BC FORUM News - from The Advocate, Spring 2016

Tough times ahead for seniors

Poverty rates for seniors, and particularly women, have been rising for years. A new report says it’s about to get worse. Many workers who are close to retirement have “wholly inadequate” retirement savings.

“While there has been progress in reducing poverty among seniors over several decades, a less rosy picture arises in recent years and in projections of the future,” says Richard Shillington of Tristat Resources. Shillington is the author of “An analysis of the economic circumstances of Canadian seniors”, published by the Broadbent Institute in February, 2016.

“Poverty rates have been rising and recently plateaued for seniors,” says the report.

“Savings data show that many Canadians, particularly those without an employer pension plan, have wholly inadequate retirement savings.”

The low-income measure (LIM) used in the report shows that senior poverty increased from a low of 3.9 percent in 1995 to 11.1 percent in 2013. One in nine seniors lives in poverty.

The poverty rate is even higher for single seniors, particularly women (at nearly 30 percent), and needs to be addressed, said Shillington.

Key findings:

• The Old Age Security (OAS) and Guaranteed Income Supplement (GIS) guarantee levels are falling behind. For single seniors, they have fallen from 76 percent of median incomes in 1984 to about 60 percent now. For senior couples, the OAS/GIS maximum benefits have declined from 53 percent to 40 percent of median incomes.

• Trends in income sources for seniors suggest that poverty rates will increase rather than decline into the future because OAS and GIS benefits are indexed to the Consumer Price Index (CPI), while average earnings rise faster than the CPI over extended periods.

• The shortfall between the OAS/ GIS guarantee levels and the LIM for 2015 – the gap that seniors need to fill using the Canada Pension Plan/Quebec Pension Plan (CPP/QPP), private pensions and private savings – is about $5,600 for single seniors and $4,700 for couples.

• The proportion of the population receiving the GIS is higher for single seniors than couples, and higher for single women (between 44 percent and 48 percent) than for single men (between 31 percent and 37 percent).

• Roughly half (47 percent) of those aged 55 – 64 have no accrued employer pension benefits. The vast majority of these Canadians retiring without an employer pension plan have totally inadequate retirement savings. For example, roughly half have savings that represent less than one year’s worth of the resources they need to supplement OAS/GIS and CPP/ QPP. Fewer than 20 percent have enough savings to support the supplemented resources required for at least five years.

• The median value of retirement assets of those aged 55 – 64 with no accrued employer pension benefits is just over $3,000. For those with annual incomes in the range of $25,000 – $50,000, the median value is just $250. For those with incomes in the $50,000 – $100,000 range, the median value is only $21,000.

• Only a small minority (roughly 15 – 20 percent) of middle-income Canadians retiring without an employer pension plan have saved anywhere near enough for retirement. The vast majority of these families with annual incomes of $50,000 and more will be hard pressed to save enough in their remaining period to retirement (less than 10 years) to avoid a significant fall in income.

• The seniors’ poverty gap is $2.5 billion in aggregate annually, due to the 719,000 poor seniors (469,000 singles and 250,000 living in an economic family). A 10 percent benefit increase in the GIS to address this gap would cost $1,628 million. This would reduce the number of poor seniors by about 149,000.

Pensions inadequate

“These findings raise serious questions about the policy needs for future pensionless cohorts, such as the adequacy of benefits from Old Age Security, the Guaranteed Income Supplement, and the Quebec and Canada pension plans,” says Shillington.

He says the report is evidence that the federal government must consider as it addresses the economic security of Canada’s growing population of seniors.

He concludes the government must increase pension income (including from the CPP/QPP) to reduce seniors’ poverty over the long term, and consider other options to address the savings gap for Canadians without workplace pensions.

In the shorter term, he says changes to the GIS, particularly those targeted at individuals, could more quickly make a serious dent in seniors’ poverty.