FEWO Committee Report

The primary role of Canada’s Retirement Income System is to provide older Canadians with adequate and stable income in retirement. The Committee examined whether this goal is being met for Canadian women.

Mr. Edward Whitehouse, Head of Pension Policy Analysis at the OECD told this Committee that Canada “has the fifth-lowest old age poverty rate among the 30 OECD countries, around 4%, compared with the OECD average of around 13%.” [18] In comparison with old age poverty rates of 25% in the United States, and 30% in Australia and Ireland, the rate of 4% places Canada in an enviable position.[19]

Despite this, some older Canadians continue to have incomes beneath the Low-Income Cut-Offs established by Statistics Canada. Although the low-income rate for seniors in couples is very low, it is considerably higher for unattached seniors.
Unattached seniors are considerably more likely to experience low income and, as Figure 2.1 demonstrates, senior women living on their own are somewhat more likely than their male counterparts to live in poverty. The number of senior women living in poverty (123 000) is considerably higher than that of men (approximately 44,000), in part because there are more senior women than men in Canada. The relatively low levels of poverty[20] among seniors is often attributed to the income floor provided by the Old Age Security (OAS) and the Guaranteed Income Supplement (GIS).

Figure 2.1 Persons in Low Income after Tax (92 LICOs base), Showing Prevalence and Estimated Number — Canada

	2000	2001	2002	2003	2004	2005	2006	2007
Unattached Elderly persons	20.6%	18.1%	19.4%	17.7%	15.4%	18.5%	15.5%	13.9%
	223 000	197 000	222 000	201 000	173 000	208 000	179 000	168 000
Unattached Elderly males	17.6%	16.8%	15.9%	14.7%	11.5%	13.6%	14.0%	13.0%
	51 000	50 000	50 000	46 000	36 000	41 000	45 000	44 000
Unattached Elderly females	21.7%	18.6%	20.7%	18.9%	16.9%	20.3%	16.1%	14.3%
	172 000	147 000	172 000	155 000	137 000	167 000	134 000	123 000

Source: Statistics Canada, Income in Canada 2007 pp. 87 and 88.

The first goal of Canada’s retirement income system is to prevent and alleviate low-income among Canadians sixty-five years of age and over. OAS is a virtually universal non-contributory public pension provided to 98% of Canadians sixty-five and older.
The income of low-income seniors is further supplemented by the GIS.

In their presentations to this Committee, the Department of Human Resources and Skills Development Canada and the Department of Finance provided a brief overview of OAS and GIS, indicating that OAS provides a basic monthly income of $517 per month to virtually all seniors who meet residency requirements. In addition to the basic OAS pension, low-income seniors may also qualify for the GIS, which provides a monthly benefit of up to $652. Low-income spouses and common law partners of GIS recipients, who are aged 60 to 64, can receive the Allowance. For low-income survivors aged 60 to 64, there is an Allowance for survivors. OAS benefits are indexed to inflation, and funded from general revenues. Spending for 2009-2010 on these programs is expected to be $36 billion.[21]

As we saw in Chapter 1, some women have a different pattern of paid and unpaid work than men. The OAS Program and GIS are not linked to labour force participation, thus they provide pensions for those who have had only limited involvement in paid employment, and supplement the earnings of those who have inadequate employment-related pensions. As Monica Townson, Research Associate with the Canadian Centre for Policy Alternatives noted, the “OAS is paid to individuals, it doesn't depend on labour force participation, and it doesn’t depend on the earnings of a spouse. It gives women a pension in their own name and it respects women's economic autonomy.”[22]

As some witnesses noted, and as Figure 2.2 below indicates, it is worth noting that women constitute more than half of OAS recipients, two-thirds of GIS recipients, and 90% of allowance recipients. This reflects the fact that women are more heavily reliant on this first pillar of the retirement income system.

Figure 2.2 OAS, GIS and Allowance Beneficiaries

	OAS						Allowance
	Women (‘000)	Total (‘000)	Women (%)	Women (‘000)	Total (‘000)	Women (%)	Women (‘000)	Total (‘000)	Women (%)
2009	2,567	4,619	56	1,053	1,670	63	87	96	91
2015	3,090	5,676	54	1,212	1,970	62	80	89	90
2025	4,241	7,947	53	1,500	2,506	60	77	86	90
2050	5,774	10,909	53	1,722	2,838	61	48	53	91

Source: Correspondence from Human Resources and Skills Development Canada to the Standing Committee on the Status of Women, based on data in the 8th Actuarial Report of the OAS Program.

Witnesses applauded recent changes to OAS and GIS, including the increase to monthly GIS benefits made in 2006 and 2007, and an increase from $500 to $3500 in the amount that can be earned in employment before the GIS benefit is clawed back.
This allows low-income seniors to earn more without having their GIS benefits reduced. The Committee has heard that other forms of income, such as RRSP revenue, are not subject to the $3500 exemption. The Committee is concerned that this might discourage low-income Canadians from saving for their retirement. As a result, the Committee recommends:

Recommendation 1

That the exemption on earned income in the Guaranteed Income Supplement be extended to other forms of income, such as RRSP income.

The Committee heard that, whereas previously an application for the Guaranteed Income Supplement had to be filled out every year, there is now a one-time application to get the GIS. The Committee urges the Government to continue efforts to simplify the application process for receiving the GIS.

The income floor of the OAS and GIS is still slightly below the poverty line for some seniors — particularly those living on their own. The OECD reported that OAS plus GIS bring households to about 90% of the poverty thresholds they have calculated for Canada. The Committee recommends:

Recommendation 2

That the Guaranteed Income Supplement be raised to the after-tax low-income cut-off.

As noted earlier, unattached seniors are much more likely to face low income. Seniors in couples are vulnerable to facing poverty when they lose their partners due to death or divorce. Because women have a longer life expectancy than men, this is a situation which is disproportionately experienced by women. The costs incurred by a person living on their own are lower than the costs incurred by a couple, but the OAS program recognizes that certain costs (such as rent and property taxes) are fixed whether or not they are shared. This is accounted for in the adjustment factor for the OAS program. The Committee heard that the adjustment factor currently used by HRSDC to calculate the costs incurred by an individual on their own compared to a couple is 1.4. Witnesses have suggested that this does not accurately reflect the actual costs of living alone, so the Committee recommends:

Recommendation 3

That the adjustment factor for single individuals be adjusted from 1.4 to 1.6 of the couple amount in recognition that the adjustment factor of 1.6 more adequately reflects the costs of living on ones’ own.

The Committee has heard that the survivor benefit in the OAS was initially designed under the assumption that the surviving spouse (usually the woman) had provided unpaid caregiving work which had limited her labour force participation, leaving her dependent on the retirement income of her spouse. Several witnesses noted that, as a result of a growing rate of divorce, the individual who provided that care role is not necessarily the surviving spouse who receives the benefit. As a result, the initial goal of the OAS survivor benefit is not being consistently met.