Today's economy

Should we worry about seniors living in poverty?

By Kevin Press,

Comments (8)

The truth is few Canadians spend their senior years worried about basic living expenses. This has been lost in the retirement income debate.Should we worry about seniors living in poverty?

One in five Canadians is worried about being able to cover basic living expenses in retirement. I reported this to audiences in Regina and Saskatoon last week, where I was invited to present the findings of our Sun Life Unretirement™ Index. But while it’s true that 22% told us that they are “not at all confident” about their ability to cover these expenses — and while it’s also true that another 49% said they are only “somewhat confident” — these Canadians are almost certainly more worried than they need to be. Despite the sometimes-overwrought debate about Canada’s retirement income system, we live in a country considered a world leader in the fight against senior citizen poverty. We have made tremendous progress on this front, thanks largely to the Canada Pension Plan (CPP), Quebec Pension Plan (QPP) and Old Age Security (OAS) programs.

I don’t mean to suggest that there aren’t ways to improve the retirement income system. I’m just saying we owe it to one another to be clear about the fact that few Canadian seniors live in poverty.

More on CPP and OAS in a moment.

Statistics Canada’s low-income data show that poverty rates among seniors fell off dramatically between the 1970s and 1990s. Our low-income measure (LIM) rate hit 33.1% in 1977. It fell to 3.7% in 1995, and has since climbed back up to 11.5% in 2009.

We saw these numbers begin to fall in the late 1970s, because that was when the first Canadians began receiving full CPP benefits. The rate fell further as members of workplace plans — which grew in number during the 1950s, 1960s and 1970s — began to retire.

Certainly it is worrisome that the LIM rate has risen since 1995. Still, the Organization for Economic Co-operation and Development (OECD) ranks Canada third-best among OECD countries in terms of providing seniors an adequate standard of living. In most OECD countries, the poverty rate is highest among children and seniors. Working-age citizens tend to have the lowest poverty rates, in percentage terms. It’s a different story in Canada, where the lowest percentage is among the elderly. We can thank CPP/QPP and OAS for much of this.

Working Canadians contribute to CPP and QPP with help from their employers. They pay out retirement, disability and death benefits to eligible recipients. A couple of specifics:

  • You can collect CPP/QPP as early as age 60, although doing so will permanently reduce the monthly income you receive. The standard age to begin collecting CPP is 65. If you hold off, you’re paid more each month. You can delay receiving CPP payments until you’re 70.
  • Your monthly cheque is based on how much you contributed and for how long. According to the Government of Canada website, the average monthly payout in March 2013 for a new pension taken at 65 was $596.66. The maximum monthly amount this year is $1,012,50. The same maximum applies to QPP.

OAS and the Guaranteed Income Supplement (GIS) are available to eligible Canadians regardless of their past or present employment status. Canadian residents quality if they’re 65 or older, a Canadian citizen or legal resident and they’ve lived in Canada for a minimum 10 years since turning 18. Non-residents qualify if they’re 65 or older, they were a Canadian citizen or legal resident before leaving the country and they’ve lived here at least 20 years since turning 18.

OAS benefits change each quarter. The maximum monthly OAS pension amount in Q2 2013 was $546.07. Depending on your income, an amount (up to 100%) of your OAS pension may be clawed back. Low-income Canadian residents are also eligible for the GIS. In Q2 2013, the top monthly GIS payout was $740.44. Visit this Government of Canada web page for details on OAS and GIS payments.

These are only high-level details, of course. For more information, visit these government web pages on CPP, QPP and OAS and consult a financial advisor.

Pinterest - Seniors living in poverty

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Csaba Jasz ( Mr ) on

My CPP and OAS gets a 1.8 % boost every year – that 1.8% is a made up number – does NOT reperesent the facts of life. The Harpergang in Ottawa wants to put us low inocme seniors into the grave ASAP.
Best country in the world, in case you were wondering

Tina on

The really disgusting part of senior poverty in Canada is there is NO way out! I am turning 65 and I had two long bouts of illness related job loss from age 50 – 56 and 60 – 63. Those years I earned less than $8000 on average (managed to stay off welfare but it wiped out my savings. NOW, my health is better – But if I earn money after 65 I lose BC Housing eligibility and I lose my GIS and because I would be self employed I would pay 9.9% CPP premiums…I would only have a net gain of about $350 out of the first $1000 earned. DISGUSTING! Meanwhile, I know a couple who own two properties – his primary residence and her primary residence — they spend a few weeks here and there together..but mainly live separate lives 200 miles apart. Their combined property value is in excess of $5 million. She has a live in housekeeper, and a live in gardener — both of which are charged a small amount of rent – which covers her home maintenance, property taxes and a fraction of utilities. She does it so that when she writes of the expenses on her mansion that she has no income to declare (she cashed in her investments and put it into real estate, because before she did that her interest made her ineligible for GIS. THIS WEALTHY couple can collect GIS….but ME WHO collects so little in GIS CPP and OAS that I am AWAY BELOW the poverty line…gets dinged for trying to earn a little. STOP GIVING GIS TO PEOPLE WITH PROPERTY INVESTMENTS. AND start realizing even if only 5% of seniors live below the poverty line those 5% MATTER – let us have a little dignity!

Nov 25: Best from the blogosphere | Save with SPP on

[…] finally, on Brighter Life, Kevin Press asks, Should we worry about seniors living in poverty? Answering his own question, he says that although one in five Canadians is worried about being able […]

Michael James on

It’s true that the current cohort of retirees is doing quite well in Canada; poverty rates are low. However, with the decline of DB pensions, aren’t we in for a higher percentage of future retirees below the poverty line if there are no changes? I see little reason to give current retirees more, but higher forced savings for current workers who do not have DB pensions might make some sense.

    Kevin Press on

    Thanks Michael. No question, the decline of defined benefit pension coverage is a significant negative development in all of this. It won’t necessarily be a driver of poverty though, given the safety net that CPP and OAS/GIC provide. That’s really my key point.

      Michael James on

      I guess I’m not completely convinced. CPP and OAS/GIS fall short for a percentage of seniors right now. Presumably, they will fall short for more seniors when fewer have DB pensions. I’m not expecting a wave of poverty, but it seems reasonable to expect poverty rates to rise somewhat as the percentage of seniors with DB pensions drops. Recently, some have called for large increases to CPP. I think maybe a modest increase would make sense just to counter the effect of fewer people having DB pensions. Instead of nearly doubling CPP, perhaps a 20% increase in contributions and benefits would be enough to keep poverty rates down.

Canadianbudgetbinder on

The retirement subject of possibly not having enough funds to retire on and relying on the government pension scheme got me worried years ago. Since then we have increased our own retirement investments, contribute the maximum amount matched to a works pension scheme as well as TFSA’s and other investments. Although I know there is a government pension scheme with the possible addition of OAS, funding our own retirement is crucial. I don’t want to base my future on what funds the government pays out. Besides, being a Non-Canadian living in Canada I will only receive a portion of the pension at retirement age. This is just another reason that I am even more determined to fund our own retirement.

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