Status of Women Committee on March 20th, 2007

[Bernard Dussault]

Any poverty-related problems that people have should not prevent the government from implementing measures like pension splitting, which was implemented yesterday. Whatever poverty problems exist should be addressed one way or another.

I mentioned the GIS earlier. There may be some other way, but once someone is in old age I don't see that anything other than the GIS could do the job. We don't have the same degree of approval for this program, but when you look at the GIS as something that increases your tax measures--I could compare it to looking at a glass as being half full or half empty. Forget the taxes. For people earning below the poverty level--let's say $15,000--it does not remove anything from those who earn more than $15,000 and those who earn less. Their earnings are not brought above $15,000, so I don't see what problem there is with this program. It just does good.

[The Chair, Liberal, Yasmin Ratansi]

Thank you.

[Ruth Rose]

I have one little comment on Madam Mathyssen's question.

If you allowed spouses to split the CPP while they were still alive, when the husband died the woman would have a higher pension of her own, and the combined pension and survivor's benefit would be higher in that case. That would also move toward fairness between couples.

[The Chair, Liberal, Yasmin Ratansi]

Thank you.

Ms. Neville.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

Thank you very much.

Let me begin by apologizing for coming in late. I'm sorry, as I was at another meeting.

I want to follow up on Ms. Mathyssen's question on income splitting. Ms. Rose, you just proposed a solution, but I'm very concerned.

You have a hypothetical couple over 80 years old, with a joint income of $65,000 or $70,000, let's say. One spouse dies, and usually it's the male spouse who dies earlier, and the woman is left alone. When there are two of them living together they split their income from their pensions and their tax rate is lower. He dies, which is the more preponderant case—men dying before women—and she is left alone, her income falls, but her tax rate increases.

Do you have suggestions of what in public policy a government can do to try to address what I see as a huge inequity for senior women? We're here to talk about the economic security of women. I think this potentially seriously undermines the economic security of older women, who get lulled into a certain lifestyle that vanishes when a spouse dies.

[Ruth Rose]

Well, first of all, I want to remark that a couple with $65,000 in retirement income is already in the top 15% or 20%—

[Anita Neville, Liberal, Winnipeg South Centre, MB]

Whatever the income is.

[Ruth Rose]

—except that after he dies, she will have survivor benefits and whatever her own income is. If her income is below $35,000, she's going to be taxed at the lowest rate anyhow, so that's not my primary concern.

I also want to say that I think income splitting for people who are still active is a major obstacle to women re-entering the labour force, because they will be taxed at their husband's tax rate. While that's not as much of a concern for people who are retired....

Don't forget, also, that we give additional tax advantages to the elderly, so they in fact are paying less tax on the same income as younger people, because we expect them to have, for example, more medical expenses and so forth. So that would not be a major concern on my part.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

Could you expand on your comment that it would inhibit them from entering the workforce?

[Ruth Rose]

Suppose you have a man who earns $100,000 and his wife is at home with the children. Indeed, in Sweden, they say that only rich men can afford to have women at home—a wife at home. But if you have income splitting, she would be taxed at $50,000 and he would be taxed at $50,000, meaning that if she goes back into the labour market, she will be taxed at the second level of taxation, which I think is 22% now, whereas in the current situation, she's taxed at the lowest rate, which is 15.5%.

Again, if there are measures giving women at home money for child care, and they go back into the labour market, lose that money and have to pay for child care, that's a major obstacle. The problem, as we know, is that while it's very nice when a woman is living with a man who earns $100,000, if they separate and she's on her own, that's when we get low-income single mothers. So I think we want policy to be directed towards keeping women in the labour market.

Also, there's been a considerable amount of study showing that child care is not only not bad for children, but also that good quality child care is good for children. Again, we want women and men to be able to keep their children in child care, but not for 60 hours a week, but maybe for 30 hours a week, as it's an educational experience for the child and it allows good parenting as well.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

Could you comment, Mr. Dussault, on whether you have....

Do I have time?

[The Chair, Liberal, Yasmin Ratansi]

Yes, you have ten seconds.

[Anita Neville, Liberal, Winnipeg South Centre, MB]

Oh, well, I'll come back, then. Thank you.

[The Chair, Liberal, Yasmin Ratansi]

Thank you.

We go to Ms. Davidson for five minutes.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

Thank you.

Thank you very much to both of you for your presentations this afternoon. I think, as with other subjects we've studied, it becomes more apparent as we get into it that there are no easy solutions for most of these issues.

I just want to go back to a couple of things you referred to. First of all, Mr. Dussault, I think you talked about the survivor spousal benefit and how it is often in fact cut to 50% if the insured spouse passes away. Is that correct?

[Bernard Dussault]

Yes.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

Is that something that can be changed or can be easily changed? Can you comment more on that?

[Bernard Dussault]

It can be changed, but there's a cost to it, and the cost is high, both marginally and absolutely--absolutely in the sense that a pension plan by itself is already something that is very expensive. So to add to it is not easy, because a 50% survivor benefit is already quite expensive, so to increase it increases the cost of something that's already quite expensive.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

I want to ask you about a couple of other options. As well as the normal pension plan, there are other pension plans that are defined contributions. Is that something that's available to very many people? Because under those, the surviving spouse gets 100% of the benefit. You don't lose anything on those.

[Bernard Dussault]

Yes, but with the defined contribution plan there is no explicit survivor benefit. There is one, as you say, because there are some assets left, but the later you die, the lower are the remaining assets, so it's not--

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

But can the defined contribution not be set up so it generates an income very similar or equal to what a defined benefit pension does?

[Bernard Dussault]

There is always a way, but a defined contribution benefit is normally designed this way to be simple. So basically, it's not designed for that purpose. But there's always a way to deal with that. Each individual would have to do something with it personally by setting a portion of the amount withdrawn each year. But in a general way, it's not possible to do that with a defined contribution.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

But there are large companies in this country that do that for their employees. Petro-Canada is one of them.

[Bernard Dussault]

What does it do, exactly?

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

It manages the plans for them. It manages the defined contribution plan, the same way a defined benefit plan can be managed, and you have the option, at retirement, of either taking that money and managing it yourself through your own financial advisor or of having the company continue to manage it. And it's managed by very astute companies that do this; they're not just managed by anyone.

Is this an option we could perhaps see more companies becoming involved in?