Thank you very much for this opportunity to discuss such an important and timely issue.
I am here on behalf of the Ottawa Council on Aging. I sit on a panel of income security experts, former ADMs, and the former chief actuary of CPP, who give advice to the council.
Our expert committee composed a recent report that the dependency ratio, the ratio of seniors to the working-age population, overstates the physical challenges posed by aging. The council has committees working on issues like housing, isolation, vulnerable seniors. If you have questions about that, through the clerk you could send them to the council. My expertise is mostly in income security, rather than housing and vulnerability.
I started concentrating on GIS in 2001, when I managed to make the press aware that there were 300,000 seniors in Canada eligible for GIS who weren't receiving it; and the HRSDC knew who they were. That situation has improved immensely, but there's still a great deal of room for improvement.
I recently published two papers on seniors, which the clerk will be familiar with. One was co-authored with Bob Baldwin, on the lack of policy analysis that accompanied the recent CPP enhancements. I also wrote a report on the economic circumstances of seniors and their income in retirement that was published a couple of years ago.
I'd like to draw attention to the Statistics Canada graph that I distributed to the committee. I was awestruck when I saw that. I'm a mathematician by training. You can see the poverty rate, on the whole, has changed very little, except for those people who happen to be between ages 65 and 85, where the proportion of the poor seems to have increased by something like 50%. Something substantial is going on.
The income of lower-income seniors, those without pensions, is completely determined by federal legislation. These people tend not to have pension plans. They don't have significant savings. Their income is old age security, federal legislation; GIS, federal legislation; Canada Pension Plan, federal-provincial legislation.
The average income of a single senior who doesn't have a pension plan is $18,000 to $19,000. We can debate whether or not they're poor, depending on what poverty lines you want to choose. It's not a lot of money. It's certainly not a lot of money in Ottawa, Vancouver, or Toronto. You basically say, “How do I survive?”
I will talk in turn about OAS and GIS.
Old age security is indexed to prices, to the CPI. It has been that way since it was created. Except for the indexation of prices, there has been no change to OAS since it was created.; it has had the same purchasing power for 50 years. Thus over time, of course, OAS has diminishing value as either income replacement or as an anti-poverty measure.
The last government announced that it was going to delay OAS by two years. This government has rescinded that, and we will have OAS at 65. I actually favour delaying OAS to 67, or even later over time, as long as you leave GIS where it is; or we could in fact debate moving GIS to age 60. You would, then, delay OAS for most seniors but keep in place income protections for seniors who are vulnerable from an income point of view.
We currently give OAS and GIS to some seniors—those who are married to somebody over 65 or who are a widow or widower—so there's a precedent for this. We also currently use GIS to replace any missing OAS for people who don't get full OAS. We do this for immigrants. We could, then, modify those programs, and there are precedents for doing so.
The guaranteed income supplement is one of those programs that help you up and hold you back. The GIS gives you money to increase your income and then claws back any income that you earn.
The program is impossibly complex. I challenge anybody to make a simple statement describing eligibility accurately. You will read that if your income is below $15,000 you're eligible; that's not true if you're an immigrant. That $15,000 excludes OAS; not everybody knows that.
It's different if you earn wages. Wages and paid employment are treated differently from self-employment. If you have dividend income, it's different. If you have capital gains income, it's different.
About one-third of seniors get GIS. About two-thirds of seniors without a pension plan get GIS. It's a very important program, and we still have many seniors not getting benefits they're entitled to receive, mostly because of the complexity.
We know now that seniors on GIS have a clawback rate—effectively a tax rate—that is at least 50%; for many of them it's 75%. When you combine it with some provincial top-ups, it's 100%. A good proportion of seniors live in social housing. Social housing charges you a rent in many places that is 30% of your income. That's another clawback on top of the other clawbacks. Many seniors have a tax rate of more than 100%.
This is not a surprise to anybody who understands these programs. The chief actuary just a couple of weeks ago had a report that said that many low-income seniors will not benefit from the enhancements to CPP benefits—the new program—because of GIS. This is not news to anybody who understands these programs.
You are going to be torn about the CPP program. It's critical for low-income seniors, but the enhancements that were announced are so minimal, and they are going to be phased in over 40 years.
Some years ago I wrote a report for the Task Force on Financial Literacy that asked for simple things: simplicity and transparency in the design of the income supports. I've been on the phone with many seniors who are missing out on benefits they're entitled to because they couldn't navigate the system or were not aware that they were eligible.
A major culprit is CPP. It's almost impossible to independently check that you're getting the CPP benefits you're entitled to receive. For income tax you can actually double-check the calculations that CRA does. I get a CPP cheque; they just said, this is what you're getting.
I'm good at this, and there's no way for me to verify that it's correct. When you get the new CPP enhancements, the enhancement rules are totally different from the rules for the CPP base. Good luck ever figuring out that you're getting what you're truly entitled to receive.
I'll make one quick comment about RRSPs: they're toxic for low-income Canadians. It's like having a mutual fund with a 50% back-end load, for people who know what that means. The banks are still doing a terrible job of giving individuals advice that says: you shouldn't be in an RSP; get yourself into a TFSA before you turn 65. They basically are not doing that.
I have some other things I'd like to say, but maybe there will be questions.