Baby boomers have been replaced by millennials as the largest generation in Canada but remain a powerful voting bloc that all major parties are eager to court.
And while Canadians in their 20s and 30s are struggling with student debt, sky-high housing prices and unaffordable child care, seniors face some serious affordability challenges of their own.
Many , for example, have little in the way of retirement savings. A 2018 poll by CIBC found that 32 per cent had nothing at all set aside for old age. But even those who have been saving up are often worried about outliving their money.
The average 65-year old today is expected to leave to live to age 86, according to Statistics Canada. And some of those years promise to be very expensive for many seniors, who will likely see steep medical costs later in retirement. More than two-thirds of Canadians who reach the age of 85 have a disability, according to a report by the C.D. Howe Institute.
So how are the major parties pledging to tackle these issues? Here is a rundown of some of the major promises. (We’re focusing on retirement, pension and financial support for seniors. For a discussion of pharmacare, please see here.)
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- Liberal Leader Justin Trudeau has promised a 10 per cent increase to Old Age Security (OAS) benefits starting at age 75. The measure would put up to $729 more a year in the pockets of most older Canadians and help lift 20,000 seniors out of poverty, according to the party.
- The party is also pledging to boost Canada Pension Plan (CPP) benefits for widows and widowers by 25 per cent. The change, which would have to be negotiated with the provinces and territories, would be worth up to $2,080 a year in additional benefits.
- Conservative Party Leader Andrew Scheer is pledging to raise the age credit, a non-refundable tax credit for seniors, by $1,000. The move would work out to tax savings of up to $150 a year for single seniors and up to $300 for couples. Seniors earning up to around $37,000 would get the full credit, which then gradually shrink as income rises, until it’s phased out at around $87,000.
- The party also said its so-called Universal Tax Cut, which lowers the tax rate for income up to roughly $47,000, would include pension earnings.
- New Democratic Party leader Jagmeet Singh has a number of promises aimed at ensuring that Canadians get the employer pensions they were promised. The party, for example, wants to move pensioners and pension at the top of the hierarchy among creditors when a company goes bankrupt. It has also pledged to stop companies from paying out dividends and bonuses when corporate pension funds are under-funded. Finally, it wants to create an industry-financed insurance pool to deal with pension plan funding shortfalls.
- The party is also proposing to introduce a one-year grace period for low-income seniors who receive the Guaranteed Income Supplement (GIS) and fail to file taxes on time. Currently, “tens of thousands” of seniors have their benefits paused for up to four months when their income taxes come in late, NDP spokesperson Melanie Richer told Global News. The NDP wants to give seniors a year to get their tax act together without losing their GIS money.
- The party also wants to make automatic enrollment in OAS and GIS retroactive.
- New Democrats would also like to make the caregiver tax credit refundable. The tax break helps those who are caring for an impaired family member. Currently the tax credit is non-refundable, meaning it simply lowers or eliminates any tax amount owning. If a refundable credit exceeds a taxpayer’s tax balance, the difference is paid out as a tax refund.
- Green Party Leader Elizabeth May wants to gradually increase the CPP income replacement rate from 25 per cent to 50 per cent of average work earnings.
- And, like the NDP, the Greens also want to introduce stronger protections for pensioners and pension benefits when companies go bankrupt.
- Bloc Quebecois Leader Yves-François Blanchet is also focused on making pension funds priority creditors during bankruptcy proceedings.
- The Bloc also wants to make the caregiver tax credit refundable.
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Will any of it help?
If the goal is to help seniors who are most in need, “you might want to target those without a pension and those who are single,” said Richard Shillington, an Ottawa-based statistician and public policy analyst.
Poverty rates among Canadians aged 65 and over are highest for widows over the age of 75, according to the Conference Board of Canada. In a 2016 report for the Broadbent Institute, Shillington found that almost half of those then aged 55 to 64 had no employer pension benefits. Among that group, “the vast majority” had “totally inadequate retirement savings,” according to the paper.
The Liberals’ proposals to beef up the CPP survivor’s benefit as well as OAS for older seniors would help in that regard, Shillington said.
Providing a larger OAS benefit at age 75 “does make sense,” said William Robson, president and CEO of the C.D. Howe Institute.
“The real fear that people have is not necessarily what their circumstances are going to be when they’re aged 59, it’s when you’re looking further ahead to when you’re older and you’re worried about running out of money,” he said.
But the problem with Trudeau’s promise, he added, is that if provides no “offset” for the increase in spending.
As for the the Liberals’ promised tweak to CPP, it “sounds good in theory,” but the devil is in the detail, Shillington added.
Currently, couples who receive the maximum CPP pension aren’t eligible to receive the survivor’s benefit, he noted. It’s not clear how the Liberals would reconcile that with its proposed 25 per cent boost.
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On the Conservatives’ promise to raise the age tax credit, Shillington said it would put a few extra dollars in the pockets of seniors who pay income taxes but would be unlikely to make a big difference. The measure will not help a large number of low-income seniors who do not pay any income tax, he added.
The age tax credit is a tax break for seniors based on the assumption that older Canadians face higher expenses than younger taxpayers, Robson said. However, he added, “I don’t think that there’s a lot of evidence for that.”
Living expenses often fall in the early stages of retirement, as people, for example, no longer have to commute to the office and buy clothing for work, Robson added.
“I would prefer to see much more generous treatment of medical expenses,” he said.
Speaking about the NDP’s idea of moving pensioners and pension benefits to the top of the line among creditors during corporate insolvency proceedings, Robson warned about making such rules retroactive. Forcing companies to make good on their pension-related obligations before paying off other debts would “rewrite the contract” for other creditors who would slip back in the hierarchy, Robson said.
There’s a risk that creditors would start calling their loans to companies with underfunded pension plans, creating a dangerous cash crunch for those businesses, Robson said. Another potential danger is that employers would simply decide to wind up those underfunded plans, he added.
And even giving pension benefits the top priority in a corporate bankruptcy may not make pensioners whole, Shillington said.
“If there’s only so much money there, being at the front line may not get you much,” he said.
The NDP’s idea of creating a pension insurance fund, on the other hand, sounds similar to Ontario’s Pension Benefits Guarantee Fund (PBGF), which covers certain defined benefit pension plans if they are wound up because the employer becomes insolvent and cannot cover all its obligations.
Ontario’s pension insurance plan has received mixed reviews from experts. CARP, a national retiree organization, has called the plan a worthy initiative and advocated for coverage to be raised beyond the current $1,500 monthly guarantee.
Robson, however, is among the skeptics. Pension emergency funds like Ontario’s, which also exist in the U.S. and the U.K., pose a moral hazard risk.
“Every time another bad set of pension plans goes into these things, they raise the premiums on the remaining participants,” he said.
Ultimately, this makes it less attractive to offer a pension plan at all, he added.
A better way to address the issue — both in the private and public sector — would be to draft rules forcing employers to better fund their pension plans, Robson said.
“That would run up against a lot of opposition but would be a much more responsible kind of a promise.”
Raising the retirement age remains taboo
While the parties toss election promises at seniors, the issue of raising the retirement age seems to have dropped off the agenda in Ottawa.
While the Harper government pushed OAS benefits to age 67, the Liberals reversed that move, bringing the benchmark back to 65.
With Canadians living longer and longer, that level is too low, Robson said.
“The next generation is going to have a tough time paying for all the promises that today’s older Canadians have made to themselves,” Robson said.