Statement made on 02 February 2011 by Senator Céline Hervieux-Payette
Hon. Céline Hervieux-Payette: Honourable senators, I intend to move adoption of the report of the Standing Senate Committee on Banking, Trade and Commerce, entitled: Canadians Saving for their Future: A Secure Retirement.
A number of expert witnesses testified and greatly helped our committee's work. It was enriching, and I think I can speak for my colleagues when I say that we were pleased to have input that will help the provinces as well as the federal government. This issue touches both jurisdictions.
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Honourable senators, I wanted to make a few comments on our recommendations: low-income Canadians and high-income Canadians are nonetheless well protected. It is middle-class Canadians who will have to make an effort when they retire.
Our committee had a very specific, very narrow mandate. We looked at two measures: the registered retirement savings plan (RRSP) and the recently established tax-free savings account (TFSA). Obviously it takes more than just those two measures to ensure a comfortable retirement for all Canadians and it was not our intention to suggest otherwise.
However, we have gone beyond those two measures. We have made comments about Canadians' knowledge of the financial sector, which is fairly closely regulated, and their knowledge of the profession of financial advisor. As we have seen in the past few years, the financial advisors may have failed in their duties, through a lack of skill or experience in certain areas.
The first recommendation was that the government should keep the ceiling on the annual contribution to registered retirement savings plans at 18 per cent. Our committee had no intention of increasing the ceiling, whose maximum is $22,000.
However, we should ensure that employees who have contributed have access to multi-employer pension plans. There was a time when we started working for a company at 18 and did not leave it until we retired. Today, not only do we change companies throughout our lives, but quite often we change careers and roles. It is important to have the flexibility to change jobs while keeping any money that has been set aside and ensuring that the employer's contribution follows us.
We have proposed legislative changes to ensure that withdrawals from RRSPs remain taxable and that the withdrawal can be paid back in full.
The third recommendation was to increase the age from 71, as is currently stipulated, to 75, which would be phased in over an eight-year period. We will see in the next budget whether the Minister of Finance makes that possible. One of the reasons this issue was examined was that there are more and more people who do not retire at the age of 70, but who keep working, and this measure would help with the transition.
The fourth recommendation is interesting. It has to do with young people and TFSAs. The maximum amount in such an account would be $100,000, which would be indexed as time goes on. We decided on this amount to take into account the possibility of an inheritance or a windfall that an individual would want to put into savings for retirement. This account could reach a maximum of $100,000 and the interest would be tax-free.
With respect to financial education for Canadians, we believe that the government could do more when it comes to educating the public about choosing a financial advisor. How can people make that choice and make sure they are fully aware of the risks?
Every expert on the matter says that we should not make the same investments at age 50 as we did at 25. During the recent financial crisis we saw pension funds melting like spring snow and people taking a much less comfortable retirement even though they had saved during their entire working lives. It is important for this sector to be examined closely.
Another concern is that management fees for certain funds are much higher than those in other countries, the United States in particular. It is good for the fund managers, but unfair to the people who will be retiring and do not earn the same lucrative salaries as the managers.
We think the Financial Consumer Agency of Canada should provide indicators that people could verify.
Education is concerned is a matter for the federal government, which administers the Canada Pension Plan and the Quebec Pension Plan. We will have to ensure that there is monitoring, supervision and innovation. We proposed that the fund be supervised by the federal government but managed by the private sector, while respecting very strict limits and rules in order to ensure that people get a good return and are given the flexibility to change jobs.
For those following this debate, we hope the provinces and the federal government will reach an agreement very soon. In the coming years, we must take precautions to ensure that the measures recommended by all the working groups are implemented as soon as possible. Supporting this impartial committee report would be a positive outcome for a Senate committee.