I'd like to begin by stating that the Public Service Alliance of Canada stands strongly behind the Canadian Labour Congress's campaign for retirement security for everyone. This campaign calls for increased CPP benefits and public pensions for poor seniors and for a system of pension insurance. These demands will help women in particular to increase their pension security and get the dignified treatment they deserve. We agree that increased benefits will ensure that no retiree, current or future, gets left behind.
For federal public service workers, however, the Public Service Pension Plan, or PSPP, is known as one of the three pillars of the Canadian retirement income system. The first of the other two pillars are the Canada and the Quebec Pension Plans, CPP and QPP, and the other pillar is Old Age Security, or OAS. It is also recognized that it is a combination of the three that ensures adequate income in retirement. Our brief today focuses on the Public Service Pension Plan.
In the best-case scenario, the PSPP ensures that the total retirement income paid to a federal public service worker from these three sources represents 70% of the average salary he or she earned during the last five years prior to retirement. While we will go into detail in our written brief, our presentation will provide highlights on socio-demographic data on the members of the PSAC, review the main characteristics of the Public Service Pension Plan, and describe how the pension income of the federal public service constitutes deferred wages.
Our members make up the overwhelming majority of program administrators and front-line service providers for the Canadian public. About 64% of our members are women.
A survey of Public Service Alliance of Canada members working full-time for the federal government and its agencies was conducted across Canada in 2006 by Environics Research Group. According to the results, approximately 25% of the establishment reported that they intended to retire within the next five years. This survey showed that a new profile of public service workers was also emerging. Women represented 57% of PSAC members between the ages of 36 and 45, as well as 57% of members having 16 or fewer years of service. The younger members are the most likely to hold a university degree.
It's important to keep certain demographics in mind when thinking about pension security for both those retiring and those just coming into the federal public service. Given the workforce shortage, it will be crucial for the federal public service as an employer to consider how it will attract and retain competent new workers.
The PSPP is a defined benefit pension plan governed by the Public Service Superannuation Act, the PSSA. Participants in the PSPP are either contributors, retirees, surviving spouses, or children of retirees. As of March 31, 2008, women represented 55% of active contributors to the plan. This is the highest rate in history. The calculation of retirement benefits is based on the number of pensionable years of service and the average salary earned during the five consecutive highest-paid years. Consequently, the greater the number of pensionable years of service and the greater the salary earned during the five best-paid years, the larger the retirement benefit. The plan calls for an income replacement of up to 70%.
As of March 31, 2008, the annual average retirement benefit paid to women retired from the federal public service was $17,061, which is 62.7% of the annual average amount paid to their retired male counterparts. In comparison, the annual average retirement benefit paid to women as of March 31, 1998, represented only 52.9% of the average amount paid to retired men. You can see that there is progress in closing the gap between the benefits received by male and female employees.
The progress is more noticeable when considering only the new, unreduced retirement benefit, which becomes payable during the most recent years.
Unreduced retirement benefits that became payable during a specific year include only immediate annuities payable to federal public service workers who retire from the public service at age 60 years or more, as well as immediate annuities payable to those who retire between 55 and 59 years of age after they have accrued a minimum of 30 years of pensionable time.
For the second year in a row, the annual average amount of unreduced retirement benefits that became payable to women in the year ending March 31, 2008, represented 97.7% of the average annual amount of unreduced retirement benefits that became payable to men at the same year. Unfortunately, we do not have access to the data for the percentage of women workers who have access to an unreduced pension.
Since 1970, pension benefits have been fully indexed to the rate of increase of the consumer price index. The PSPP is a defined benefit pension plan to which contributions are also mandatory. The contribution rates and the retirement terms are coordinated with the CPP and the QPP. Retirees who collect benefits from the PSPP see their benefits payable under the PSSA reduced at age 65, or as soon as they collect CPP or QPP benefits, or CPP or QPP disability benefits.
There are a few other important aspects of the plan I'd like to mention. The legislation also contains a certain number of significant provisions for women as contributors to the plan or as the spouse of a contributor—for example, the possibility of accumulating, subject to certain conditions, pensionable service during leave without pay for family obligations, maternity or parental leave, or for the relocation of a spouse; part-time employees can contribute to the plan provided their assigned work week is equal to or greater than 12 hours; benefits are paid to surviving spouses; and retirements benefits are shared in the event of a divorce as per the Pension Benefits Division Act. These aspects of the plan have resulted in enabling women to retire with some security and still contribute to the community and the economy.
Obviously, labour disputes resulting in strikes also have an impact on one's ability to retire. For example, our members who work at the Museum of Civilization and the War Museum, a bargaining unit that is definitely female-dominated, has been on strike for 72 days. For those workers who are not term employees, every day on strike is one day longer until retirement.
It will come as no surprise to anyone that we stress the fact that the pension benefits paid to federal public service workers are deferred wages. All contributions paid into the PSPP constitute a portion of our members' overall compensation. A significant portion of the salary of a federal public service worker contributing to the PSPP is paid in the form of contributions required under the CPP or QPP and the Public Service Superannuation Act. In addition, the contribution rate pertaining to the contributions that employees are required to pay into their pension plans under the Public Service Superannuation Act will continue to increase until 2013. In fact, contributions to the PSPP between 2005 and 2013 will have increased 41% on the workers' side. By 2013, employee contributions will represent approximately 40% of the cost of all pension benefits. In theory, the employer pays the remaining 60%. This represents a portion of the public sector worker's salary, and that is very clear at the bargaining table.
Without getting into a discussion of actuarial models and the solvency ratios of pension funds, we can say that given the very long-term nature of defined benefit pension plans, they may post deficits at times and surpluses at others. We know that back in 1999 the government resorted to legislation, Bill , to take $30 billion from the surpluses of the three public service pension plans, and as I'm sure you all know, PSAC and 12 other plaintiffs are currently suing the federal government in an attempt to recover this money.
According to a Statistics Canada study published in November 2007, the percentage of women who have a certified pension plan has been increasing steadily over the past 30 years. Better-educated women are looking for organizations that provide security through a good pension plan.
The pension fund covered by the Public Service Superannuation Act is a perfect example of a pension plan that enables women to retire from the labour force while still maintaining a decent standard of living thanks to the deferred salary they have accumulated throughout their working lives as federal public service workers.
The federal government also benefits as the employer, because it can recruit a competent workforce more easily and retain them longer.
Canadian taxpayers also come out ahead when the retirees, with their households, are receiving sufficient incomes to be able to contribute to the community and the economy, and potentially the retirees are prevented from qualifying for the guaranteed income supplement.
The message cannot be any clearer: our members have been contributing to a pension plan that has ensured that women can retire with security and dignity. This plan has reduced the chances that women in the federal public service will retire poor, unlike too many Canadian women who must depend solely on the Canada Pension Plan, or Quebec Pension Plan, and the OAS.
As you know, Annette Marquis has joined me. She is one of the disability and pension officers at the PSAC. Although I didn't say it at the beginning, we pooled the presentation time so that we would be available for questions.
:
First of all, we talked about the gap on, I believe, page 5 of the English brief. It's on page 5 in the French version as well.
The gap is that 62.7% of the average annual amount is paid to women as compared to their male counterparts. On the bottom you'll see the graph that shows that wage gap pictorially. If you look at the bottom of that graph--and I apologize for the very small print, which is very taxing at my age--the first bullet says:
Include immediate annuities, disability retirement benefits, and annual allowances payable to former contributors only
You can see here that the benefits being paid out are not simply full pensions; they also include people who go off on disability pensions and people who are injured on the job and go out through assorted pensions. It's not a reflection of those who go off on an unreduced pension. A lot of things here actually show the difference from a purely gender perspective, but given that we can't factor out the unreduced pensions piece, we can't show you with hard numbers a really solid comparison between men and women.
You also asked a question about leave without pay for workers. The answer depends on the type of leave without pay that workers go off on. For some types of leave without pay, such as maternity and parental leave, the employer continues to pay the employer's share. However, when the worker comes back from maternity or parental leave, they would then pay their share for their absence.
For other types of leave, such as relocation for spouse, I believe the employee is the person who ends up paying their share, meaning the employer's share and then their share for the current period when they come back to work. If, for example, you had taken three years of leave without pay to follow your spouse to the House of Commons, and you couldn't get a job as a public sector worker in Ottawa, you would be paying triple superannuation when you got back to your job. You would triple your contributions. The same is the case for things like education leave. That can be dependent on the employer's discretion.
You can see that for situations such as spousal relocation leave, we don't have the hard statistics. Treasury Board would be able to provide you with those, but I'm quite certain that the majority of those cases would be women following their male spouses.
You asked a question about the $30 billion and the lawsuit. That was a few years ago, and we're actually going through the court case. It was back in 1999; it was Bill C-78. It was $30 billion, and it came from the three federal public service pension plans.
:
Thank you for the question.
With respect to our members who work at the Museum of Civilization and the War Museum, they work for the museum corporation and do participate in the plan. Unfortunately, many of those workers are term hires, so they're not permanent employees and don't actually have full access to all benefits available to permanent and indeterminate staff. Obviously, if they're not working, they don't accrue pensionable time. That comes as no surprise; however, it is dismaying to realize that workers can be left out on the sidewalk for 72 days, quite honestly.
With respect to the question of pay equity, pay equity has a very measurable impact on the actual pension benefit on retirement. In 1999, following the large Treasury Board settlement and the $3-billion payout to public sectors workers current and past, for those whose salary was increased, for their final five years of work it had a really significant impact on their pension benefit as retirees. As you know, most of these workers worked in female-dominated work groups, which we sometimes refer to as “pink ghettos”, where women are working and the value of their work has not always been financially or economically recognized by the employer.
So those differences, those adjustments to their wages, made a huge difference for their pension benefits and their ability to participate fully in society as retirees.
:
The larger the pension plan, the more spread out the risk.
I'm not an actuary. I want to say that very clearly: I am not an actuary. I am absolutely not a pensions expert. But I understand the concept that risk is diluted with more people in the pool.
We certainly support a defined benefit pension plan. Our staff has one, and we believe that sharing the cost of a defined benefit pension plan is fair and reasonable. As you can see again from the statistics and the information provided to you, federal public sector workers contribute 9.6%, I believe, of their pay on average to their pension plans. That is both in the form of the Canada Pension Plan or the Quebec Pension Plan and their benefits under the public service superannuation plan. It has been a successful plan, a beneficial plan, because it is such a large plan.
I think it would be really wonderful for people if they could participate in a very large plan and that people would have portability so that they could come from the private sector into the public sector, and on.
With respect to your question about private sector plans, I guess it's a question about whether a plan is better or not. I've never been a member of a private sector plan. I've been a public service worker since I was a kid. I suppose if I were making a lot of money in the private sector and getting paid a really large salary, there might be a correlating benefit to a bigger pension plan, but again I'm mindful of the fact that many private plans are not fully funded and aren't as stable financially in the long term.
So from where I sit, big defined benefit plans that distill the risk, that spread the risk out, definitely serve our members well. That serves the public well, and in the long term benefits the economy and society, because we don't have women in particular—since we're focused on women here, given that they have unreduced pension benefits—living at high levels of poverty.
:
Thank you, Madam Chair.
In your brief, on page 5, you state that as of March 31, 2008, the annual average retirement benefit paid to women retired from the federal public service was $17,061, which is 62,7% of the annual average amount paid to their retired male counterparts. You know that the poverty line is somewhere around $23,000. Consequently, with $17,000, these women are definitely below the poverty line. This leads me to the last sentence of your document where it says: “However, available data do not allow us to state that retirement benefits paid under the Public Service Superannuation Act are sufficient to keep all beneficiaries out of poverty.“ This suggests that your plan does not protect everybody against poverty.
This brings me to the position of the Canadian Labour Congress which you support. In various documents that have been tabled by different witnesses, it says that 55% of women get their main income from the public plans, i.e. the Quebec Pension Plan or the Canada Pension Plan. This is due to the fact the companies where they are employed do not have a pension plan that would complement the combined amount of the CPP benefit and Old Age Security benefit, depending on your eligibility. This means that they are very close to the poverty line.
The CLC proposes to increase the replacement rate from 25% to 50% over the long term, which would clearly help those women who are not in or who leave the labour market, either to raise children or to become informal caregivers, caring for elderly relatives.
I would like to hear your views on this. Furthermore, several witnesses said they would like to see a national summit on pensions in Canada, to discuss all pensions but more specifically the issue of women's pensions. I would like to hear your views on this, even if this makes for a lot of questions.
:
I think having a national summit on pensions or a national summit on gender equality and women's full participation in the economy would be a grand thing. I would definitely want to be there. I'd send some cards and ask you to invite me.
Seriously, though, I think this is a huge issue. It impacts every single person in this room, regardless of whether you're a member of Parliament or not. I know some of you have daughters, sisters, or mothers who are definitely impacted by the fact that if they worked as a secretary in a law office or even if they were a lawyer, they didn't have a pension plan.
I have to be really honest. When I was a young public sector worker, I didn't think I'd live to retire. There was sort of this arrogance of youth that I was going to move to a different job and do something else. Obviously, I did move to something different, but I'm certainly happy that I was a public sector worker and that I was obligated to participate in the superannuation plan. I'm very grateful to the Government of Canada for having the foresight to come up with a national superannuation plan. And I look at people I work with and I know that they feel the same way.
I think that in our current society we like to individualize collective problems. I find that tendency to be quite scary. We have an obligation to look after our old and our young. Those of us who are able to, can go and work. We can hopefully earn a living wage. But for those who can't, we need to be able to take care of those people and to ensure that they can provide for themselves and for their offspring.
Our plan is not a perfect plan. It still has shortcomings. I talked about if you relocated with your spouse and you've got a job that's not a high-paying job.... Let's face it, most public sector jobs are not the jobs we read about in the newspaper, where people are making huge sums of money. Most public sector jobs are people earning in and around $40,000 a year and trying to support their families on that.
If you come back to work after a leave and you've got to pay triple superannuation for three years so that you can buy back three years' worth of leave without pay, and you're paying back the employer's portion, your portion, and your current portion for working, odds are you're going to opt out of buying back those three years. That has a direct impact on people as they get old, and on their ability to look after themselves. And then it's society, be it the gains supplement.... We all pay again for it, and at the cost of their dignity. And human dignity is a critical part to a full participation in society.
:
Thank you, Madam Chair. I'll be very brief.
Last week we had Professor Lynn McDonald here. She talked about women who experience forced retirement. These are women who are caregivers for their children or for infirm spouses or for relatives they need to provide care for. They are also women who are forced to retire because of their own health issues.
They may wish to come back into the job market after their caregiving days are done, but their skills are out of date or they're perceived as being too old to come back, so they're pushed into retirement before they're ready. As a result, their CPP is most definitely not adequate, and they're reduced to living on OAS and GIS. The cut-off in terms of OAS and GIS is about $12,000 a year. That's what you get if you don't have CPP, and yet the low-income cutoff is $18,000.
In terms of the CPP, I know there's a flexibility there. If you retire early, you take a 5% penalty; if you stay late, you have a 6% reward. The government is currently looking at perhaps changing this by increasing the penalty if you retire early and increasing the incentive at the other end if you stay later.
It seems to me that these women who are forced into early retirement are caught in a trap. Would you comment on that, and perhaps suggest a way to ensure that women aren't victimized by this proposed change? Is there a way of increasing the incentive for delaying retirement without this penalty at the end?
:
Thank you very much, Patty.
I think the time is up. We've finished with the round of questions.
Before I thank the witnesses, there is one thing I would like to ask of the witnesses, and it follows up on Mr. Van Kesteren's question.
Do you think there should be some kind of legislation brought in that would penalize in some way companies that have, as you say, spent the pension plan money on assets, etc.? Secondly, do you think it would stop this from happening if private pension funds that are now run by particular companies for their workers were actually given to an independent third party to manage those funds--so it was hived out of the company? Will those two things help?
The third question is this. You talked about something that most people have not talked about, which is of great concern to me, and that is the fact that many people who have not been in the paid workforce tend to have nothing to depend on when they retire but OAS and sometimes GIS--and hopefully some sort of survivor benefit if they were married.
Those three things I would like a quick answer on, Patty, because then I have to go for it.
:
Nicole, your hand came up just a little too late there, but it is unanimous. Thank you. This will happen in the new year.
I just want to tell you a couple of things. Given that we have only three more meetings, as you know, you're going to be getting your report on pensions on Wednesday, and we will be discussing the report on Thursday and possibly on Friday. We are looking at spending one hour on the trafficking this Thursday. That's going to take an hour off our work, and we wanted to finish this report, table it, and have this dealt with by Thursday, because we're rising and everyone agreed that they wanted this done by Thursday.
Let me tell you what it's going to look like this coming Thursday. From 3:30 to 4:30, we have the minister coming to speak to supplementary estimates and GBA. That's one hour. We have from 4:30 to 5:30 to deal with the beginning of the 25 pages of the report. That's this coming Thursday.
On Tuesday, December 8, we're going to deal for one hour with the Olympics and human trafficking. Then we have one hour to deal with ending our report and with our recommendations.
I'm putting this to you because I want to seek your wisdom as a committee on how you want to use your time. It may very well be that one of these meetings is going to have to be extended by an hour if we're going to make it happen, because we will need to have this thing ready and done on Thursday morning.
Okay, the votes have started, so I'm just letting you know this. Maybe you can think about it, and next week when we meet, you can decide if you want an extra hour in the meeting at some point.
Also, just quickly before you go, a survivor of human trafficking has written to us and has said that she wants to come and present. She wants 10 to 15 minutes. If we add one more person to that one hour, there's no way we'll finish it. I don't know if you want to just stick with the original motion and not expand it. My belief is that if we expand it to one person, we're going to have to expand it to all the others.