Evidence of meeting #43 for Status of Women in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was women.
A recording is available from Parliament.
Consultant, As an Individual
I won't and can't speak in detail about Nortel. What I will say—
Consultant, As an Individual
—is that with regard to the registered pension plan, the participants will take a haircut on their benefits, but they will get benefits.
Part of the problem in the Nortel situation and in a surprising number of private sector situations is that promises are made with respect to retirement outside the framework of a formal, pre-funded pension plan. And all of these non-funded benefits are at risk when the employer goes down.
Having said that, I think it just strengthens a Nortel-type situation. It makes a case for strengthening funding rules, but it also makes a case for separating the method of delivering retirement income from individual employers.
Liberal
Lise Zarac Liberal LaSalle—Émard, QC
Earlier you mentioned that the statistics did not include baby boomers, and you mentioned in your presentation that there were still changes to come. Is that what you took into consideration? What changes could we expect to see in future?
Consultant, As an Individual
For example, if we look at the history of the Canada Pension Plan, back in the early days of the plan, the number of female contributors was less than 50% of the number of male contributors. We're now up to a situation where there are equal numbers of male and female contributors, which means that somewhere down the road there's going to be... Well, in fact, the numbers are in the tables the clerk will give you. You'll see that by 2015, I think, the number of new retirement benefits under the Canada Pension Plan will be.... There will be just as many women getting new benefits as men. In fact, even now there are more women receiving CPP retirement benefits than there are men. And that's not because of the equal inflow; it's because women stay in receipt of retirement benefits longer than men do. But even the newly initiated benefits will equalize by around 2015.
Liberal
Lise Zarac Liberal LaSalle—Émard, QC
However, Ms. McDonald and Mr. Baldwin—you said this earlier—women are the most vulnerable because they provide care. Can we nevertheless expect changes?
We know that women are more educated than they used to be. They should necessarily have better salaries. However, women will still bear children and take care of seniors. What can we really expect? Will they still be the most vulnerable persons?
Professor, Faculty of Social Work, Director of the Institute for Life Course and Aging, University of Toronto
I think they will. I'm absolutely certain they will, because it doesn't look as if the inequality in the labour market, which I've talked about, is ending. Women make 70¢ on the dollar.
Some women will do better than others. Married women make 70¢ on the dollar. Single women never married make 93¢ on the dollar. That group of women will do extremely well in the baby boom generation, but I still think the inequality will persist. I don't know why the pension system has to make up for what is an issue in the labour market. I'm not sure how you solve that problem.
Consultant, As an Individual
For me, that's part of the reason why old age security is so important.
The other thought I have is that we talk about widows and widowers, and it is such a common part of the experience of older women that you spend a period of time on your own; it's a much more common experience for older women than for older men. It's part of the reason too that I'm interested in the issue of the guarantees we offer to singles versus couples, which is within our capacity to do something about. The underlying problem is a labour market problem, and it's hard to build the corrective into programs like CPP and into the third pillar, which is why I go to OAS.
Liberal
The Chair Liberal Hedy Fry
Thank you very much, Mr. Baldwin.
I'm sorry, but we're going to have move on; it's over seven minutes. Perhaps you can hold the thought, Dr. McDonald, and come up with it later.
Madame Demers.
Bloc
Nicole Demers Bloc Laval, QC
Thank you, Madam Chair.
Ms. McDonald, Mr. Baldwin, thank you for being with us this afternoon.
Mr. Baldwin, you said something that somewhat surprised me, that we won't have achieved pension income equality between men and women by 2050. That's quite a serious manner. We know that more women currently belong to a public sector pension plan. I was wondering where the deficiencies are.
Last week we also learned that all money had to be withdrawn from an RRIF by the age of 90. Every week, I go and celebrate birthdays of 100 years or more with women who have achieved that venerable age. However, very few men reach that advanced age. If you withdraw all your money at 90, what do you live on between 90 and 105, or even 108? How can you offset that shortfall?
As regards natural caregivers, someone suggested applying the same equation solely for women who take care of children until the age of seven. They can receive a credit for pension plan contributions. Could women who take care of an aging parent, a sick spouse or a sick child enjoy the same conditions, and for seven years as well? Would that be beneficial, in your opinion? I think these measures would be readily applicable because the process for that is already established.
Money from RRSPs is also a subject of concern for me. Currently, seniors can accumulate maximum employment income of $3,500 a year without being penalized with respect to the Guaranteed Income Supplement or pension income. Those people therefore have $3,500 more in their pockets and do not pay any more tax. However, those who withdraw $3,500 from their RRSPs must pay tax on that amount, which is normal, but that $3,500 is added to their income, which has the effect of moving them to another tax bracket. Those people then lose all their programs, the Guaranteed Income Supplement and the other programs to which they are entitled. And yet, a simple amendment to section 13 of the Old Age Security Act would make it possible to make a change of the same order of magnitude—$3,500:$3,500, that doesn't change—and to grant an exemption as in the case of working people. For a person who works very hard to set money aside but who is penalized relative to another person who has not saved, what is the point of investing money in an RRSP?
With respect to the Guaranteed Income Supplement, a couple receives more money than a single person, as you've already said, Mr. Baldwin. However, if the husband dies, the survivor benefit is immediately reduced to the amount granted to single persons, without the slightest transition. No consideration is given to the fact that that person had a higher income when she was living as a couple. The change after the husband's death is very quick. She then receives only part of the previous amount and winds up in a state of considerable poverty.
Do you have any idea of what we could do about that? Are the options I've proposed desirable, or do we need something more?
Consultant, As an Individual
First of all on the question of why equality and amounts of retirement income will not be achieved through CPP, it all relates to Dr. McDonald's point about earnings differences prior to retirement. The chief actuary projects women's CPP benefits getting up to 84% of the men's level by 2050, but that's the end of that story.
Concerning the caregiver, you're right that it would be possible to exempt periods of caregiving. I presume that one needs a non-obtrusive administrative routine to figure out when people are caregiving and when they're not, but if you can overcome that problem, you could probably do it.
Having to draw down your RRSP accumulations by age 90 is a case of just not having caught up with the evolution of changing mortality. Indeed, I was going to mention, in the unedited version of my comments, that there are a number of things we don't know about RRSPs and defined contribution plans. One of them is that we don't know what actual experience people have drawing them down on their own. We don't know whether people run out of money before they reach the end of their lives or whether they're actually being too cautious. It's one of those important things that we should know more about and don't, especially since there are more of these arrangements in place.
Finally, I think your comments on the tax-back rate under GIS are very important, not only in terms of the incentives people have to save before retirement, but incentives people have to work after they're retired, if they're on low income. It's also an area wherein you have a real tension between what you might want to do for fiscal reasons and what you might want to do to have a good benefit design. You relieve those problems, of course, if you boost OAS and scale back GIS, but then you have a lot more money flowing through your public accounts, and that creates problems of it own. So you have a real dilemma here.
Liberal
The Chair Liberal Hedy Fry
Thank you.
Dr. McDonald, did you want to answer? I think you have 30 seconds in which to do so.
Professor, Faculty of Social Work, Director of the Institute for Life Course and Aging, University of Toronto
The exempt period could be expanded, and I think the current government has been looking at that. I also think that taking a look at the allowance may be a way to go, because it's biased towards marital status. Also, the call has been made for a universal caregiving program. Again, does the pension system solve this, or do we do something broader? I think the two policies should work together, if that happens.
I would say that women put in $25 billion into the Canadian economy in one year through caregiving. They're making a huge contribution, and it's going to get much bigger as our population ages. We all know that 85 and up is the portion that is going to grow. The baby boom women are going to be caregivers; there's no question.
Conservative
Candice Bergen Conservative Portage—Lisgar, MB
Thank you very much, Madam Chair. Thank you to the witnesses for being here.
There are so many issues and it's such a complex topic that I'm trying to break it up into segments. I'm going to try to do that, and you can tell me whether I'm on the right track or maybe that I'm being too black and white.
I think we have an issue right now with senior women, many of whom are widows living under the poverty line. I would like you, Mr. Baldwin, first of all, to very briefly comment. You started to explain that we ought to be careful when we talk about the poverty line. You mentioned something about some women being below the poverty line, but the line...
Do you remember that comment? Can you very quickly expand on it?
Consultant, As an Individual
There are a number of different definitions of poverty lines around. Lynn has been citing ones used most frequently by Statistics Canada—low-income cutoffs. There are also low-income measures, or LIMs; there are market basket measures.
Conservative
Consultant, As an Individual
And as you choose one versus the other, you move a lot of people.
Conservative
Candice Bergen Conservative Portage—Lisgar, MB
One might not be in poverty and one might be. I think we all know right now that there are a lot of senior women who've stayed home and raised their children. They were thinking there would be enough in their husband's pension and somehow it would just be taken care of. I think the fact is that women are a lot more educated now.
We had a professor testify that things have changed quite drastically in the last 10 years, so we have a problem right now with senior women—many of whom are widows—who need help. I don't think the pension program necessarily today can help them unless we create one that is more like a social program, where we could increase benefits and it would become more of a social program. But I think we also want to look forward and consider how we make sure women in the future have an adequate pension.
Some of the things you refer to... Here's what I can't get my head around. Many of those things are life choices. Sometimes, for example, staying home with the child definitely is a choice for a woman. She decides she wants to do it. When they make that decision, maybe she and her husband say, because they're not having her income, what they will do is reduce his income by contributing to a spousal RRSP, or they might put money away. They make a conscious decision to stay home. How do we then recognize the value they are placing and the value they are giving to our society by staying home, but at the same time not take away from people who say they won't stay home and will put their children in child care? Now we're taking their tax money, their tax dollars, and giving it to the woman who stays home.
Do you follow what I'm saying? I'm going to change it now. Another life choice is divorce. There are so many different examples of why people would get a divorce, but many times it is a choice, and it really does cost a lot of money. There's the financial implication. Again, we have individuals who are paying their taxes and working hard and all those things, and maybe they don't get a divorce, but now we're using their income to help supplement people who have gotten a divorce.
I'm wondering how we look at women right now who are under the poverty line, who are widows. They need our help, so that's one part of it. Maybe that's the OAS, which you referred to, Mr. Baldwin. But looking forward, how do we not punish and make people pay for other people's decisions, whether it's staying home to raise their children or getting a divorce?
Professor, Faculty of Social Work, Director of the Institute for Life Course and Aging, University of Toronto
Do you have the answer?
Consultant, As an Individual
It's easier in a way to give a theoretical answer, which is that you squeeze the income stream for the two people out of what the employed partner has set aside for retirement. Rather than have a survivor benefit delivered through a cross-subsidy to all plan members, you in effect say that the income stream—normally that of the male spouse—has to be sufficient to cover both lives. You then try to eliminate the cross-subsidy that way.
One of the problems in the divorce situation is that even if you split the assets out by one formula or other at the time of divorce, the labour market experience of the divorced wife after the divorce may not be comparable to that of the divorced man. So you end up with an unequal situation. I would say, too, that to some extent—and while I appreciate your thinking that as we look to the future we want mechanisms that involve a limited degree of cross-subsidization—you've thought about it primarily with respect to taxpayers. I would remind you, though, that these things also happen inside private arrangements. There are always limits to them.
For example, you're in a workplace pension plan that has a survivor benefit built into it. Single participants in the plan subsidize married participants, generally speaking. People with short life expectancy subsidize people with long life expectancy. Granted, there are tolerances—beyond which you theoretically and practically don't want to go—but I would just say that within certain bounds, people seem willing to put up with this.
I think the short answer to your question is that you have to get two streams of income out of one accumulation.
Liberal
The Chair Liberal Hedy Fry
I just wanted to tell you that you have about a minute and a half to ask and to answer.
I don't know if Ms. McDonald will have a comment as well.
Conservative
Candice Bergen Conservative Portage—Lisgar, MB
Okay, thanks.
Maybe that's where other forms of preparing for pension come into play, and where we can educate all Canadians, whether they are stay-at-home moms or divorced women, that there are mechanisms, whether it's RRSPs or the new tax free savings account. There are other ways.
I think if we look in other countries, we see they aren't just depending on pension plans. They're depending on private savings and private planning as well. Are you finding that is also something that might be lacking, the actual financial education and people's awareness?
Professor, Faculty of Social Work, Director of the Institute for Life Course and Aging, University of Toronto
It's good that you asked.
Monica Townson, who I know was here earlier, ran focus groups right across this country with older women about their pensions. She did not ask about legal issues, which I think would have been a really helpful thing to do too. She basically concluded—and she has a lovely little book about it—that women don't have a clue. And they really don't.
That's not being rude; it's—