Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue 22  - Evidence - June 21, 2012


OTTAWA, Thursday, June 21, 2012

The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-25, An Act relating to pooled registered pension plans and making related amendments to other Acts, met this day at 10:30 a.m. to give clause-by-clause consideration to the bill.

Senator Irving Gerstein (Chair) in the chair.

[English]

The Chair: Honourable senators, I call this meeting of the Standing Senate Committee on Banking, Trade and Commerce to order. The purpose of today's meeting is to do clause-by-clause consideration on Bill C-25.

Is it agreed that the committee proceed to clause-by-clause consideration of Bill C-25, An Act relating to pooled registered pension plans and making related amendments to other Acts?

Hon. Senators: Agreed.

The Chair: I understand that Senator Eggleton would like to make some general comments before we proceed.

Senator Eggleton: Thank you very much. I come in the capacity as being my party's spokesperson on this particular bill. I want to make some general comments about it, particularly on the basis of what we heard from the witnesses yesterday.

The pension system in this country is stressed. Many Canadians are worried that they will not have enough money on which to retire. That will result in the lowering of their standard of living. That will result in more and more of them getting into poverty, particularly as we see the aging of the population over the next number of years and decades. More and more people will be falling towards that line.

Studies have indicated that as little as 17 per cent of the population really think they are prepared for retirement and fully 83 per cent of the population that has been surveyed do not really know how much they need. However, all the indications are that living standards will fall for a lot of people. If that happens, the cost to the public purse will be staggering. As more people fall towards the poverty line, the additional support systems from the taxpayers, whether they are from the federal government or from the provincial governments, will be more and more challenged.

Mr. Chair, I believe that we need to renovate our pension system, particularly to prevent people from falling into poverty or to prevent people from suffering a significant fall in their living standards. We have a base for people to start on in terms of the public sector, the CPP and the QPP, but they do not provide enough. For a woman we are talking about $4,900 on average a year and $6,500 a year for a man. Those figures are way, way below the poverty levels, and below most of the levels that OECD countries have. We are definitely not in the same league as many other countries in the OECD in terms of the amount we provide.

Workplace pensions have been another area where people have relied upon the system. Particularly, defined benefit plans are decreasing substantially, as we well know. There are now 23 per cent with workplace pension plans, which means 77 per cent do not have one. The 77 per cent have to rely on RRSPs or home equity or other savings they may have. When it comes to RRSPs particularly, Statistics Canada says the median amount that people have saved is $60,000. That will buy you an annuity of about $3,000 a year. Can you live on $3,000 a year, or even the $3,000 plus the $6,500? No, it is still all below the poverty line.

The government is saying that it thinks another tool in the kit, if I can put it that way, would be pooled registered pension plans which are now put forward as a proposition in Bill C-25. Of course, Bill C-25 can only deal with the federally regulated industry, so they have to rely on the provinces to implement it so that the vast majority of workers would have the opportunity to become a part of this.

This plan, as Mr. Dan Kelly said yesterday, is by no means a panacea. It provides for a very limited kind of pooling compared to the Canada Pension Plan or compared to the other plans we heard about yesterday from OMERS or the teachers' pension plan, so it has much more limited ability to help people in terms of their pension. It has no ability at all to make up for bad years. One of the problems that people found when they came into the recession in 2008 was that suddenly the market value of their RRSP investments was substantially lower because of the market conditions at the time. It made it difficult for a lot of people to pick that money up in time to retire on it.

This plan would be much better if it had some ability to make up for bad years when the economy is down or if you had the ability to later on put more money into it to try to make up for that, but there is no provision for that.

Mr. Kelly, who was here yesterday, also said that he thought — of course he represented the Canadian Federation of Independent Business — maybe a third of their businesses might be willing to get into it — "might. He did not say "would.'' In fact, some of them said they might have to do it on the backs of their workers by cutting other benefits or salaries in order to be able to keep in balance, for economic reasons, their ability to pay into this kind of thing.

To a great extent, it looks like if people get into this plan and their employer is willing to sponsor it, it may well be without the employer contributing much to it, if anything. However, the employee — the person this should service — is being locked into this RRSP. If it is not managed properly, the fees will be too high; they do not really have any choice at all.

I think it is the wrong choice. A far better choice would have been — and I emphasize this — a voluntary supplementary CPP because the Canada Pension Plan Investment Board has a terrific track record of success. The fund is quite solvent. It was not always that way, but it is quite so now. I think it would be a far better way to go.

One other reason is the fact that, as we heard from the witnesses yesterday, the major pension plans, whether it is CPP, OMERS or the teachers' fund, are operating at about 50 to 65 basis points of fees, half a per cent to a little bit above that, whereas, again as the witnesses told us yesterday, what we are talking about here is at least double that. It is at least 125 basis points, if not more.

As one of the witnesses said, that kind of doubling has an impact in the long term. It may sound like a small amount in fees right at the beginning or at any given time, but over the long haul that is an awful lot of money.

I think this has also been demonstrated in terms of the Australian experience. They ended up having to make a lot of revisions to it. I would hope that the government has paid some attention to the Australian experience. They are finding that the earnings are low, which is what affects the pension that ultimately can be obtained by the employee. The financial service industry, because of higher fee rates, has really been the big winner in all of that. They have had over a decade of experience in it.

It is also something that Ontario understands because while it was mentioned yesterday that Quebec has signed up for this, Ontario has not. In fact, Ontario believes that the implementation of pension innovation should be tied to CPP enhancement as part of a comprehensive approach. They say it is unclear about the PRPP's fiduciary framework.

One of the witnesses also mentioned that yesterday. They also say that they do not know how we will achieve the low-cost objective. It is very unclear. It is not enough guidance being given to obtain the low fees that the minister is saying that he hopes it will be.

One can argue that this is better than nothing or one piece in the tool kit. I think it lets the government off the hook because the government will say this is what we are doing, but this is not really adequate at all. We should really be going in a different direction because people will find it quite difficult to retire on the kind of money they have been able to assemble for their retirement.

Senator Tkachuk: Could I ask a question? Did the Liberals support this in the house?

Senator Eggleton: Yes, they did.

Senator Tkachuk: That is all I wanted to know.

Senator Eggleton: Yes, but —

Senator Tkachuk: That is all I wanted to know — yes or no.

Senator Eggleton: I am not finished with my answer. They made the same points that I did, but they also said at the same time that it is better than nothing.

The Chair: Senator Eggleton, thank you. I think the question was answered.

With leave, is it agreed that the committee be allowed to group clauses by the headings identified in the bill when appropriate?

Hon. Senators: Agreed.

The Chair: Shall the title stand postponed?

Hon. Senators: Agreed.

The Chair: Shall clause 1, which contains the short title, stand postponed?

Hon. Senators: Agreed.

The Chair: Shall clauses 2 to 9 under the headings "Interpretation,'' "Purpose of Act,'' "Application'' and "Agreements'' carry?

Hon. Senators: Agreed.

The Chair: Shall clauses 10 to 13 under the headings "Powers of Superintendent'' and "Registration'' carry?

Hon. Senators: Agreed.

The Chair: Shall clauses 14 to 26 under the heading "Administration of Pooled Registered Pension Plans'' carry?

Hon. Senators: Agreed.

The Chair: Shall clause 27 to 33 under the heading "Employer'' carry?

Hon. Senators: Agreed.

The Chair: Shall clauses 34 to 38 under the headings "Directions of Compliance'' and "Objections and Appeals'' carry?

Hon. Senators: Agreed.

The Chair: Shall clauses 39 to 44 under the heading "General Requirements'' carry?

Hon. Senators: Agreed.

The Chair: Shall clauses 45 to 51 under the headings "Contributions,'' "Locking-In'' and "Variable Payments'' carry?

Hon. Senators: Agreed.

The Chair: Shall clauses 52 to 57 under the headings "Death of Member''; "Divorce, Annulment, Separation or Breakdown of Common-Law Partnership''; "Transfer of Funds and Purchase of Life Annuities''; "Sex Discrimination Prohibited''; and "Rights to Information'' carry?

Hon. Senators: Agreed.

The Chair: Shall clauses 58 to 62 under the headings "Duty to Provide Information'' and "Termination and Winding-Up'' carry?

Hon. Senators: Agreed.

The Chair: Shall clauses 63 to 74 under the heading "General'' carry?

Hon. Senators: Agreed.

The Chair: Shall clauses 75 to 78 under the headings "Offences and Punishment,'' "Regulations'' and "Annual Report'' carry?

Hon. Senators: Agreed.

The Chair: Shall clauses 79 to 95 under the headings "Related Amendments,'' "Coordinating Amendment'' and "Coming into Force'' carry?

Hon. Senators: Agreed.

The Chair: Shall clause 1, which contains the short title, carry?

Hon. Senators: Agreed.

The Chair: Shall the title carry?

Hon. Senators: Agreed.

The Chair: Shall the bill carry?

Hon. Senators: Agreed.

The Chair: Does the committee wish to consider appending observations to the report?

Senator Ringuette: Yes.

Senator Tkachuk: No.

Senator Oliver: No.

Senator Ringuette: Yes, we would like to.

Senator Harb: It would be a good idea.

Senator Eggleton: Hear the observations first before you say no.

Senator Harb: It is a good idea. It does not matter.

Senator Tkachuk: No, it does matter. We should have known about this before.

Senator Hervieux-Payette: What is the reason not to listen to it? If you disagree, you vote against it. I do not see the reason.

Senator Tkachuk: We are done the bill. I thought we were done the bill.

Senator Oliver: He has not asked the question, "Shall I report the bill without amendment?''

Senator Tkachuk: I move that we report the bill without amendment.

The Chair: I have a motion on the floor.

Senator Stewart Olsen: Second.

Senator Oliver: There is one more question to ask: "Shall I report the bill without amendment to the Senate?''

Senator Massicotte: Chair, to clarify, there is a bit of confusion. Did we vote on the bill without amendment?

The Chair: Yes.

Senator Eggleton: Observations are separate.

Senator Ringuette: It is a separate item.

The Chair: Are we open to the discussion of amendments? We have a motion that there be no observations.

Senator Tkachuk: I move there be no observations.

Senator Ringuette: Honestly, come on, guys. Before you rule that you do not want any observations, you should at least know what the observations would be.

Senator Tkachuk: Normally this is a discussion we have before we do clause-by-clause study. We have a discussion about whether we going to have observations. It is all part of the process. We are never surprised at the last minute.

Senator Hervieux-Payette: It is no surprise. It is not amending anything.

Senator Tkachuk: We have reported the bill. Observations usually take quite a bit of time, chair. It may take a week to decide upon what we are going to do. There are always amendments made. There are changes done and the steering committee is involved many times. This is very unusual.

Senator Hervieux-Payette: We are in a democracy. Why do you not let him say the observation? You vote against it.

Senator Tkachuk: He has a speech at third reading. He can say whatever he wants.

Senator Hervieux-Payette: It is not the same.

Senator Tkachuk: We do have a democracy.

Senator Eggleton: Can I speak? Can I speak on a suggestion that you might want to consider?

The two suggestions I have in observations recognize the fact that you have adopted the bill, so these are not amendments to the bill. They are ways that it can be made better. I have given my general comments. I do not think it is the direction to go, but the committee has decided to, so that is fine.

What I have here is helpful in a supplementary way. Why was this not given out in advance? The clerk has copies of it. I can come around to you. It is because it was just yesterday that we heard this stuff. It was just yesterday afternoon, so I have cobbled this together, but I have done it on the basis of the evidence that we heard here yesterday.

The Chair: Senator Eggleton, we adopted the bill. You have an opportunity at third reading to make these statements in the chamber so that everyone can hear it.

Do I have a motion for adjournment?

Senator Ringuette: Chair, can you clarify the process for me?

Senator Tkachuk: I move that we adjourn.

The Chair: I have a motion for adjournment.

Senator Tkachuk: There is no debate.

The Chair: All in favour?

Senator Tkachuk: All in favour.

The Chair: Carried.

Senator Ringuette: Oh, nice job.

The Chair: This meeting is adjourned.

(The committee adjourned.)


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