162,000 missing voices in debate on pensions
TheStar.com – Opinion/Comment – 162,000 missing voices in debate on pensions
Published On Fri Dec 04 2009. By Carol Goar, Editorial Board
You’ll be hearing a lot about pension reform in the next two weeks.
On Dec. 17, a federal-provincial task force on retirement income adequacy, which has been working since July, will deliver its report to the country’s finance ministers.
In anticipation of the ministers’ meeting in Whitehorse, representatives from business, labour, think-tanks and the pension management industry have intensified their lobbying. After the report is released, those whose ideas were overlooked or rejected will demand an explanation.
But one important voice will be missing from the debate: that of the 162,000 seniors who rely solely on Old Age Security. It is the country’s only pension program that is not linked to workplace participation.
Barring a surprise from federal Finance Minister Jim Flaherty, it won’t be part of the discussion in Whitehorse. Nor is it part of the public conversation. Most Canadians aren’t even aware that Old Age Security – which includes a top-up for low-income seniors called the Guaranteed Income Supplement – now leaves thousands of seniors in poverty.
Although Ottawa still touts it as guaranteed annual income for all seniors, 14 per cent of unattached women over the age of 65 have slipped below Statistics Canada’s low-income cut-off.
One of the few economists trying to highlight the plight of Canada’s most vulnerable seniors is Monica Townson, a pension specialist with more than 20 years of experience.
She has written a policy brief in the run-up to this month’s meeting urging the finance ministers to widen the pension debate.
Townson doesn’t question the need to shore up the retirement savings of working Canadians. She simply asks that “no section of the (pension) system is overlooked.”
Old Age Security, which dates back to 1927, is the cornerstone of Canada’s pension system. It covers all seniors, except recent immigrants.
The addition of the Guaranteed Income Supplement in 1967 made it the most successful anti-poverty program in the country’s history.
Further improvements followed. In 1972, benefits were indexed to the cost of living. In 2000, they were extended to same-sex partners.
Now it needs another update, as Towson demonstrates in her policy brief (available at www.policyalternatives.ca). The maximum benefit a senior can receive is $14,033 a year. The low-income cut-off for a single individual in an urban centre, according to Statistics Canada, is $18,373. That leaves a $4,340 gap, which cannot be bridged by tax credits alone.
Poverty-proofing Old Age Security would mean an increase in federal spending at a time when Prime Minister Stephen Harper has it made clear he intends to reduce expenditures. But the cost could be contained by targeting the worst-off seniors. And the assistance could be financed by reallocating federal dollars as part of a comprehensive pension reform package.
For example, the government could phase out tax subsidies for RRSP contributions. Only 30 per cent of Canadians – primarily those in the upper income brackets – use this savings vehicle. Yet it costs Ottawa $10 billion a year.
Alternately, policy-makers could expand the Canada Pension Plan, offering supplemental coverage to workers without company pensions. That would reduce the number of seniors in poverty. “Changes to any part of the system are likely to require adjustments to other parts,” Townson says.
Should the finance ministers overlook Old Age Security at this month’s meeting, the best opportunity to rebalance Canada’s retirement income system would be lost. But all hope would not be gone.
Old Age Security is the one part of the pension system that can be fixed without federal-provincial haggling, prolonged studies or ministerial summits. All it takes is a national government willing to uphold Canada’s 40-year tradition of allowing seniors to live in dignity.
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