Human Resources Committee on Oct. 17th, 2017

[Jane Rooney, Financial Literacy Leader, Financial Consumer Agency of Canada]

I want to begin by thanking you for inviting me to join you today.

It is my pleasure to talk to you about what we are doing at the Financial Consumer Agency of Canada, and more specifically about how our financial literacy work can help with today's discussion on income security.

First, I would like to explain FCAC's mandate to protect financial consumers. We do this in two ways. First, we are a market conduct regulator, responsible for the supervision of financial institutions such as banks on consumer protection issues. Our second mandate at FCAC is to play a national role in strengthening financial literacy, which we define as having the knowledge, the skills, and the confidence to make responsible financial decisions.

In 2014, the federal government named me as Canada's first financial literacy leader to provide national leadership on this issue and to work with stakeholders toward strengthening the financial literacy of Canadians.

At the FCAC, we believe that financial literacy is a vital life skill. It can play a role in income security for seniors, but also for people of all ages.

I would like to share some research findings on the challenges seniors face. I will then explain how financial literacy can be useful.

In 2009 and again in 2014 we fielded the Canadian financial capability survey, which examined the financial knowledge, skills, and behaviour of Canadians. Our analysis found that debt is a growing issue for seniors. Specifically,19% of retirees in Canada had a mortgage on their primary residence in 2014, up from 16% in 2009. The proportion of retirees with an outstanding credit card balance increased to almost 15% in 2014 from 12% in 2009.

Our research also found that high-interest payday loan use doubled between 2009 and 2014, from 1.9% to 4.3%—still a fairly small number, but it's a worrying trend—and that 13% of these borrowers were seniors.

Bankruptcies among seniors are also on the rise. According to statistics from the Office of the Superintendent of Bankruptcy, 10.9% of personal bankruptcies in Canada last year were filed by seniors age 65 and older, and 6.9% were filed by people age 60 to 64. This means that in 2016 alone, seniors and near seniors filed 18% of personal bankruptcies in Canada.

Another trend to highlight is that we know more seniors today are responsible for saving more for their own future and that they are also living longer, which is a good thing. However, this means that we need to plan and save for a longer retirement and budget for the possibility of higher health care costs.

Finally, I should mention the growing body of research showing that financial literacy is closely connected to physical and mental health. A majority of Canadians ranked money as their number one cause of stress—higher than work, health, or family obligations.

I'll turn to the important role of financial literacy and what it can do to address these issues.

Financial literacy can actually help people feel in control of their money and be more confident when making financial decisions in an increasingly complex financial world. We found through our analysis of the Canadian financial capability survey that when seniors and near seniors feel more confident in their ability to make ends meet and to choose financial products, they are more likely to have planned financially or be planning for their retirement.

Financial literacy is of course not only important for those preparing for retirement, it is essential for people living in their senior years. In the first year of my mandate, we held consultations across the country with organizations and individual Canadians. Based on our findings, we developed and launched, as an early milestone, the seniors financial literacy strategy. I have brought copies here today. It sets out four goals as a foundation for moving forward on financial literacy.

To implement this strategy, FCAC developed specialized content for seniors and near seniors. For example, we have information on planning for and living in retirement that includes how to set up a budget, how to use credit wisely, how to access government benefits, how to protect yourself from fraud and financial abuse, and what to do if you're a victim.

We've also worked closely with our federal government counterparts at ESDC to develop stronger and clearer messages for their online Canadian retirement income calculator.

We also coordinate efforts with others to advance the goals of our seniors strategy. We work with the members of my national steering committee, which is a committee of 15 executives from all sectors, who are helping to implement that strategy.

We also leverage 13 financial literacy networks across Canada that represent more than 500 organizations in the public, private, and non-profit sectors. We provide them with free, unbiased material that can be adapted and delivered directly to seniors in their communities.

Research and consultations with Canadians and organizations confirm the fact that financial literacy is a key skill for everyone in today's society.

In 2015, we launched the National Strategy for Financial Literacy—Count Me In, Canada, which has three broad goals, to encourage people of all ages to: manage their money and debt wisely; plan and save for the future; and prevent and protect themselves from fraud and financial abuse.

Many initiatives are under way to help all Canadians reach these goals. Financial literacy is now taught in all educational jurisdictions across Canada, and I'm pleased to report that our 15-year-olds ranked second among the 15 countries that recently completed an international research survey.

FCAC and our partners are now working at getting financial literacy into the workplace to reach our Canadian adults. We currently have pilot programs under way, but there are some challenges for FCAC and other organizations that are trying to boost financial literacy among seniors.

First, we in government need to work better to integrate financial literacy into our programs. One good initiative is FCAC's work with the CRA's community volunteer income tax program, which helps low-income people complete their income taxes to access benefits.

We are disseminating some brochures to help people better understand their banking rights, like the right to cash a government cheque for free, and for those people who receive the GIS, they have a right to no-cost accounts at eight financial institutions.

Second, there are many valuable organizations in communities that help seniors, but more support is needed for these organizations.

One example of a grants and contributions program that is very effective is ESDC's new horizons for seniors program. It has helped to fund many programs in communities to help with the issue of financial abuse and fraud among seniors.

Financial literacy is a vital life skill. It helps people acquire the necessary knowledge, skills and confidence to make financial decisions that are tailored to their needs.

Momentum is building, and my goal is to ensure that seniors are supported no matter where they are.

Thank you very much.

[The Chair, Liberal, Bryan May]

Thank you very much.

Now, from Statistics Canada, we welcome Sébastien Larochelle-Côté, managing editor, education, labour and income statistics branch.

[Sébastien Larochelle-Côté, Managing Editor, Education, Labour and Income Statistics Branch, Statistics Canada]

Thank you very much for the invitation to appear.

I am going to start at slide 3. Seniors account for a growing proportion of the population. The population we have been asked to report on is the situation of older women in Canada. The population of both males and females in Canada continues to age.

There are now 3.2 million women over the age of 65 in Canada. Nearly one in five of all women in Canada is over the age of 65. Between 2011 and 2016, the number of people aged 65 and older grew by 20%. That's four times the national rate. It was the fastest growth rate for this group in seven decades. This reflects the transition of the large cohort of baby boomers into their senior years.

As the chart demonstrates, the share of older women within the overall population should continue to increase. By 2031, just 14 years from now, the number of women aged 65 and above could reach 5.1 million, or 24% of the total female population. It is projected that these trends will continue.

At the same time, the senior population will become increasingly diverse. Today, close to 30% of women over the age of 65 are immigrants; by 2062, almost 50% of seniors could be foreign-born. This may have implications for the source and characteristics of income security, which can be quite different from one population subgroup to the next.

Slide 4 shows us other census results. An increasingly large share of the senior population, particularly women, lives alone or in collective dwellings. That's especially the case for older age groups. These trends will probably continue with the aging of baby boomers, who are even more likely to live alone than previous cohorts of seniors, as the chart shows.

I'm going to now turn to another perspective on collective dwellings. Slide 5 examines the oldest old, those aged at least 85. One-third of Canadians aged 85 and older live in collective dwellings, such as seniors residences and nursing homes. Our latest census results show that there is a strong gender dimension to the issue of older people living in collective dwellings. In 2016 more than 180,000 women aged 85 and above were living in collective dwellings, compared with more than 60,000 men. The vast majority of these women lived in a nursing home or in a mix of nursing home and seniors residence.

Slide 6 describes how transition into nursing homes often happens because of health issues. Our research shows that the onset of Alzheimer's and dementia is strongly correlated with entry into institutional care. Our macro-simulation projections indicate that the number of Canadians with such conditions will rise in the coming years, because of both the increasing prevalence of such conditions and the growing population of older Canadians susceptible to such conditions. There are also important gender differences to consider. In this context, additional health care costs associated with Alzheimer's are projected to be about $13 billion by 2031.

Slide 7 describes the current situation in terms of seniors' incomes. It indicates that family and individual incomes have been increasing over the past four decades, and especially since the early 2000s. Both employment income and private retirement income are responsible for that increase.

So today's seniors are healthier and more likely to work than previous generations of seniors. In addition, men and women over the age of 65 are more likely to receive an income through private pensions.

However, if you look at slide 8—low-income rates—as was mentioned before, the proportion of people who are low income, which happens when a family's after-tax income falls below a given income threshold, has increased since the late 1990s. The low-income measure used here is a relative measure of low income and can be interpreted as the share of the population that has low income relative to the median family.

Why did low-income rates increase among seniors? It's not because the incomes of seniors fell, but rather because the incomes of other Canadians grew faster, which raised the low-income threshold. In other words, seniors' incomes have fallen behind those of other Canadians.

Another important point with respect to low income is that some groups are more at risk of being in the low-income group than others. They include older women who are not in an economic family, i.e., those who do not live with family members or are living alone, older women with a disability, aboriginal women, and recent immigrant women.

That being said, slide 9 shows that government plays an important role in reducing low income, especially among seniors. To evaluate the impact of transfers on low income, it is possible to calculate the low-income rate before and after the inclusion of transfers. While government transfers reduce low income by about 50% for the overall population, they reduce low income by more than 70% among seniors. That is largely because government pensions, such as the OAS, GIS, and CPP, represent the largest source of income for seniors at the bottom of the income distribution.

As shown on slide 10, other factors are important for the well-being of seniors. That includes access to private pensions, pension savings, accumulated wealth and the ability to participate in the labour market.

The coverage provided by a retirement pension is important. It represents a significant source of income for many seniors in Canada.

However, it should be noted that the proportion of women covered by a retirement pension has remained relatively stable over the past two decades. That proportion has dropped among men. Right now, women are more likely to be covered by a private pension plan than men.

Finally, of course, social and community support is important for the economic well-being of senior women. For example, half the women with close friends or close family members rate their health as excellent or very good, compared with 33% of those with no close friends.

That is the end of the presentation. I encourage you to have a look at our next census releases, which will be October 25 and November 29.

Thank you.

[The Chair, Liberal, Bryan May]

Thank you very much, sir.

That concludes the opening remarks from our witness panel today. We're going to questions.

For six minutes we have MP Wong.

[Alice Wong, Conservative, Richmond Centre, BC]

Thank you, Mr. Chair, and welcome to all the stakeholders and witnesses, and especially Irene from B.C., because I came from British Columbia.

Then, of course, I'd like to welcome Jane. I used to work with her closely when I was the former minister for seniors. Financial literacy has done a good job, and I'm glad that they're still around helping not only seniors but those who are also getting ready to be seniors. They've done great work.

My question, which is for everybody, will be centred around two issues. The first is elder abuse, especially financial abuse. Ms. Rooney mentioned that because of the lack of understanding of what matters to them when they buy any product, or even when their own family members or friends abuse them....

That of course relates to working with the banking industry. As I mentioned in previous committee meetings, I think we should get them involved. If there's any sign of financial abuse, they should be authorized to inform the relevant authorities.

This is a question I'd like to address to Ms. Rooney first.

[Jane Rooney]

Thank you very much. It's a pleasure to be here and to answer the question.

Regarding elder abuse, we define financial abuse—and it is the most prevalent form of elder abuse—as being someone who is close to you or a family member taking money from you. Financial abuse is generally done by someone who is close to you.

What are we doing about it? At FCAC, we work with the financial industry. We regulate the banks. We encourage the financial institutions to provide to their clients information about what financial abuse and fraud look like, but also what to do about them, so about complaint handling.

In terms of arming people with information concerning how they can identify and understand it, we have worked with several members of my steering committee. The Canadian Bankers Association has a program that we co-developed called Your Money Seniors. It has three modules. One is a module around budgeting, just helping people manage money in their older years. The other two are on fraud and financial abuse.

I've participated in sessions with seniors. It's remarkable that when a financial professional, who has to be non-commercial in nature to provide the information, starts talking and opening up to people about what fraud and financial abuse looks like, people start talking and realizing that they might have been victims. It concludes with what you should do about it, which is to identify the issue to your financial institution and report it to the police.

As a second example of working with the industry, we worked with—it's a new name—the Canadian Credit Union Association. We helped them develop a program called Recognize, Review, and Respond. It's a training program for their front-line staff, and they've delivered it to credit unions all across Canada. It includes videos. It's a way to train financial institutions' front-line staff to recognize when someone might be a victim, to put a stop to it, and they have formal reporting mechanisms.

These are just some examples of working with the industry and using our own content to help raise awareness that this is a problem.

One last thing is that we worked with ESDC and the provinces and territories to create a booklet about powers of attorney and joint accounts. It's an opportunity to raise awareness that there are powerful tools out there that can cause harm to someone if used incorrectly. In the case of a joint account—two owners of assets within an account—if someone is a victim of financial abuse, at times people could withdraw money. Again the opportunity was with the provinces and territories to raise awareness about these tools—powers of attorney and joint accounts—so that people recognize that these tools can be used to harm them, so that they understand better those tools.

[Alice Wong, Conservative, Richmond Centre, BC]

Thank you.

My next question is about caring for the caregivers. Very often we forget that they are people who are working and who have to look after their grandparents or parents.

When I was the minister, I had an employer panel for carers, and so employers are very much aware of their own employees who are having to go to work and to care for their own family members. This is a great challenge to our economic growth, because these people tend to really not want a promotion, or they want to reduce their hours just because they want to make sure their parents or grandparents are being looked after.

My question is directed towards my friends in B.C. Could you shed more light on caring for carers?

[The Chair, Liberal, Bryan May]

You have about 30 seconds.

[Irene Sheppard]

It's hard to say that in 30 seconds.

It's absolutely important. We need to do a much better job on that. It has to do with workplace policies, but it also has to do with caregivers being willing to accept the kind of help that is going to help them not to use up their energy in different ways. What I mean by that is sometimes bringing somebody in to clean mom or dad's house will relieve the caregiver, as opposed to when they try to do everything.

Some of it is the mindset of the caregivers. They can feel like they're responsible for mom and dad 100%. They need to be a little more thoughtful about that in order to be a healthy caregiver.

[The Chair, Liberal, Bryan May]

Thank you very much.

Now we go to MP Ruimy, please.

[Dan Ruimy, Liberal, Pitt Meadows—Maple Ridge, BC]

Thank you, everybody, for coming and presenting to us today.

We definitely have some interesting times ahead of us. Part of the challenge I keep hearing, even with the previous panel, is that when we're looking at statistics, those statistics don't really tell the whole story.

For instance, Mr. Veall, you were saying that OAS should be raised to age 67. The folks I'm meeting in my riding can't do that. They can't wait for age 67 to get their OAS. They can't wait to get their GIS. They're so much behind the eight ball that if we were to delay that, it would cause serious harm.

I know you've done a lot of research on that. I'd like to know more about retirement planning. You talked about TFSAs. I think you're onto something with saving RRSPs versus TFSAs and how that works. The challenge comes back to the fact that a lot of our up-and-coming seniors just don't make enough money to save, period. You've done some research, so could you shed a little more light on that please?

[Dr. Michael R. Veall]

I said two things. I said the OAS component—the more-or-less automatic component that's only taxed away at high incomes, actually completely up to $120,000—would be the component that you would gradually move forward in time, for later years. But the GIS component would come in and fill the gap completely. So it would have no impact at all on a low-income senior at age 65.

In fact I was not even studying that myself. That was what I read that Richard Shillington had told this committee. I was saying that made some sense because it still allows the potential saving on the OAS side but doesn't pose the problems that you're describing. I mentioned in my testimony that I understand there are people who are just hanging on, just trying to get to the age when they are eligible for these programs, because they are so impoverished.

I don't want to go on about it too much, but in terms of my own research, I think what is sometimes thought of as a problem of senior inequality is in fact that there are more seniors who are working further into the period that we used to think of as retirement age. That will necessarily cause some inequality if you just look at the seniors population. I argue that the more appropriate way is to think of inequality in terms of the broader population. In fact, at some level, inequality is being reduced because they're having incomes that are more like those of the rest of the population.

I accept there are value judgments that underlie all of this. At the same time, as everyone here is aware, you have to have a system that can be funded. Perhaps splitting the difference is allowing the sort of description that Richard gave.

[Dan Ruimy, Liberal, Pitt Meadows—Maple Ridge, BC]

Having a system that can be funded, yes, that's true. But there's a lot of learning. When I was a kid they said you had to save up for however many years you thought you were going to live. I think for me they said I had to save up $1 million. For me, that was not going to happen. So we don't even try. That's the financial literacy part that is a challenge for people. If it's not attainable, they're not going to go there.

There's also regional disparity. In B.C., when three-quarters of your income is going to your apartment, then you have no money in your pocket. We heard testimony last week that for the same person making the same amount of money, one in B.C. and one on the east coast, the difference is $1,400 in their pocket. If I have an extra $1,400, I can save that, but if I don't, I'm not saving that. That's coming from where you live, and we can't expect people to move all over the place.

I'd like to quickly move to Jane. I asked a question before about financial literacy and the up-and-coming seniors. How are they faring, the ones who will be seniors in 10 years? The responses we got were that they actually seem to be a little better off with their financial planning. Is that something you see?

[Jane Rooney]

We fielded the financial capabilities survey in 2009 and 2014. We saw some improvements in some areas. More people were saving for their kids' education, but people still said in 2014 that they didn't know how much to save for retirement. Not as many people as we would like were saving for retirement.

We saw some worrying trends. That's why at FCAC what we've been working on is really breaking down what the behaviours are that we want to change. We want people to be able to save more, to address your point. When people are on low incomes, how can they access money, change spending habits, and save? We're focusing on helping people budget, which helps people feel more in control of their money. They know their income.

[Dan Ruimy, Liberal, Pitt Meadows—Maple Ridge, BC]

I have 30 seconds. I have one quick question directed to Surrey.

Dementia is one problem that is coming on. How does one even plan to save? When you look at assisted living facilities costing $5,000-plus a month, how do you plan for any of that stuff?

[The Chair, Liberal, Bryan May]

You literally have 10 seconds. Again, I'm sorry.

[Irene Sheppard]

With mild dementia, if you set up your life right, you can keep going without having to move into those expensive care homes.

I think that's the place to start: reduce the amount of time. In the end, you go into a care home if your dementia is too bad. It is what it is.

[The Chair, Liberal, Bryan May]

Thank you.

Hopefully we can get back to you for a full question. I'm sorry about this.

We move quickly to MP Rachel Blaney.

[Rachel Blaney, NDP, North Island—Powell River, BC]

Thank you.

I want to start off with a “yes”, “no”, or “abstain” question. If you could keep the response to those choices, I would really appreciate it.

I want to know whether, from your perspective, you believe the government should implement a national seniors strategy.

Nicole, could I start with you?

[A voice]

Sorry....

[Rachel Blaney, NDP, North Island—Powell River, BC]

Irene, yes or no?

[Irene Sheppard]

Yes.

[Dr. Michael R. Veall]

Abstain.

[Jane Rooney]

Yes.

[Sébastien Larochelle-Côté]

Abstain.