Status of Women Committee on Oct. 20th, 2009

[Grant Schellenberg]

Certainly because the likelihood of having pension coverage is positively correlated with earnings, I would expect the overall incidence of pension coverage we would get from the LAD to go up. The magnitude of that shift with moving the threshold from $1,000 to $10,000 would have to be seen.

From our standpoint, to use all tax filers, even those who have no earnings, would result in an unrealistically low pension coverage rate, one that does not have a lot of meaning. By using the $1,000 threshold, we have in a sense established a very conservative measure of the pension coverage rate. The further up the income distribution we go, we would get a more restricted sample and a higher rate of pension coverage. There's always a judgment call on those types of questions.

[Nicole Demers, Bloc, Laval, QC]

Mr. Schellenberg, two years ago, we conducted a study on the economic security of women. At that time, we asked Statistics Canada to start issuing statistics on older women over 80 years of age because we are now living up to the ages of 100, 105 and 110, and we believe that the difference is really pronounced between women 75 years of age and those over 80.

Have you begun to keep statistics on the pension incomes of women who are 80 and over? If so, could we have them?

[Grant Schellenberg]

We can get that information both from the 2006 census, because we have enough sample size from that now, and from looking at the tax file data and seeing what we could do there. One of the implications is that as you move to the population who are 80 and older, you do have a growing proportion of women who may be institutionalized, and when we do things like household surveys or the census of the general population, there's always the risk of losing the institutional population. So particular emphasis would have to be made to capture that group as well.

[Nicole Demers, Bloc, Laval, QC]

Thank you very much.

Thank you, Madam Chair.

[The Chair, Liberal, Hedy Fry]

Thank you very much.

Mr. Van Kesteren.

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

Thank you, gentlemen, for showing up.

In a former life I had a mentor who was an actuary, and he used to tell me it's all in the numbers, and he ran his business literally just looking at a spreadsheet. I'm a firm believer in that too. I'm really thankful and pleased that you're here today, because it really is all in the numbers.

I'll just start with that. The last slide confused me. Can you just explain that slide? Maybe everybody else got it, but I don't quite understand what the slide is telling us. Why is there a difference between women aged 65 and older and women aged 65 to 69. Is the one 65 all the way up to everybody...?

[Grant Schellenberg]

The dotted red line is women just aged 65 to 69. So in a sense we've captured young seniors. The other slide captures all seniors 65 and over, including those in their seventies, eighties, and nineties. What it shows is that the GIS rates for those in their sixties are about 10 percentage points lower than the total population. The implication here is that GIS receipt is higher among women in their seventies and eighties and beyond.

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

I was very pleased also to do this study. Obviously we all have mothers, but I was one of that group—maybe most of us are here—who had mothers who raised families and were never able to enter the workforce, and subsequently they were disadvantaged when their time came for retirement.

The question I want to ask is about trends. If we were to judge the trend today, where it's going, taking into account the labour force—in the past 30 years women have entered it—what impact do you expect to see on poverty rates in this group of women as they enter their senior years? Where is that line going to go? How is that trend going to move?

[Grant Schellenberg]

In terms of answering that question, I would focus on three sets of characteristics that I think have implications. The first set of characteristics is what's happening with the labour market and demographic characteristics of women who are now in their thirties, forties and fifties, and coming up on retirement. What are the key trends we're seeing there? Again, I think, on the positive side, we're seeing high and sustained rates of labour force participation and, as a result of that—and acknowledging the fact of years out of the workforce—higher lifetime earnings than any preceding cohort.

The second factor that I would point to there is the tremendous increase in educational attainment among women in their thirties, forties and fifties. If we look at workers aged 45 to 59, even at the beginning of the 1990s—men included here—the proportion who had high school or even less than high school was quite substantial. I don't have the number off the top of my head, but it was in the range of probably 40% to 50%. The proportion with a university degree was quite small. That has been fundamentally reversed over the last 20 years. To the extent that things such as earnings and pension coverage are correlated with earnings, that would certainly have a positive impact.

On the negative side around the demographic and the labour markets, I think the incidence of later-life divorce is something that we hadn't seen before, and that would be another implication. So there are those types of trends in the demographics on the labour market side, plus the fact that they're having fewer children than used to be the case.

That's all fine and well, but the next set of characteristics is what's happening within the workplace. Here we have trends in pension coverage, the characteristics of pension plans. In the United States and the U.K., from what I read in the literature, the shift towards defined contribution plans has surpassed what we've seen in Canada. If we were to move in that direction of greater prevalence of group RRSPs, that would reshape the financial preparations that people would be making and the vehicles they would have to make those financial preparations, regardless of their education and these factors.

The third one I would point to is what's happening in financial markets in terms of rates of return on these things—I'm not in a position to speculate on that—and also in terms of whether people are in institutional savings arrangements like defined benefit plans or in individualized retirement accounts, which raises issues such as management expense ratios and things like that that people at the C.D. Howe Institute and others have pointed to.

So I think those three sets of characteristics—the demographic and labour market, what's happening within workplaces, and what's happening in the financial markets—all come to bear.

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

Finally, I—

[Grant Schellenberg]

Sorry, Ted wants to add something.

[Ted Wannell]

I just want to follow up a bit on the aspect of the trajectory, because just a few months ago we completed a study looking at people who start in their late forties, and following them to their late sixties, particularly looking at what influences the receipt of the GIS when they're in their late sixties. That's kind of an indicator of low income, once you're into the range where you're eligible for the GIS.

It's all the types of things that you'd expect to see. If you start off with relatively low income in your late forties, if your income declines over the next 20 years, if you get sick as evidenced by a disability deduction on your income tax, those would increase the probability of GIS receipts. On the other hand, if you're contributing regularly to an RRSP, if you're a member of a registered pension plan, all those things are really protection against qualifying for the GIS in your late sixties.

[The Chair, Liberal, Hedy Fry]

You have one minute.

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

Very quickly, going back to the slide on page 4, what percentage of the public sector would be women and what percentage would be men?

[Grant Schellenberg]

That's easy data to obtain, but I don't have it in front of me at this point in time. I could provide you with that.

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

And maybe the same for the private sector.

[Grant Schellenberg]

Sure.

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

That would be interesting to see. We obviously have to do some catching up with the private sector.

Thank you, Madam Chair.

[The Chair, Liberal, Hedy Fry]

Thank you.

Irene.

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

I'd like to thank you, gentlemen, for being here. I appreciate very much all this information. I hope I can do justice to it in terms of my questions.

In slide one, I found it very interesting that, among those who were covered by pensions, in terms of males it had declined and in terms of women it had increased slightly, but both were in the area of 38% to 39%. That means that 60% of Canadians are not covered by pensions, and it would seem to me we should be very concerned about that.

Have you pursued any of that in terms of looking at trends? Ultimately, in the fact that 60% of Canadians are not covered, what does that mean? Can you speculate?

[Ted Wannell]

Well, I don't really have to speculate. That was one of the results in the study. If you don't have RPP coverage, then you're more likely to collect GIS and to fall into that low-income category once you're past age 65.

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

And that's a very difficult place to be in because it's significantly lower than the low-income cut-off.

[Ted Wannell]

And I believe Grant also has some figures on the proportion of pension income in the different quintiles, which is also relevant here.

[Grant Schellenberg]

The fundamental issue you're getting at here is, what are the implications for retirement for individuals who do not have coverage within a registered pension plan? Somewhat surprisingly, the issue of income replacement rates for people who do and do not have pensions has not been addressed up until now, largely because of lack of data and the longitudinal data of the duration that we need to address that question.

But on that point, we could ask what the implications are for retirement of having or not having pension coverage. Last year we released the 2007 General Social Survey, and in that release we focused on non-retired Canadians who were 45 to 59 years and we asked them a whole battery of questions about what their plans and expectations were around retirement.

What we found was that pension coverage was associated with a number of plans and expectations. Individuals who did not have a pension plan were far more likely to say they did not intend to retire. There was a difference of about 12 percentage points between those two groups. Of those who said they planned on retiring, those who did not have a pension plan were far more likely to express uncertainty or to say they didn't know about the timing of their retirement.

Clearly, if you have a defined benefit plan and you know at age 60 you will get x% of your salary, it will add certainty to one's retirement plans. And similarly, among those who stated a planned age of retirement, the likelihood of saying they were going to retire before age 60 was 17% of those who did not have a pension, but 39% of those with a pension. So the age of retirement and the age at which people leave the labour force is fundamentally different for those with and without pensions.

Finally, we asked these near-retirees: at the time you expect to leave the workforce, do you think your retirement will be more than adequate, adequate, barely adequate, or not adequate to maintain your standard of living? What we found was that 74% of people with pensions said they expected their retirement income to be adequate or more than adequate, compared to 60% of those with no pension. So that was a difference of about 14 percentage points. Quite clearly, there are differences.

In another study we have currently under way, we're just looking at a very narrow cohort of individuals using the tax file data. These are people who did or did not have RPP coverage in 1991 when they were 55. And by the time those individuals were 70 to 72 years of age, the difference in the proportion who were retired and who had left the workforce was 5 to 15 percentage points, depending on where they were in the income distribution. So quite clearly there are implications.

The final point I would draw from that last study, though, was that of those individuals who had left the workforce--those with no RPP, they had retired--we didn't find a significant difference in the earnings replacement rate achieved by RPP members and non-members. RPP non-members were far less likely to be retired--as I've just said, there was a difference of 5 to 15 percentage points--but of those who had left, at age 70 to 72 they were replacing a comparable share of their earnings that they had had at 55 years.

That's only one study, and given the importance of that issue, it certainly warrants more and deeper analysis, and that's certainly an important question to keep pursuing.

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

So the poor are working longer, then. And I know the retirement age has been pushed up to 71 in most recent legislation. Is it because people are so poorly prepared for a secure retirement that they're working longer? Do the statistics suggest that they're becoming Wal-Mart greeters, that kind of thing?