Action on seniors and population ageing
Canada's retirement income system
The retirement income system in Canada consists of three pillars - two public and one private. Canada's two public pension programs, Old Age Security and the Canada/Quebec Pension Plans, ensure a minimum level of income in retirement for Canadian seniors. The private pillar consists of tax-deferred retirement savings in employer-sponsored registered pension plans (RPPs) and individual registered retirement savings plans (RRSPs). The tax deferral provided on savings in these plans encourages Canadians to save for retirement to help maintain pre-retirement standards of living.
Other financial assistance is available to seniors through the income tax system. For example, the Age Credit and the Pension Income Credit reduce the amount of tax seniors owe.
Old Age Security (OAS)
OAS benefits provide basic income to Canadian citizens and residents who meet age, residence and legal status requirements. It is financed from Government of Canada general revenues and indexed quarterly to the Consumer Price Index. Recognizing the difficult financial circumstances faced by many seniors, OAS provides additional income-tested benefits for low-income individuals through the Guaranteed Income Supplement (GIS), the Allowance and the Allowance for the Survivor. The GIS is a monthly benefit available to OAS pensioners with little to no other income. The amount of the benefit is dependent upon marital status, residence and income. The Allowance is available to qualified 60 to 64 year-old spouses and common-law partners of OAS/GIS pensioners. The Allowance for the Survivor is available to low-income individuals aged 60 to 64 whose spouse or common-law partner is deceased and who neither remarried nor entered into a common-law relationship.
In 2005-2006, 4.3 million individuals received OAS benefits, totalling $29 billion.28
Canada Pension Plan (CPP)
The CPP is jointly governed by Canada's federal and provincial governments and operates throughout Canada, except in Quebec that has its own comparable plan. The CPP provides for a variety of benefits based on life changes. Best known for its retirement pension, the CPP also provides benefits for surviving partners and children of CPP contributors, people with disabilities and their children and a one-time maximum benefit of $2,500 in the event of death. It is a contributory plan; contributors are employees or self-employed persons between the ages of 18 and 70 who earn at least a minimum amount during a calendar year. Benefits are calculated based on how much and for how long a contributor has paid into the CPP.
In 2005-06, four million Canadians received CPP benefits, totalling $25 billion.29
Tax deferred savings in RPPs and RRSPs
The private pillar consists of tax-deferred savings in RPPs and RRSPs. Contributions to these plans are deducted from income, and investment income is not taxed as it is earned. Withdrawals and payments from the plans are included in the taxpayer's income and are subject to regular income tax.
The system of limits for RPPs and RRSPs allows individuals to contribute 18.0% of earnings per year to an RPP and/or an RRSP, or to earn pension benefits in a defined benefit RPP of 2.0% of earnings per year, up to specified dollar amounts. For 2007, the annual dollar contribution limits for RRSPs and RPPs are, respectively, $19,000 and $20,000. For defined benefit RPPs, the maximum pension limit per year of service is $2,222.30
Sustainability of Public Pensions
Canada has one of the best retirement income systems in the world and one of the few that is poised to confront the enormous financial challenge associated with an ageing population. Canada's diversified system (a mix of public and private pensions and a major role for tax policies) is a very effective way to provide for retirement income needs, as it is less vulnerable to changes in economic and demographic conditions such as population ageing, than systems in other countries.
Overall, Canada's economic, labour market and social environments are healthy and prospects for the coming years are positive. As a percentage of Canada's Gross Domestic Product (GDP), the cost of public pensions is considered reasonable relative to other countries. Although the ratio of expenditures to GDP is expected to increase from its 2004 level of 2.3% to 2.4% in 2010 and to a high of 3.2% in 2030, it is projected to fall to 2.0% by 2075.31
In 1997, the federal and provincial governments agreed to significant reforms to the Canada Pension Plan to ensure its long-term financial sustainability. (Quebec undertook similar reforms in 1997 to ensure the financial sustainability of the Quebec Pension Plan.) These reforms, which included accelerating scheduled contribution rate increases, a new investment strategy and benefit measures to reduce the growth in benefit expenditures, ensured that the Plan would be financially sustainable and affordable, able to meet current and future obligations. The reforms also sought to ensure that the Plan would be fair across generations.
The 21st Actuarial Report on the Canada Pension Plan prepared by the Plan's Chief Actuary took into account the ageing of the population and concluded that the CPP is financially sustainable at current contribution rates and under current provisions for at least the next 75 years. The growth in CPP assets over this period will provide the capacity for the plan to absorb a wide range of unforeseen economic or demographic fluctuations.32
Action on the retirement income system
Amendments to the Canada Pension Plan and Old Age Security Act
Bill C-36 to amend portions of the Canada Pension Plan and Old Age Security Act is currently under consideration by the Canadian Parliament. The Amendments would improve fairness for seniors and persons with disabilities. The most significant change proposed to the OAS Act is the introduction of a "lifetime" application process for the Guaranteed Income Supplement (GIS), ensuring that those entitled to the GIS and who file an annual tax return will never have to reapply. This will address the concerns of some seniors that GIS was difficult to access due to the need to re-apply every time a shift in annual income occurred. For persons with disabilities, the Amendments would provide greater access to Canada Pension Plan disability benefits for those with longer-term labour force attachment. In addition, there are proposals to improve service to seniors by modernizing and simplifying the application and delivery of both programs.33
Guaranteed Income Supplement
The GIS maximum benefit was increased by $36 a month for single seniors and by $58 a month for couples, with half the increase taking effect on Janaury 1, 2006 and the balance a year later - the first substantive increase to the income-tested supplement in close to 25 years. A total of 1.6 million Canadians will benefit from this increase, including more than 50,000 seniors who become eligible for benefits as a result of the increase.34
Defined benefit pension plans
In 2006, the federal government announced that it will provide temporary funding relief to help re-establish full funding of defined benefit pension plans for employees working in areas of federal jurisdiction while providing safeguards for promised pension benefits.35 Under defined benefit pension plans, employers and employees make contributions but the level of promised benefits is not a function of investment income. Instead, employers promise to deliver benefits based on the employee's earnings and years of service, providing a predictable retirement income.36
International Social Security Agreements
Canada first began concluding social security agreements in 1977. At that time, the principal consideration for concluding agreements was to ensure that immigrants to Canada were able to obtain pension benefits based on any social security credits they may have accumulated in the countries in which they lived and worked before or after coming to Canada. As a country which has received over seven million immigrants since the end of World War II, Canada has large numbers of persons who have accumulated some social security credits in other countries but who require a social security agreement in order to establish eligibility for benefits from those countries.
Canada believes in the economic and social advantages of concluding reciprocal social security arrangements with other countries from around the world and strongly encourages other countries to do the same. From an economic perspective, these agreements foster greater ties between countries, encourage greater economic investment and alleviate a financial burden for companies operating between two countries. Economic investment leads to greater social development - a strong ancillary benefit reaped from the agreements themselves. Countries which take steps to respect previous pension coverage from persons who have lived or worked in two countries ensures that gaps in social security protection will be avoided - something actively encouraged by international organizations like the International Labour Office and the World Bank.
Canadian pension legislation contains no nationality-based restrictions that prevent citizens of other countries from receiving Canadian pensions or that reduce the amount of the Canadian pensions to which they are entitled simply because he/she is not a citizen. This goes a long way in terms of ensuring broad pension coverage for the vast majority of Canada's seniors. Over the last five years, Canada has signed new agreements with Japan, Estonia, Latvia, Lithuania and Hungary.37
Personal Income Tax System
In 2006, the federal government implemented several significant changes to the personal income tax system that will benefit seniors. The maximum amount of eligible pension income claimed under the Pension Income Credit increased from $1,000 to $2,000. The increase will benefit nearly 2.7 million taxpayers who receive eligible pension income, providing up to $155 per pensioner and removing approximately 85,000 pensioners from the tax rolls.38 The Age Credit also increased from $4,066 to $5,066. As a result, for 2006 and subsequent taxation years, lower- and middle-income seniors will receive up to about $150 of additional income tax relief; and, lower- and middle-income senior couples will receive up to about $300 in additional tax relief.39
Pension income splitting
A cornerstone of the Government's commitment to seniors is to allow pension income splitting in recognition of the special challenges of planning and managing retirement income. Starting in 2007, couples may reduce their combined taxes by transferring up to one-half of their eligible pension income to a spouse or common-law partner.
For individuals aged 65 years and over, the major types of qualifying income that can be allocated to a spouse or common-law partner are: a pension from a registered pension plan (RPP); income from a registered retirement savings plan (RRSP) annuity; and payments out of or under a registered retirement income fund.
For individuals under 65 years of age, the major type of qualifying income that can be allocated to a spouse or common-law partner is income from a registered pension plan.
For the 2007 taxation year, $675 million of tax relief is anticipated under the pension splitting measure.
The increase to the Age Credit and pension income splitting will deliver more than $1 billion in tax reductions annually for Canadians by significantly increasing the Age Credit — retroactive to January 1, 2006 and permitting couples with eligible pension income to reduce their combined taxes by transferring income to the lower-earning spouse.40
Health and well-being
Canada's health care system
Canada's publicly funded health care system is best described as an interlocking set of ten provincial and three territorial health insurance plans. Known to Canadians as "Medicare," the system provides access to universal, comprehensive coverage for medically necessary hospital and physician services. These services are administered and delivered by the provincial and territorial governments, and are provided free of charge.
The provincial and territorial governments fund health care services with assistance from the federal government, primarily through the Canada Health Transfer. The Canada Health Transfer is $32.5 billion in 2006-07, of which $20.1 billion is in cash and $12.4 billion in tax transfers.41 For 2007-08, the level of the cash transfer will be $21.3 billion. (The value of the tax point transfer is not yet available.)42
In order to receive their full allocation of federal funding for health care, the provincial and territorial health insurance plans must meet five criteria - comprehensiveness, universality, portability, accessibility and public administration - that are provided in the federal government's Canada Health Act. In addition to setting and administering the Canada Health Act and providing funding, the federal government provides direct delivery of health care services to specific groups (e.g., First Nations people living on reserves; Inuit in the North; serving members of the Canadian Forces and the Royal Canadian Mounted Police; and eligible veterans). Many other organizations and groups, including health professional associations and accreditation, education, research and voluntary organizations, contribute to health care in Canada.
The provinces and territories provide coverage to certain people (e.g., seniors, children and social assistance recipients) for health services that are not generally covered under the publicly funded health care system. These supplementary health benefits often include prescription drugs, dental care, vision care, medical equipment and appliances (prostheses, wheelchairs, etc.), independent living and the services of other health professionals, such as podiatrists and chiropractors. The level of coverage varies across the country.
Those who do not qualify for supplementary benefits under government plans pay for these services with individual, out-of-pocket payments or through private health insurance plans. Many Canadians, either through their employers or on their own, are covered by private health insurance and the level of service provided varies according to the plan purchased.43
Action on health and well-being
Canada is increasing its efforts to better understand the implications of the ageing population on health and long-term care needs and costs: what the future health status and health needs of the seniors' population will be and the most effective interventions to support healthy ageing.
Falls Prevention Initiative
Falls are a major cause of injury among seniors. The fall-related injury rate is nine times greater among seniors than among those under age 65. Falls account for approximately 85.0% of all injuries among seniors. Almost 62.0% of injury-related hospitalizations for seniors result from falls. This issue is now recognized as a serious public health issue and work is underway to develop interventions and strategies for prevention.44 In 2007, the Public Health Agency of Canada (PHAC) will host a national forum on the topic.
Disabilites
The most common types of disabilities among seniors living in the community involve mobility and agility limitations, which are frequently accompanied by pain-related limitations. Hearing and visual impairments and memory loss also affect a significant number of seniors.
Most individuals with disabilities have the supports they need to actively participate in the lives of their families and communities; however, some do not and consequently, face barriers to full participation and inclusion in society. A challenge for disability policy over the coming years will be to maintain and enhance the supports needed by younger people with disabilities while anticipating the rapid growth in the number of older people with disabilities.45
In recognition of the high medical expenses associated with disability and chronic illness, the federal government increased the Refundable Medical Expense Supplement from $767 to $1,000 in 2006.46 The Supplement is a tax credit available to working individuals with low incomes and high medical expenses.
Emergency response and preparedness
Seniors are a particularly vulnerable group in health emergencies and disaster situations. PHAC is working with provincial and territorial governments and international partners including the World Health Organization (WHO) and the United States Administration on Ageing, to determine the best approaches for ensuring that older adults are considered in all aspects of planning, responding and recovering from emergencies. In 2006, PHAC's work was recognized through an award bestowed by Her Majesty, Queen Elizabeth the Second. In February 2007, the Agency hosted an international workshop on Emergency Preparedness and Seniors to develop a blueprint for action.47
Elder abuse
Canada has been recognized internationally as a leader in raising public awareness of abuse of older adults and in developing innovative approaches to dealing with the issue. Canadian research indicates that between 4 and 10% of older adults experience one or more forms of abuse.48 The WHO and the International Network for the Prevention of Elder Abuse declared June 15, 2006, the first annual World Elder Abuse Awareness Day. Individuals, organizations, communities, and governments across Canada organized numerous events, including cultural, educational, art and social activities to recognize World Elder Abuse Awareness Day. As well, multigenerational initiatives were organized to help children and youth learn more about ageing, ageism, and abuse.49
Housing
The Government continues to increase its funding for affordable housing by committing an additional $1.4 billion to provinces and territories in 2006.50 (Affordable housing includes transitional and supportive housing for seniors and others with special needs.) This funding is in addition to ongoing government support for existing social housing occupied by seniors.
The Government also announced $270 million for a new Homelessness Partnering Strategy to address homelessness in communities across Canada. Under the Strategy, the Homelessness Partnership Initiative will put into place the structures and supports needed to move an individual towards self-sufficiency and participation in Canadian society.
In addition, $256 million is designated for the two-year extension of Canada Mortgage and Housing Corporation's renovation programs for low-income households. This extension will help some 38,000 low-income households, including assistance to help seniors remain independent in their current homes.51
Participation
In Canada, active ageing is increasingly the norm and there is growing recognition of the contributions seniors make to their families and communities through paid employment and unpaid activities. Seniors continue to participate and contribute to society as workers, volunteers, grandparents and care givers to elderly family members and friends.
Older workers
As the workforce ages and labour force growth slows, retaining older workers is becoming increasingly important, both for their well-being and for the health of the Canadian economy.
As the Organisation for Economic Co-operation and Development (OECD) Thematic Review of Older Workers indicates, older workers in Canada are faring well in the labour market (higher than average earnings, lower than average unemployment rates). However, individuals aged 55-64 who lose their jobs stay unemployed, on average, for nearly 50% longer than prime-age workers.52 Older workers in remote and/or one-industry communities are especially at risk in the event of layoff or firm closure.
The Government of Canada has designed a two-pronged strategy to address adjustment issues faced by older workers and to meet the longer-term needs of Canada's economy.
Targeted Initiative for Older Workers (TIOW)
To address the immediate needs of unemployed older workers in vulnerable communities, a two-year initiative, the Targeted Initiative for Older Workers was announced by the Government of Canada in October 2006.
This is a $70 million federal initiative, cost-shared with provinces and territories designed to help unemployed older workers in communities affected by downsizing or closures in sectors such as forestry, fishing, mining and textiles. TIOW will increase the employability of older workers through skills upgrading and work experience in new jobs to help them remain in or reintegrate into employment.
Feasibility study
While the Targeted Initiative for Older Workers will address immediate needs of older workers, an expert panel is undertaking a study on labour market conditions affecting older workers and potential measures to assist them over the longer term.53
Unpaid activities
For seniors, participation in organizations and associations, as well as volunteering, is not only a way of contributing to their communities and to society, but also an effective way to meet people and to avoid social isolation.
New Horizons for Seniors Program
This federal program supports local projects across Canada that encourage seniors to contribute their skills, experience and wisdom in support of social well-being in their communities, while promoting their involvement to reduce the risk of social isolation. Projects typically focus on themes of contribution to community, active living, social participation and/or partnership building.
The maximum funding available for each project is $25,000 (CAD) for a 12-month period. Projects range from outreach to vulnerable seniors, promoting volunteering and mentoring, encouraging intergenerational learning and recreational activities.
Since the program began in 2004, 1,729 projects involving about 100,000 participants have been funded in over 500 communities across Canada. Federal funding for 2006-07 is $15.6 million and as of 2007-08 and thereafter, $19.5 million.54
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