benefits to cover the cost of living so that no senior would live in poverty.
Mr. Jean Rousseau (Compton—Stanstead, NDP): Mr. Speaker, according to the Conference Board of Canada, 1.6 million senior citizens live in poverty in Canada. Right now 12 million Canadians do not have any type of pension plan for their retirement.
I ask my colleague, why is it important to have a reliable and safe pension plan for all Canadians, as well as health and social programs? Why is it important to make sure that money is put in the right places?
Ms. Irene Mathyssen: Mr. Speaker, it is essential that seniors be secure in their retirement. They are great contributors to the economy. All of their lives they have contributed to the well-being of Canadians. They absolutely deserve pension security. It makes economic and ethical sense.
A country is judged by how it treats its most vulnerable. We will be sorely judged if we do not ensure that our seniors are protected.