Senate Special Committee on Aging

Submission to the

Senate Special Committee on Aging

Using Policy to Improve the Lives Of Those In Greatest Need

Women Elders in Action

a project of 411 Seniors Centre

WE*ACT  is a provincial network concerned about economic security for senior women, especially those living alone, as most will do at some point in their lives. We have researched and written extensively on the pension position of these already retired women. We are pleased to have opportunity to bring our concerns about Canada’s pension policy to this Senate Special Committee on Aging so that your deliberations and subsequent recommendations will affect the federal government’s policy development in this regard.

In 2004/5, we published our position paper on pension reform: Pensions in Canada: Policy Reform Because Women Matter. In this paper, we analyzed poverty for senior women in terms of their earlier over burden of societal caretaking duties, the insecurities inherent in their attachment to the labour force, their longevity compared to men, and their failure to access adequate childcare and pay equity to conclude that Canada’s public pension policy would be better based on women’s needs: as they are more numerous, will be more dependent on it than men, for longer. At that time, we made 23 recommendations to improve public pensions and related policies (WE*ACT, 2004/05).

Since then, WE*ACT has spent considerable effort to develop an understanding of the financial retirement readiness of women currently in the labour force to refute the popular belief that poverty for senior women will be a thing of the past.

Drawing heavily on current research from Statistics Canada regarding women’s average annual earnings, their prevalence in non-standard (part-time, contract, temporary) work, their continued overburden of society’s care giving duties, their lack of occupational pensions and their inability to contribute significantly to Registered Retirement Savings Plans (RRSPs), we see that many will continue to be disadvantaged when the majority of retirement income depends on an individual’s life time earnings and savings. 

As context, we note that in 2003 the average annual pre-tax income of women aged 16 and over from all sources, including employment earnings, government transfer payments, investment income, and other money income ($24,400), was 62% of that average total for men ($39,300) (Statistics Canada 2006, p 133).

Recently published research from the Canadian Institute of Actuaries and the University of Waterloo found that fully two thirds of Canadian workers 40 years and older are on a trajectory to be under-funded to retire at 65 (Andrews, Bonnar and Brown 2007, p 2).  Their analysis was based on the savings required from an annual income equal to the Average Industrial Wage ($40,000). Significantly, the average wage earned by women in this country was substantially lower than this: $25,000 in 2003 (Statistics Canada, p 138). Clearly, unmarried, divorced or widowed women, even though they are participants in the labour force, are at continued risk for poverty in old age.

In 2004, 40% of women workers held non-standard jobs commonly offering low wages without security or benefits (Townson 2006, p 348). The warning that they should expect to work until 67 or even 73 to achieve some semblance of economic security dovetails conveniently with the government’s desire to have aging workers stay in the workforce longer (Andrews et al, p 5).

According to Terrance Hunsley, Senior Projects Director, Policy Research Initiative, Human Resources and Social Development Canada, keeping people on the job past 65 will contribute to labour productivity (2006); one component of the Canada’s declining productivity levels about which this government has legitimate concerns.

His views are endorsed by William Robson of the C D Howe Institute, who spoke to British Columbia’s Premier’s Council on Aging and Seniors Issues as it examined the elimination of mandatory retirement in June 2006. He suggested that keeping workers on the job until the age of 74 will increase Canada’s productivity and fuel the economy.

From every direction we are hearing calls to keep people working longer enabled by this movement to eliminate mandatory retirement where it exists. Inevitably, we also hear voices like that of the Fraser Institute who want Canada to increase the pension age (Carrigg 2004) and suggestions of eliminating access to early Canada Pension Plan (Conference Board of Canada 2006) and rewarding those who collect benefits after 65, to ‘encourage’ seniors to stay on the job (Lizee 2007).  However, women labouring in temporary and/or low paying contract work with no benefits and little chance to increase their retirement income, interpret this as an unreasonable demand.

While the strategy of extended work lives may be attractive to well-paid professionals, the reality for many women in the labour force is much different. Many of them have already done double-shifts as mothers working inside AND outside the home. Some have been sandwiched between the demands of their growing families and their own aging parents. Aside from the fact that they have already contributed extensively to society in a variety of ways, extending work life will do little to improve their economic situation when they do retire. These factors are part of the reason that until very recently women in Britain and Europe were pensioned earlier than men.

Look to Corporations for Productivity Improvements

According to David Dodge, as Bank of Canada governor in June 2007, “Canada’s disappointing productivity record is attributable to industry not taking full advantage of new information and communications technologies, and insufficient investments in equipment, research and technology and worker training” (Beltrame, 2007).

This government has shown an eagerness to cut corporate tax rates despite what has been described by Andrew Jackson, Canadian Centre for Policy Alternatives research associate, as the tenuous links between business taxation and the process of real investment and job creation (Jackson 2005, p 3). Corporate profits have soared, boosted by deep cuts in the corporate tax rate, without much net benefit to Canadian society as a whole. Profits are being invested outside the country in record amounts, stashed in offshore tax shelters, or paid out to corporate insiders and shareholders (p 1). In short, we are rewarding corporations for not improving our lagging productivity.

WE*ACT would like this government to focus on corporations as the most important source of productivity improvements rather then fretting Canadian women (and men) holding part-time, temporary, contract or low paying service sector jobs with the notion that they must work until they drop. We need government leadership in demanding more of corporations that are paying higher shareholder profits or taking profits out of the country at record rates to invest elsewhere. The tax system can be fine tuned to do this.

Use taxation policy to diminish our inequalities

Corporate profits that make their way to shareholders here are frequently accessed by individuals through their RRSP portfolios and through RPPs (occupational pensions). The combined projected net tax expenditure for those Canadians able to contribute to these private plans for 2007 is $21,235 billion (Canada Department of Finance 2006, p 5). This is an enormous figure when one considers that three out of ten Canadian families possess neither of these pension assets (National Advisory Council on Aging 2005, p 12).

Since taking power, the current federal government has increased tax credit for some types of pension income and introduced pension splitting.  The estimated tax expenditure for 2007 for these additional initiatives based on private pension income is $1.5 billion (Canada Department of Finance, p 5). For the same period, the tax expenditure associated with non-taxation of Guaranteed Income Supplement (GIS) for poor seniors (of whom the majority are women) has been pegged at $270 million (p 4) about 18% of that amount, despite the fact that at least 35% of Canadian seniors require some top up to achieve a very modest amount of income through this program (NACA, p 12).

In essence, generous tax deductions for RRSPs are a social program for the wealthy. In the past, whenever we have questioned this tax break that benefits mostly high income male earners, it has been defended as a tax deferral, meaning that taxes would be recovered at a later date when money was withdrawn from these programs. As you well know, pension splitting works by transferring part of a larger income to a spouse with lower income in order to allow the former to qualify for a lower tax bracket. Clearly, one partner’s income must be larger than the others’ in order to have excess to transfer. The source of this extra income is most often RRSPs or occupational pensions (because other forms of income such as OAP, GIS, CPP do not qualify). Thus our other concern about Pension Splitting is that it is an effort to get a further tax break when that previously mentioned tax deferral comes due. It seems inherently unfair to millions of low income Canadians that income generated from  investments that garner early tax breaks upfront can now be ‘shared’ for tax purposes to further avoid taxation.

In economist Monica Townson’s paper written for the Canadian Association of Social Workers in 2007 entitled, Financial Security for Women Seniors in Canada, she concludes that pension splitting may not even benefit women in the couple applying as the transfer of wealth is only on paper. Thus a woman may have to pay more income tax and possibly lose her qualification for income-based program subsidies, but may not experience an increase in her real income at all (p 55).

Townson tackles the myth that both partners have equal access to the family income (p 54) citing Frances Woolley’s work Control Over Money in Marriage. Woolley found that partners with greater incomes have greater control over money; that younger spouses do better; and that there is less income pooling when one partner, especially the man, has been married before.

Spousal RRSP contributions appear to be a better way to go. These increase the actual retirement income of the spouse with lower income and would tend to eliminate the option for later pension splitting.  However, both of these policies aimed at couples will be of little interest to working singles whose numbers are on the rise.

The gap between seniors’ revenues and those of other Canadians is increasing (NACA, p 8).  We believe that tax policy should be designed to enhance quality of life for low income seniors based on the concept that government intervention should benefit those who need it most. Many unattached seniors qualify for this consideration at the stage of life when they are least able to improve things for themselves. WE* believes that massive tax expenditures for registered retirement contribution might be better directed to FULL indexing of Old Age Pension and much needed increases to Guaranteed Income Supplement, programs that meet the needs of those at greatest risk for poverty. We encourage members of the Senate Special Committee on Aging to read our entire list of recommendations for pension reform from our 2004/05 position paper but for brevity the following highlights are provided:


1.       Increase GIS so that total Old Age Security/GIS is at a level at least commensurate with the pre-tax low-income cut off (LICO). Currently, most recipients of this supplement are women who have had low-paying or part-time jobs and/or immigrants with little or no paid work experience. These programs can answer their most pressing need for adequate support.

2.       Raise the income ceiling for maximum Canada Pension Plan contributions from $40,500 to at least $60,000. Thus, higher income earners would contribute more to the fund.

Depending on how this increase was designed, this could raise the resources needed to support a designated caregiver drop out (see #5) and the increase in replacement rate mentioned below.

3.       Modify CPP/Quebec Pension Plan so that it replaces 50% of the income for low-income workers, disproportionately women. The current maximum of 25% of average wage consigns those receiving the least pay to a continuation of extreme poverty throughout their retirement years. This is one way to utilize a work-based pension program to alleviate retirement income disparities and compensate for our unwillingness to legislate a ‘living wage’.

4.       Oppose privatization of public pensions. Privatization of pensions in jurisdictions outside of Canada provides important lessons. Research clearly indicates moving to privatization puts low-income earners at great risk. They frequently find themselves without enough discretionary income to contribute. Even if they are able to contribute, they lose a sizeable portion of that investment for fees, commissions and program maintenance paid to private financial institutions.

Low income earners derive no tax advantage from investing in RRSPs. If they are entitled to receive GIS on retirement, cashing in registered holdings will reduce their GIS payments and other low income subsidies and access to programs especially designed for low income seniors. This translates to an effective tax rate of at least 75% paid on those private pension holdings (Shillington, 2003).

5.       The value to the Canadian economy of care giving in 1996 was approximately $5 billion, a figure believed to have increased substantially in the decade since then (Fast, J. and J. A. Frederick, 1999). In 2005, the tax credit offered to compensate for this work was pegged at $77 million (Canada Department of Finance, p 2). Therefore, we suggest that its is necessary to further develop a parallel ‘dropout’ provision in the CPP/QPP to the existing child care dropout to include persons who are caring for people with disabilities or providing eldercare or care for grandchildren so that women's care-giving contributions are recognized and not penalized when benefits are calculated.

This is necessary to compensate for the extreme pressure care-giving puts on the disproportionately large number of women who take on these social responsibilities; as public policy makers increasingly deny a social obligation for providing care. Ensure that these drop out provisions are incorporated within the body of all CPP applications.

The policy of ignoring 15% of all workers’ lowest paid efforts should not be expected to cover this application. Otherwise, people who have never sacrificed to perform the care giving role will experience the same benefits as those that do. OCCUPATIONAL PENSIONS

6.       Set Joint and Last Survivor rates to cover the real costs of maintaining the same residence and standard of living for the survivor once a spouse is gone. It has been suggested that as much as 15% more may be required. Research is required to determine this figure more accurately.


7.   Ensure incomes below the poverty line (commonly understood as Low Income Cut Off) are not taxed. The gap between the wealthiest in the country and the poorest widens daily (Canadian Centre for Policy Alternatives 2007).  It has become untenable for those with the very least income to continue to help subsidize programs for those better off (e.g. subsidies/grants to businesses; energy retrofitting programs for homeowners; generous pensions for MPs; education saving funds utilized disproportionately by higher income families; etc.)

8.   In December 2007, we revised our recommendation regarding converting income tax deductions to credits for RRPPs and RRSPs. We are endorsing a more moderate proposal put forward by Monica Townson in, Financial Security for Women Seniors in Canada 2007. She suggests that the dollar limit on RRSP contributions should be reduced and the savings in lost tax revenues redirected to improve OAS and GIS benefits for low-income individuals.


9.   Require that all public pensions are fully indexed.

10.  Analyze all future changes to pension policy in Canada to determine differential impacts on women and men; as required under the 1995 Federal Plan for Gender Equality.


11.  Improve women’s wages and employment opportunities in the paid work force with enforceable pay and employment equity policies so they are better able to accumulate funds for their old age. Recent developments that permit governments to pass legislation rolling back contract agreements (including pay equity) should be disallowed.

12. The federal government must reinvest in affordable housing for Canadians. In BC today, low cost housing rentals and purchases are equally scarce in large centres and small towns. Province-wide, many seniors are spending an unsustainable 50 -  60%  (NACA, p 22) of their income on housing which means sacrificing food, medicine, home heating, etc.


Andrews, Doug, Steve Bonnar and Robert l. Brown. Planning for Retirement: Are Canadians Saving Enough? Canadian Institute of Actuaries and the University of Waterloo, Ottawa 2007

Beltrame, Julie. Canadian Press: Aging boomers starting to lower economic growth and it’ll get worse. Ottawa, June 15, 2007

Canada Department of Finance, Tax Expenditures and Evaluations 2006:2. Website: 2e.html Ottawa 2006

Canadian Centre for Policy Alternatives. Monitor: Canada’s Huge Income Gap Has Widened, p 1, 6 – 9. Growing Gap Project, Ottawa, April 2007

Carrigg, David. More seniors toiling through golden years. November 10 Vancouver Courier, Vancouver 2004

Conference Board of Canada. Executive report: Canada’s demographic revolution adjusting to an Aging population, Ottawa March 2006

Hunsley, Terrance. Population Aging and Life-Course Flexibility Briefing Note: Encouraging Choice: Aging, Labour Supply, and Older Workers. , Government of Canada, Ottawa 2006

Jackson, Andrew. Behind The Numbers, Vol. 7, Number 3: The Case Against More Corporate Tax Cuts. Canadian Centre for Policy Alternatives. Ottawa 2005

Lizee, Michel. Presentation to the BC Pension Forum: Pension Regulation in Quebec: What’s New? Vancouver 2007

National Advisory Council on Aging. Seniors on the margins; Aging in poverty in Canada. H88-5/3-2005), p 8. Government of Canada, Ottawa 2005

Shillington, Richard. New Poverty Traps: Means-Testing and Modest-Income Seniors, p 2; C. D. Howe Institute Backgrounder; Toronto, 2003

Statistics Canada, Women in Canada: A gender-based statistical report, 5th ed. Ottawa: Ministry of Industry 2006

Townson, Monica. New Frontiers of Research on Retirement: New Vulnerable Groups; Statistics Canada, Editor in Chief, Leroy Stone, Ottawa 2006

Townson, Monica. Financial Security for Women Seniors in Canada. Paper written for the Canadian Association of Social Workers, Ottawa 2007

Werner, Kevin. Mountain News, Seniors bilked out of $1B in pension money. Hamilton, April 20, 2007

Women Elders in Action (WE*ACT). Pensions in Canada: Policy Reform Because Women Matter. Research paper, Vancouver 2004/05

Design & Develop by Melissa L. Garcia at VCN