:
Good morning, ladies and gentleman. We'll convene our meeting of the Standing Committee on Government Operations and Estimates.
As one aspect of our mandate, we not only review the planned expenditures of various government departments and their estimates, but we also review the statutory programs. One of the recommendations made in a recent study we did as a committee was to do a better job of oversight as a committee; to commit to review all significant statutory spending at least once every four or eight years, I believe it was. Obviously, it's difficult to do more than that.
We're very pleased. This is the first attempt to provide this additional scrutiny to some of the statutory spending undertaken by the government, so we're very pleased today to welcome very much a blue ribbon panel dealing with the public service pension plan.
We're joined by representatives from the Treasury Board Secretariat: Ms. Kim Gowing, director of the pension and benefits sector; and Ernest Meszaros, senior adviser, pension and benefits sector.
Welcome, Ms. Gowing and Mr. Meszaros.
We also have, from the Office of the Superintendent of Financial Institutions, Jean-Claude Ménard, chief actuary.
Welcome, Mr. Ménard.
We also have Public Sector Pension Investment Board representatives Martin Leroux and Mark Boutet. I'll let them introduce their positions.
I understand that all three groups will have brief opening statements. I hope we have time for a thorough go-round to ask questions.
Proceeding in the order that we have them on our agenda, we'll invite Ms. Gowing, the director of the pension and benefits sector of the Treasury Board Secretariat, to make opening remarks.
Welcome, Ms. Gowing.
Thank you for the invitation to appear before your committee today. I'm here with Ernest Meszaros, a senior adviser within Pensions and Benefits at Treasury Board.
We'd like to provide you with an overview of the public service pension plan and the work we do with our partners to manage and administer the plan.
The public service pension plan has existed for over 100 years, since 1870, and in its current form is subject to the Public Service Superannuation Act. The plan provisions in this act have been amended from time to time, with the most recent changes coming last year with budget 2012. The plan is a contributory defined benefit plan covering most of the employees of the federal public service, territorial governments, and certain public service crown corporations. As of March 31, 2012, the pension plan had a total of 565,125 members, of which 313,652 are active contributors.
The President of the Treasury Board is responsible for the overall management of the public service pension plan. The Treasury Board Secretariat provides the president with operational support to manage the provisions of the pension plan, such as providing recommendations on contribution rates and the production of the annual report. The Treasury Board Secretariat also engages with partners such as the Office of the Chief Actuary and the Public Sector Pension Investment Board, both of which are represented here today, and provides them with policy and program advice.
Public Works and Government Services Canada is responsible for the day-to-day administration of the plan. The Public Service Pension Advisory Committee, composed of employee, employer, and pensioner representatives, is established under legislation to provide advice to the President of the Treasury Board on various matters relating to the plan.
Under the Public Service Superannuation Act, a member's pension benefit is determined as 2% times the number of years of service, up to a maximum of 35 years, times the average of the five highest-paid years of salary. Pension benefits are coordinated with the Canada Pension Plan and the Quebec Pension Plan, and indexed to the consumer price index.
The plan was most recently amended on January 1, 2013, to implement the following changes announced in budget 2012: employee contributions will be increased over a five-year period to reach a 50-50 current service cost-sharing ratio between government and employees by 2017; the government's share of the cost as of 2012 was 62%. New employees joining the plan after January 1, 2013, will be eligible for an unreduced pension at age 65 instead of age 60 for pre-2013 members; and other age-related retirement thresholds were also increased by five years for new employees. The Public Service Pension Plan Advisory Committee was consulted on these changes prior to their coming into effect. The chief actuary was also enlisted to provide expert advice.
Prior to 2000, employee and government contributions were not invested. In 2000, the government established the Public Sector Pension Investment Board, PSPIB, in order to invest pension contributions into the capital markets. Employee and government pension contributions, net of payments and expenses, are now sent to PSPIB and invested. The funding of the post-2000 pension liability is dependent on employee and government contributions and the returns achieved by PSPIB on the invested assets. The president is responsible to make certain funding decisions for the plan and relies on advice from the chief actuary.
The chief actuary generally provides this advice through actuarial valuations. The most recent valuation for funding purposes was completed as at March 31, 2011. This report was tabled in Parliament on June 21, 2012. The chief actuary also prepared an updated actuarial report for the public service pension plan to reflect the plan design changes outlined in budget 2012. This report was tabled in Parliament on March 25 of this year.
The president, based on advice from the chief actuary, recommends employee contributions to the Treasury Board for approval. The rates for 2013, 2014, and 2015 have been approved and implemented. Based on actuarial advice from the chief actuary, the president approves government contributions that are required in addition to the approved employee contributions to pay for the current service cost.
Pension costs and corresponding contribution rates have risen over the last 20 years due to many factors, such as low interest rates and increases in longevity of pensioners. For example, in 1980, employee contributions were approximately 5% of pensionable payroll and they are now closer to 9%. This trend is not unique to the public service pension plan, as all pension plans are faced with the same economic and demographic challenges.
In 2011 the actuarial valuation report valued the post-2000 liability at $46.8 billion while the actuarial value of assets were $42.4 billion, resulting in a deficit of $4.4 billion.
Pension plan surpluses or deficits occur when actuarial results vary from the projections that were set in the previous actuarial evaluation. There are many factors affecting the funding of the plan that explain the deficit as of March 31, 2011. Notably, liabilities were higher than anticipated for various reasons, including the fact that Canadians are living longer. Assets were also lower, as the return since the beginning of the funding of the post-2000 liability was lower than initially anticipated during the period that witnessed two of the worst market crises.
Legislation requires that the President of the Treasury Board fund this deficit over a period of no longer than 15 years. In 2012 the president approved special payments of $435 million annually to the plan over the next 13 years. These payments are expected to eliminate the deficit by 2026. The first payment was made as of March 31, 2013. These funds are transferred to the PSPIB and invested along with regular contribution amounts.
Thank you.
:
Mr. Chair, honourable members of the committee, good morning. Thank you for the opportunity to appear before you today.
The primary role of the Office of the Chief Actuary is to provide actuarial services to the federal and provincial governments that are Canada Pension Plan stakeholders. While I report to the Superintendent of Financial Institutions, I am solely responsible for the content and actuarial opinions reflected in the reports prepared by my office.
The Office of the Chief Actuary conducts statutory actuarial evaluations—generally, every three years—on the Canada Pension Plan, the Old Age Security Program, and pension and benefits plans covering the federal public service, the Canadian Forces, the Royal Canadian Mounted Police, federally appointed judges, and members of Parliament. In addition, whenever a bill is introduced before Parliament that significantly impacts the financial status of a public pension plan under the statutory responsibility of the Chief Actuary, the office must submit an actuarial report to the appropriate minister.
Following the passing of Bill , the Public Service Superannuation Act was amended to increase the pensionable age—from age 60 to 65 in the case of new participants—for contributors entering the plan after January 1, 2013. Member contribution rates will be increased to bring their share of the plan's current service cost from 35% to 50%, thereby splitting the cost 50/50 between the members and the government. The President of the Treasury Board, the Honourable Tony Clement, submitted an actuarial report on March 25, 2013.
In the second half of the 21st century, we experienced remarkable gains in life expectancy and highly decreased mortality rates. In 1965, average life expectancy at age 65 was another 15 years. This means that someone who was 65 years old back then could hope to receive their benefits for 15 years, on average, until the age of 80. At that time, women lived slightly longer than men.
Today, 65-year-old retirees can hope to live another 20 years on average—with women still living slightly longer than men. However, the gap between the two sexes is narrowing quickly. According to projections, taking into account future mortality improvements—that is, future gains in life expectancy resulting from decreasing mortality rates—we could expect an additional three to four-year gain in life expectancy at age 65. Around 2050, based on our projections, people will reach the age of 88—people who were 65 years old 23 years earlier. Canadians are living longer, healthier lives and are working to a more advanced age.
[English]
According to the most recent labour force survey from Statistics Canada, the number of Canadians between the ages of 65 and 69 who are working has more than doubled over the last 10 years, increasing from 144,000 in 2002 to 374,000 in 2012. The number of those aged 60 to 64 who are still working also increased significantly to reach one million in 2012. Overall, the number of workers between ages 60 and 69 has more than doubled over the last 10 years, increasing from 600,000 to 1.4 million.
In any case, whether the focus is on a pay-as-you-go plan or a fully funded plan, a defined benefit or a defined contribution solution, or a public or private sector pension plan, it's clear that increased longevity will continue to put pressure on pension plan financing.
Thank you very much again for the opportunity to appear before the committee.
I will be happy to answer any questions you might have.
:
Thank you and good morning.
My name is Martin Leroux. I am the Vice-President of the Policy Portfolio and Asset Liability Management for PSP Investments—known more formally as the Public Sector Pension Investment Board. Joining me is my colleague Mark Boutet, Vice-President of Communications and Government Relations.
We are pleased to appear before the committee today to answer your questions. I will start with a quick overview of who we are and what we do, but I will be brief to leave as much time as possible for your questions.
[English]
PSP Investments is an arm's-length crown corporation that was established back in 2000 to invest the amounts transferred by the Government of Canada for the funding of the post-2000 obligations of the pension plans of the Public Service of Canada, the Canadian Forces, and the RCMP. Since March 2007 we have also invested amounts for the reserve forces pension plan. With more than 400 employees and $64.5 billion in assets under management as of March 31, 2012, PSP Investments is one of the largest pension fund managers in Canada. We've experienced a very rapid growth in assets fuelled by strong positive inflows of about $4 billion to $5 billion over the past few years, and also by our strong investment returns. Our assets under management are expected to exceed $450 billion by 2035.
Our mandate is to manage the funds in the best interest of the contributors and the beneficiaries of the plan and to invest with a view of achieving a maximum rate of return without undue risk of loss, having regard for the funding policies and requirements of the plans and their ability to meet their financial obligations.
[Translation]
More simply stated, this means that PSP Investments' mandate is to ensure that, given the current level of contributions, we earn sufficient return, so that there will be enough assets to cover pension benefits—that is, in the absence of other factors affecting the funding of the plans.
Currently, the Chief Actuary has determined that this requires achieving a 4.1% rate of return after inflation.
[English]
One can appreciate that achieving a 4.1% return after inflation is not risk-free. There is no single risk-free asset class or investment strategy that would deliver such a return year after year. This is particularly true in today's low interest rate environment, so at least a minimum amount of investment risk must be taken in order to achieve the desired level of return. In other words, PSP Investments must invest in the financial market to achieve its legislated mandate.
Let me give you an overview of how we achieve that. The blueprint for how we invest in the financial market to achieve the 4.1% rate of return is what we call the policy portfolio. It is basically our long-term strategic asset allocation. It dictates where every dollar we receive will be deployed in the market—in Canadian equity, foreign equity, bonds, real estate, and so on. This asset allocation strategy is the key determinant of risk and returns over time.
You will see that our current policy portfolio goes beyond public asset classes like stocks and bonds, and we do include a significant allocation to less liquid private asset classes, namely, real estate, private equity, infrastructure, and renewable resources. Those asset classes involve ownership interests in assets that do not trade on public exchanges, such as an equity stake in private companies or in an office tower.
Why are we doing this? If you look at the way the obligations of the plan are funded, we expect PSP Investments to continue receiving strong and positive inflows of capital until 2030. In other words, we won't need to sell assets to pay benefits for a long period of time. This puts us in a unique position where we can have a very long-term view with respect to our investments. It thus provides us with the opportunity to invest in assets that are private and less liquid.
[Translation]
Of course, we expect to be rewarded for doing so by receiving some excess returns or “illiquidity premiums”, which investors typically demand for taking on illiquidity risk—risk that we can afford given our special circumstances.
We also invest in what we call “real return” asset classes—such as real estate, infrastructure and renewable resources. Why? Because, in addition to capturing illiquidity premiums, these types of assets are considered a good match for the inflation-sensitive nature of the plans' liabilities.
[English]
As a result, the policy portfolio is expected to provide for a better return than a portfolio invested only in public markets such as bonds and equities. It is also expected to provide a better match with the pension obligations, the pension liabilities, and how they are funded, thereby reducing the risk associated with the funding of the plans and thus contributing to their sustainability.
You may ask how we have done so far. Have we achieved the actual rate of return of 4.1% after inflation? Since we started our diversification strategy of investing in less liquid private assets back in 2004, PSP has recorded a compounded rate of return of 7.6% after expenses. This compares to an actual rate of return of 6.2% over the same period. That is the actual rate plus inflation. So we have exceeded the actual rate of return, despite the fact that this period included one of the worst market meltdowns since the Great Depression.
This concludes my remarks today.
We look forward to your questions.
:
I would appreciate that.
On June 12 of this year, the modernization disability management in the FPS was announced. At that point, it was said that the current sick leave credit system discriminates against newer and younger employees, yet in Bill there was the introduction, as you pointed out, of the first two-tier pension system in the history of FPS providing hirees after January 1, 2013, with a reduced benefit.
How do you explain and reconcile these two contradictory positions, that it's been modernized and it's going to be better, yet there's going to be this reduced pension benefit?
:
First, because the changes are looking forward, it means the balance sheet as of March 31, 2011, is not impacted, so the deficit is exactly the same.
Over time, employees will pay a bit more than they previously paid and the government will pay a bit less.
As the total current service cost—that is, actually about 20% of the pensionable payroll—this number is about 17% for what we call the group 2 contributors. It's the people who will join the plan after January 1, 2013. So going forward, the current service costs will be lower for those people, and of course the employees will pay a lower contribution rate as well as the government for these employees.
It will take some time—I would say at least a couple of actuarial reports—before we will see the impact on liabilities going forward.
I want to thank the witnesses for joining us today.
[English]
In my opinion, there's kind of an elephant in the room at this meeting when we talk about pensions. Most Canadians and most pension holders are wondering whether the finance minister is still scheduled to meet his provincial counterparts to discuss expanding the CPP and QPP.
Are you getting signals or signs that the government is still committed to negotiating, with the provinces and territories, the retirement security for all Canadians, or are they not?
And thank you, guests, for being here today.
The first question is for Ms. Gowing.
You described the pre-2000 regime and the post-2000 regime, and credit where credit is due, I think there was a recognition at that time under the Liberal government that we needed to have a different set-up for funding public sector pensions.
In the post-2000 plan you mentioned that there's a deficit of $4.4 billion. I'm wondering if you could talk about the special payments to make up for that $4.4 billion. In a way, we have a certain generation that signed up well before 2000 that was entitled to certain benefits, but now, based on the deficit, there's an inability to make those payments, so the current taxpayers have to top that up.
What other options did the Treasury Board have in terms of addressing that pension fund deficit that was there?
One of the things that's special about Canada, when you look at debt-to-GDP ratios, is that we tend to focus on net debt to GDP, and it shows a much healthier fiscal situation of Canada compared to other countries. I'm not sure if you're an economist or can talk about this. With a net debt to GDP, we take out the fact that the pension liabilities are not coming out of general revenue. In many cases, things like the CPP, the current public sector pension plan...they're self-funded by investments, whereas in other countries they resemble our pre-2000 regime. So compared to the United States or other G-7 countries, Canada is in a much healthier fiscal situation.
Can you talk about that, why net debt to GDP is actually a pretty valid metric to look at when we compare Canada's fiscal situation to that of other countries?
My next question is for Mr. Ménard.
You mentioned the fact that life expectancy is going up and the fact that the population is aging. Those are two trajectory forces. Today, there are fewer young people to pay the benefits, but more pensioners. To some extent, that reflects a transfer of wealth from one generation to the other.
I believe important steps have been taken such as raising the eligibility age from 65 to 67 and the contribution rate from 35% to 50%.
How do those measures—meaning the increases in the eligibility age and the contribution rate—compare to steps other countries are taking?
:
Actually, your time is up, unfortunately, Bernard. Thank you.
We're just about to go to the second round. But if I could take one minute, I'm still curious about the changes made in Bill , the two significant changes of 60 to 65 years old and the 35% contribution to 50%.
With regard to the $50 billion surplus we had in the year 2000 that was legislated away from the fund, if that had been invested at the 4% annual compounding interest, would either of these steps have been necessary if the workers' deferred wages had not been taken away from them in the year 2000 in the big scoop of Marcel Massé's final move as Treasury Board president? Has anyone ever extrapolated the position the fund would be in if we had not been denied that $50 billion actuarial surplus that existed in 2000?
Monsieur Ménard, you've been here since 1999. Has that study ever been done?
I want to follow up on this renewable portfolio. I have a series of quick questions on this.
Who is the Public Sector Pension Investment Board seeking advice from on selection for the renewable portfolio? When you're evaluating, are you also giving consideration to other externalities? In other words, some of the investments you may make in renewables may provide additional revenue through taxation and so forth to the Government of Canada. I'm particularly interested in the interest in investing in timber, and I'm wondering if preference is being given to those corporations that are dedicated to sustainable harvests, and some are also dedicated to setting aside caribou habitat.
My final question on this is about agricultural land. In your annual report of 2012, you say you are interested in moving toward the purchase of or investment in farmland. I find it odd that at the same time as the federal and the Saskatchewan governments are selling off the 80-year-old prairie pastures, which generate tens of millions of dollars in tax revenue for the Government of Canada, the pension fund is now interested in investing in agricultural land.
:
I'll try to address all of your questions.
In terms of decision-making, as with our other private asset classes, we have built an in-house team to make decisions. From time to time they will be seeking external advice to help them, but we see a lot of value in making those investments with in-house expertise.
To give you some background on why we've created this asset class called renewable resources, which include timberland and farmland, there are a few things that as an investment organization we want to make sure we're focusing on. The first thing is to recognize that we are funding liabilities, and thus we will be taking a close look at the nature of those liabilities. As I mentioned before, that means we will be favouring investment so that where we fail, there's an equity premium we can get that will also provide some inflation protection over time. One thing we need to keep in mind is that the pension obligations of the public service pension plan are highly sensitive to inflation. Those final average earnings are fully indexed in retirement, so we want to pay close attention to inflation. In our mind, timberland and farmland are definitely well geared to keep pace with inflation.
A third criterion that we look at is purely diversification. In our mind, investing in timberland and farmland is definitely a strong diversifier from the other investments in our portfolio, which will help us weather more volatile market conditions. A good example of that is when we invest in timber we buy into biological growth, which is not well correlated with the economy or where the stock market is going, so for us there are strong advantages in doing that.
I believe you had one question on the ESG. Mark, do you want to touch on that?
I want to thank all of our witnesses for their testimony here today. This is actually a really interesting subject.
There is one thing in particular, Mr. Chair, that we should step back and take a look at. It is what Mr. Ménard originally voiced, and I think Ms. Gowing also mentioned it, which is that Canadians are living longer. I think that's a goal that most people would say government should have. We should have policies that encourage people to be educated. We should have proper health care, so that we have better health outcomes at the end of the day.
Now that being said, Mr. Chair, it's also our responsibility to make sure, of course, that they have a stable income. I want to applaud each of you for your efforts to make sure that for the people who work for the federal government who are entitled to their benefits...you're looking out to make sure those dollars are managed wisely and that they're kept supremely and paramount in mind.
I'm just going to step back, Mr. Chair, before I go to the PSP. There is one thing we all agree on...and maybe I should just ask the president himself about it.
Your purpose is to create a stable return so that there is stability in the actual pension plan itself and so that you are beating inflation without risking those dollars. Is that correct?
:
That being said, we've had.... I remember the Internet bust of 2000. There was a lot of angst there. I know many people lost 30% to 50% of their investment income, Mr. Chair. And then we also had the great recession in 2007-08, and it continued on for a few years after that.
For you to be maintaining that...it shows that obviously you are watching.
When you mentioned that you were investing in a lot of illiquid properties and shares in businesses, etc., outside of the country, a number of people seemed to murmur that that wasn't a good goal. We may have an infrastructure deficit in Canada, but if I were in your shoes, I would be asking how we are going to beat inflation and how we are going to diversify so that the Canadian economy, if it's having a hard time, will still have investment income coming in. To me, that means you would have to go outside of that.
I have a question on that. You said there are airports and ports. Did you also include bridges in the asset portfolio of the non-financial...?
:
It would be interesting to know—you've kind of predicted what I'd like to know—when push comes to shove what you would do.
What would you do in the case where you're actually getting a pretty good return? It would be interesting; and I think Canadians and those who invest in this plan would sleep better at night knowing that at the end of the line, if a company is unethical, then their investment portfolio will reflect the ethical issues on that.
I'd like to go on to something that Mr. Albas made some reference to, and that's the aging population.
[Translation]
What's the percentage of working versus retired public servants? What's the ratio? Have you figured out how that ratio will change over the next 10 years? Have you done any estimates to that end? Does your plan take age changes into account? How do the ratio and fluctuations affect the financial sustainability of the pension plan?
:
Thank you very much, Mr. Chair.
I would like to join my colleagues in welcoming you all here today and echoing their sentiments that this has been very interesting and very informative.
I want to perhaps try to understand the history a little bit better. Obviously, we know that this crown corporation was created in 1999, and the pre-2000 contributions were not invested on....
Mr. Ménard, you were here in 1999. I'm wondering if you can help me understand, or describe for me, what was happening at that time, either in the industry or perhaps in other countries, that had our Government of Canada move to the changes and the creation of this crown corporation.
:
I will give you a bit of a comparison with the OECD countries. There are mainly three ways to recognize the pension promise or the liabilities related to public servants. First, in Mexico, for example, you pay the retirees and you don't necessarily book the liabilities before, when the service is rendered. Second, there's what we call notional funding, which is what we had in Canada before 2000. There were credits representing employee and employer contributions that went into the superannuation account through the Consolidated Revenue Fund. The third way is to back the liabilities by tangible assets, which is what has been done since 2000.
One thing particular to our plan is that when you start to finance years of service starting in 2000, 2001, and 2002, it means that the minute before, 100% of your liabilities are on the government books. As time passes, this liability is transferred and backed by tangible assets. As we speak today, 13 years after the implementation started on April 1, 2000, when we look at the total liabilities, about 30% for the public service is backed by tangible assets, and the remaining 70% for service before the year 2000 is still on the government books.
Going forward to 2050, because it takes that long to move the liabilities, because the pension plan is of a long-term nature, by 2050 almost all of the pension promise will be backed by tangible assets.
:
Yes. There are two aspects to it, because you could say we had a small surplus in 2008. If I look at a longer period and I start with the 1999 report until now, at that time we projected that the life expectancy of public service men who were 65...that they would live until 85. In the most recent report, it's 87. So we have changed our assumptions, because people are living longer than expected. That's one aspect.
The other thing is that the 2008-09 crisis was a game changer. One difficult assumption to make, of course, is the discount rate or the expected rate of return on assets, and since then we have reduced our expectation from 4.3% to 4.1%, and this has also increased the liabilities. When I do that, first I compare the assumptions with my peers. At 4.1% it's well-aligned with the other public sector pension plans in Canada.
The other thing we are looking at is the work done by Credit Suisse. They released a report in February 2013. There's an interesting article about the “low-return world”. We have taken this into consideration and reduced accordingly the expectations on the assets side, which means that it increases the liabilities and therefore the deficit.
Thanks to our guests. This has been a very enlightening morning, indeed.
As we know, these types of liabilities have to be closely monitored. They can get away on you quickly. By this morning's testimony, I have assurance that the situation is well in hand.
I have a question of possibly Mr. Leroux. You indicated in your brief that the chief actuary has determined that this requires achieving a 4.1% rate of return after inflation. Is that a real return? Is that 4.1% after inflation of 2%, or does that include a 2% inflation rate?
That concludes the second round of questioning. We have time to get a little bit further into a third round.
I have two points for clarification. I don't believe I heard or saw in the report an estimate of the total amount of brokerage fees you might spend in an average year above and beyond your in-house costs.
Second, on the composition of your board of trustees, if you're moving to a 50-50 contribution rate, will you be moving to a 50-50 composition of the board, employer to employee? Even though some of us are of the view that all pensions are deferred wages of the employee, is that change in the composition of the board in the works? As well, give an idea of the broker fees paid for your investment.
Again, thank you for your expertise.
I want to switch to more of a human relations kind of question.
In the brief, you've indicated, Madam Gowing, that of the 565,125 members, 313,652 are active contributors. We know there is downsizing going on in the public service, and I'm assuming that of the 12,000 to 13,000 jobs that will be eliminated, a number of those would be younger and contributing members of the public service.
How does that impact, first of all, the liabilities you've calculated? Second, what effect, if any, does it have in terms of the anticipated contributions? Has that work been done?
Thank you, lady and gentlemen, for an excellent presentation.
Following up from Ms. Mathyssen, I have a news alert: we're all getting older. The reality is that this is the demographic in Canada, but I guess it's like a fine Okanagan wine; we're getting better with age. Our workforce is in many cases working longer or living longer, so it's helping in that respect.
I have a couple of questions. One is to Mr. Leroux. First of all, you talked in your opening comments about the size of the pension fund. Is it one of the top three in Canada by size?
:
Well, the story is different, I would say.
Every year now, we are releasing on our website a fact sheet page on registered pension plan coverage. In that two-page fact sheet you can see that about 87% or 88% of public sector pension plans continue to be covered by defined benefit pension plans.
If you look at the private sector, and indeed if you look at the overall coverage first, about 6 million workers are covered by an employer pension plan, which is about 40% of the labour force. If you look at the trend now between defined benefit and defined contribution plans, you see that in the private sector about 24% of workers are covered by an employer pension plan.
It has been stable for the public sector, but it has decreased for the private sector.
:
I didn't have any input on this. This initiative is called the pooled registered pension plan.
I have two observations to make. I would say the first is that size matters. Indeed, I think Bill Morneau released a report for the Ontario legislature and said in his report that in order to achieve efficiency, or in terms of returns, any fund lower than $40 billion might incur expenses that will be detrimental to the plan members.
To some extent, this idea, this planned pooled registered pension plan, is to permit all Canadians to pool their assets, to put their retirement savings together, and then achieve, first, better returns, and also lower administrative expenses.
Thank you, Ms. Gowing.
That actually finishes our time for questioning the panellists.
We want to sincerely thank all the panellists for their presentations. It was very interesting, and it's very helpful for us to get a better grasp of this significant area of statutory spending by the federal government.
Thanks to all of you.
We're going to suspend the meeting briefly and reconvene in camera for five minutes or so to discuss future business.
Thank you again, Ms. Gowing, Monsieur Leroux, and Monsieur Ménard.
[Proceedings continue in camera]