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FEWO Committee Report

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Ms. Hedy Fry, M.P.
Standing Committee on the Status of Women
House of Commons
Ottawa, ON
K1A 0A6

Dear Ms. Fry:

Pursuant to Standing Order 109 of the House of Commons, I am pleased to respond on behalf of the Government of Canada to the recommendations made by the House of Commons Standing Committee on the Status of Women in its Report, Pension Security for Women, tabled in the House of Commons on December 10, 2009. 

Improving retirement income security for women and all Canadians is a complex issue that is influenced by a broad range of factors including women’s labour force participation, life expectancy and their role in Canada’s social and family structures. 

Over the past three decades, the proportion of seniors in low income has decreased dramatically.  Between 1980 and 2007, the incidence of low income among seniors dropped from 21.3 percent to 4.8 percent — one of the lowest rates among the member countries of the Organization of Economic Co-operation and Development (OECD).  For senior women, the incidence of low-income dropped from 26.7 percent to 6 percent over that period.  This is largely due to the effectiveness of Canada’s Retirement Income System (RIS) and increased labour force participation. 

Many women currently aged 65 or older did not work outside the home for significant periods of time, and were not able to build up pension incomes of their own.  Labour force participation among women aged 15 or over has been increasing, from 46 percent in 1976 to 63 percent in 2008.  Most striking is the 82 percent participation rate among women aged 25 to 44.  As a result, future cohorts of senior women are more likely to retire with various sources of income. 

The Old Age Security (OAS) program is a key component of Canada’s RIS.  The quasi-universal, non-contributory OAS pension provides a basis upon which Canadians may build additional private income from other sources such as the Canada Pension Plan (CPP), Registered Retirement Savings Plans (RRSPs), Registered Pension Plans, investments or personal savings.  The income-tested Guaranteed Income Supplement (GIS) provides additional support to those with little or no other income.  Together, the OAS pension and the GIS provide Canadian seniors with a minimum income guarantee, regardless of whether they have been in the paid labour force or not.  This is particularly helpful for women who may have had frequent interruptions in their labour market participation, or for women who worked at home instead of the paid labour force.  In 2008-2009, 4.5 million seniors, including 2.5 million women, received $33.4 billion in OAS benefits.  This includes $7.5 billion in GIS payments for 1.6 million low-income seniors, of which 1 million were women.  Since 2006, the GIS has been increased by 7 percent, over and above regular indexation.

Our Government has been engaged in a very serious discussion with Canadians on pensions and pension security over the past year.  Moreover, we have taken concrete action to strengthen Canada’s RIS and reduce the tax burden on seniors since forming the Government in 2006.

Along with provincial and territorial governments, in May 2009, we completed the mandated triennial review of the CPP.  Proposed reforms include the removal of the requirement for individuals to stop working or reduce earnings for two months in order to take up CPP benefits and permitting more low-earning years to be excluded from the pension calculation.  These CPP amendments received Royal Assent in Parliament on December 15, 2009, and provincial governments are in the process of seeking Orders-In-Council from their legislatures.  In order to come into effect, two-thirds of the provinces having two-thirds of the national population must agree to these changes.

In order to ensure that the RIS continues to be responsive to Canadian seniors, the Government of Canada has been reviewing issues related to pensions under federal jurisdiction.  In January 2009, we released for public comment a major research paper on the legislative and regulatory regime for federally‑regulated private pension plans.  In addition, from March to May 2009, we conducted extensive cross‑country and online public consultations open to all Canadians on the legislative and regulatory framework for federally‑regulated private pension plans.  Based on what we heard in these consultations, the Government released, on October 27, 2009, an important reform plan for the federal private pension legislative and regulatory framework that will:

  • enhance protections for plan members;

  • reduce funding volatility for defined benefit plans;

  • make it easier for participants to negotiate changes to their pension arrangements;

  • improve the framework for defined contribution plans and for negotiated contribution plans; and

  • modernize the rules for investments made by pension funds.

The Government of Canada is committed to introducing legislation and regulations to put the proposals to improve the Pension Benefits Standards Act, 1985 and its associated regulations into effect in the coming months, with the goal of having substantially all measures in force before the end of June 2010.

In June 2009, to help protect pension benefits while allowing companies more flexibility in meeting their pension obligations, we brought into force new regulations to provide temporary solvency funding relief for federally‑regulated defined benefit pension plans.  The measures cover plans established for employees working in areas within the federal jurisdiction.

As only 10 percent of pensions are federally regulated, we recognized the need to work with our provincial partners to examine the larger pension concerns facing Canadians.  We raised the issue at the annual meeting of Finance Ministers in late 2008 and established a joint federal‑provincial research working group on retirement income adequacy in May 2009, with respected academic Jack Mintz as Director of Research, and Ted Menzies, the Parliamentary Secretary to the Minister of Finance, as the Chair.  The findings of this group were presented at the Finance Ministers meeting in December 2009.  Based on the working group’s findings, Finance Ministers agreed to proceed with an analysis of options to improve the RIS, leading to a review of policy options at their upcoming May 2010 meeting.  In preparation for the May meeting, the Government of Canada launched a public consultation in March 2010 on the government-supported RIS, including on the issues of saving for retirement and on approaches to ensuring the ongoing strength of the system.  

Our Government has introduced landmark changes to ease the tax burden on all Canadian seniors since 2006, including nearly $2 billion annually in tax relief to seniors and pensioners.  Measures include the following:

  • The 2006 Tax Fairness Plan introduced pension income splitting for 2007 and subsequent taxation years, and increased the Age Credit amount by $1,000 for 2006 and subsequent taxation years.

  • Budget 2006 doubled the amount of income eligible for the Pension Income Credit (to $2,000 from $1,000), as of 2006.

  • Budget 2007 increased the age limit for maturing pensions and RRSPs to 71 from 69, as of 2007.

  • Budget 2008 introduced the Tax-Free Savings Account (TFSA), which is particularly beneficial to seniors as it helps them to meet their ongoing savings needs on a tax-efficient basis.  TFSA investment income and withdrawals do not affect federal income-tested benefits and credits, such as the GIS.

  • Budget 2008 increased the amount that can be earned before the GIS is reduced to $3,500, so that GIS recipients are able to keep more of their hard-earned money without any reduction in GIS benefits. 

  • Budget 2008 increased flexibility for seniors and older workers with federally‑regulated pension assets that are held in Life Income Funds.

  • The 2008 Economic and Fiscal Statement reduced the required minimum Registered Retirement Income Fund (RRIF) withdrawal for 2008 by 25%, providing $200 million in tax assistance to RRIF holders and allowing retirees to keep more of their savings in RRIFs.

  • Budget 2009, once again, increased the Age Credit amount by $1,000 for 2009 and subsequent taxation years.

Seniors have also benefited from our Government’s broad‑based tax relief, including our two-point reduction in the Goods and Services Tax (GST), our reduction in the lowest personal income tax rate to 15%, the increase to the basic personal amount and other amounts, and our increase to the two lowest income tax bracket thresholds.

The Government has long recognized the need to enhance the practice of gender-based analysis (GBA) across all departments and agencies, and is committed to continuing the application of GBA in future policy development.  The Government of Canada systematically collects sex-disaggregated data on the RIS and integrates GBA at all levels and at all stages in policy development and decision-making processes related to women and the RIS, including CPP triennial reviews.  In fact, the majority of federal government data on pensions and income is disaggregated by sex so that trends in the retirement income of women and men can be easily monitored.

I would like to acknowledge the work of the Committee members in studying the challenges facing women and pension security.  The Status of Women Report on Pension Security for Women will contribute to the dialogue on the RIS, in which Canadians are increasingly engaged. 

Yours very truly,

Diane Finley, P.C., M.P.