Status of Women Committee on Oct. 6th, 2009

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

There must be a way to gauge. We know from the index when we gauge inflation, perhaps—we use a certain basket of goods, as they call it. Is there some way to know? Is there a way your department tracks that, so we can say, yes, things are improving for these women or that things are actually getting worse?

[Thomas Shepherd]

There is no doubt that their median incomes are rising and that the proportion of them living below all the low-income cut-offs has declined substantially, no matter which measure you use.

Another measure to look at is net worth—asset levels, home ownership, and so on. I was surprised, looking at the figures on net worth among unattached women, but again over the last 15 to 20 years even net worth in terms of assets and wealth has also increased. Even when you look at income replacement rates, the proportion of women's income after retirement as a percentage of their pre-retirement income, again they have been generally comparable to men for some time. In terms of cost of living, the benefits are indexed to the cost of living once people are receiving them, so they do grow. The public benefits do grow.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Continuing on in that direction, how do we compare internationally? Where do we rank in looking after single women who never contributed to CPP?

[Thomas Shepherd]

We do now have one of the lowest levels of low income among seniors in all family types in the OECD. I have a chart here that compares Canada, Australia, Germany, Netherlands, Sweden, U.K., and U.S. On this chart, the only country that has a lower rate of low income among seniors is the Netherlands. So we're substantially lower. The most recent data was in 2000, but the trend has been similar since then. The U.S. is at 28%, the U.K. 17%, Germany 10%, Australia 23%, and Canada 5%. So internationally there's no question, because our system is fairly targeted towards those lower-income individuals.

[Dominique La Salle]

I would just add the other side of that equation: is it sustainable? In the case of Canada, it is sustainable. Many countries have had some measures of success but may have built their system in such a way that it's not sustainable. So they have to look at pushing the age of retirement, increasing contribution rates, etc. So our situation is pretty good in that respect as well.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

We obviously have some international agreements. I want to ask you about the security agreements you have with various countries around the world. Why are they important?

[Dominique La Salle]

For a number of very important reasons. They're important for the individual to be able to have access to the benefits in Canada that would have been provided by another country, and vice versa. In that respect, because of the nature of the very important immigration in Canada, there is a lot more inflow, if you like, of pension moneys in the country than outflows. That's number one. There's an aspect of reciprocity of treatment in that.

The other thing is that it's also an economic argument. When we enter into such an agreement with a country for Canadian businesses doing business in that country, the Canadian expatriates who are there working temporarily are exempt from the local social security tax. They continue paying their CPP and accruing benefits here, but they're working in some other country.

So we have 52 agreements that are signed—50 are in place and implemented—and we are very busy negotiating at this time with India, Brazil, Argentina, etc.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

And presently we have an agreement for 10 years, I understand. Is that correct? And why is that important, say, as opposed to maybe somebody coming and receiving benefits right away, or three years down the road?

[Dominique La Salle]

I think you're referring to the residency requirement for the purpose of being eligible to receive OAS benefits. You need to have 10 years of residence. When we enter into an agreement, years of residence in another country can count for these years of residence. I want to be very clear that this is only for eligibility, it is not the issue of the level of the benefit. The level of the benefit is based on years of residence in Canada. If we sign an agreement with a country and someone from that country moves to Canada and has lived all his life here, that person may be eligible immediately for OAS and, by virtue of being eligible for OAS, are eligible for GIS, the guaranteed income supplement. But if that person moved to Canada a year ago and is now over 65, then one-fortieth of the benefit is paid.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Do I have a little bit of time?

[The Chair, Liberal, Hedy Fry]

No, I'm sorry. I've given you leeway to meet the others who went over a little bit, Dave.

Irene Mathyssen.

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Thank you, Madam Chair.

I want to say thank you very much for coming here and providing all of this information.

You ended your presentation on a positive note, but I've been doing a lot of background reading, and it seems that there has been a shift from defined benefit retirement programs to defined contributions and, in the last, I don't know, 20 years, another shift to RRSPs.

In light of what's going on right now, with “too big to fail”, General Motors failing, with the number of companies that we see entering into bankruptcy, it seems that the precarious nature of pensions is very much with us. I noted that with DC plans, the shift is to workers taking the risk, and even at that, 60% of people have no private pensions.

I am wondering, are we facing a reversal of the pension gains that you described in your presentation? I'm very, very aware that stock markets are wonky at the best of times, and we've experienced that in the last little while. People have complained about losing and being afraid that their pensions are not secure. Do we have to be prepared for some very serious consequences in the next few years?

[Thomas Shepherd]

As you note, there has been a shift from DB to DC. People have been increasingly using their RRSPs as their primary retirement vehicle, which are more dependent on market returns and the market context. In terms of whether we are looking at a serious reversal in the shorter term, I would say I don't see anything in what we've seen so far that would indicate that. There are increased pressures, obviously, facing workplace pension plans, but in general the solvency ratios have picked back up a bit recently. There's a fair bit of stability still in the system, in terms of those who do have a plan, and as I noted, women are more likely to have that DB plan now.

I'll leave it at that.

[Dominique La Salle]

I would add that as the risk has shifted from the plan in a DB plan to the individual in a DC plan...I mean, there are advantages to both plans. The DC plan allows you to fund all your money in one lump sum--

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Is it more portable?

[Dominique La Salle]

Exactly. It's more portable and that sort of thing.

But will the individual have the knowledge to make an informed choice, which you find in a large pension plan where you have experts and so on? That is unclear. Speaking personally, I would not know where to park my money, aside from the usual average return type of instrument. There's lots of experience dealing with this around the world. Will people assume that risk? Will they make the decision to invest more or save more, and so on?

Some countries have tried innovative features, such as auto-enrolment and default investment instruments. In other words, they don't force you to invest, but.... Sweden is an example. In Sweden, they brought in a reform. They auto-enrolled people. They have 700 different funds. Nobody can understand 700 different funds. But there is a default fund, or a couple of default funds, and I think they are age based. In other words, they are more conservative as you come closer to retirement. All of that is on, so to speak, cruise control. If you don't do anything, that's what happens.

[Irene Mathyssen, NDP, London—Fanshawe, ON]

In your presentation you talked about the cost of CPP, OAS, and GIS being about $32 billion each. While that sounds like a lot of money, I was thinking about the cost of not having that kind of protection. I know you're a number cruncher, but have you given some thought to what could happen if that kind of security was not there?

[Thomas Shepherd]

There is no question. On the guaranteed income supplement specifically, we do have figures that indicate what the rate of low income would have been if it had not been in place. It would be quite a bit higher.

[Nathalie Martel]

If I remember, I think right now the incidence of low income among seniors is 4.8%. That's based on 2007 figures. I believe that if the GIS did not exist, that rate would be around 16%. So the GIS makes a big difference.

[Dominique La Salle]

If that's not accurate, we'll send you a letter.

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Revenue Canada sends me lots of letters.

I wanted to come back to Madam Demers' question about income splitting. We noted in this committee, when we did a study in regard to the economic security of older women, that it does indeed negatively impact single women or single seniors. Those at the top, those who have that very substantive income, are able to reap benefits. I think that if the income was in the range of $60,000, the benefit was about $8,000, whereas at the lowest level there was no benefit at all. I am very worried about that and about how to make that more fair and equitable. How can Parliament make sure that those people at the bottom are benefiting in the same way as the people at the top?

Second, in the presentation you said that in those situations where there is income splitting, each spouse, even if one spouse didn't make significant contributions to CPP, would receive a payment in her own name. Does that mean that there is actually a cheque given to that spouse that is separate from her partner's?

[Dominique La Salle]

I will let Heather answer this, but regarding your first question about how we balance the benefits provided to higher-income Canadians with those to lower-income Canadians, the GIS is a case in point. The GIS is not available to higher-income Canadians.

[Nathalie Martel]

For a single individual to receive GIS you need to have an income below roughly $15,000. Above that, you're not entitled. For couples, it's around $22,000.

[Dominique La Salle]

For the question of income splitting, Heather.

[Heather Bordeleau, Director, Canada Pension Plan, Policy and Legislation, Department of Human Resources and Social Development Canada]

Yes. Actually, in the Canada Pension Plan it's more pension sharing, because we have credit splitting and then we have pension sharing. That's for couples who are together. The amount that goes out actually is never any more than would be paid out if there was just the one pension or the two pensions.

What it allows us to do is, in the case of a couple, looking at the income and also at their period of cohabitation, normally it's a 50-50 split. It's an equal split for that period. Yes, it does create a payment to the person whether they had no pension or whether they had a low pension. So it could move some money over to the other payment. That doesn't actually extend past the point of death or separation. It's almost like a temporary measure where they can split the payments.