Question Period Note: Sen_Jan2024_003

What is the Government doing to support seniors who do not have partners??

Canada’s public pensions, namely the Old Age Security program and the Canada Pension Plan, provide critical income support to Canadian seniors, including those who live alone.

The Old Age Security program is residence-based, and pays a basic pension to both single and married or common-law seniors who meet the minimum residence requirements.

OAS pensioners who are in low income are also eligible to receive additional support through the Guaranteed Income Supplement. Single seniors receive a higher rate of GIS, in recognition of their higher living expenses. Together, the OAS pension and the GIS provide seniors with a minimum income guarantee.

CPP benefits are determined by earnings and contributions of individuals over their working lives. Generally, the more one works and contributes, the higher their pension amount. However, the CPP also includes provisions that protect the value of benefits of mothers who stop working or reduce their earnings in order to provide care for young children.

The CPP disability pension is automatically converted to a retirement pension at age 65. Unlike the QPP, the CPP does not impose a penalty when converting from the disability pension to a retirement pension.

The Old Age Security (OAS) program is the first pillar of Canada’s retirement income system, and plays a significant role in providing income security to Canadians in their senior years. The benefits under the OAS program include the basic OAS pension, which is paid to all persons aged 65 or over who meet the residence requirements, the Guaranteed Income Supplement (GIS) for low-income OAS pensioners, and the Allowances for low-income Canadians aged 60 to 64 who are the spouses or common-law partners of GIS recipients, or who are widows or widowers.

The GIS is an income-tested benefit that provides additional support to lowincome seniors who have little or no income other than the OAS pension. Together, the OAS pension and the GIS help ensure that the overall income of seniors does not fall below a specified threshold, providing seniors with a minimum income guarantee.

To ensure that they retain their value over time, OAS benefits are reviewed four times per year (in January, April, July and October) in accordance with changes in the Consumer Price Index (CPI). The CPI measures the price of a typical “basket” of goods and services, such as food, shelter, gas and clothing, commonly purchased by Canadian households. The basket contains approximately 600 items and is the most accurate reflection of the national cost of living. The quarterly indexation provides benefit increases to recipients when prices go up.

In addition, the Old Age Security Act contains a guarantee ensuring that benefits can never go down, even in the event of a decline in the CPI. Should the average cost of living decrease, OAS benefit amounts stay at the same level as during the previous three-month period.

To date, the Government has undertaken several measures to improve the financial security of low-income seniors. Since 2016, the Government has:

increased the GIS top-up for the lowest income single seniors by up to $947 annually, helping close to 900,000 seniors who rely almost exclusively on the OAS pension and the GIS;

restored the age of eligibility for the OAS pension and the GIS to 65 from 67, preventing about 100,000 future seniors from falling into poverty;

increased the GIS Earnings Exemption from $3,500 to $5,000, extended the exemption to selfemployment income, and introduced an additional 50% exemption on employment and selfemployment income between $5,000 and $15,000, starting in July 2020. This measure enables working GIS recipients to earn up to $15,000 in employment and selfemployment income before the GIS benefit reduction applies to their full income;

introduced a permanent 10% increase to the OAS pension for seniors aged 75 and over, which started in July 2022.

The Canada Pension Plan (CPP) is a sustainable contributory social insurance program that provides partial income replacement for Canadian workers and their families in the event of retirement, disability or death. All monthly CPP benefits are indexed annually. The CPP covers employed and self-employed persons in Canada (outside of Quebec). Quebec has a separate but comparable Québec Pension Plan.

In 1997, Québec decided to apply the same penalty to beneficiaries of the Disability Pension as that imposed on beneficiaries who freely chose to retire early. Therefore, a person receiving a disability pension will have their retirement pension reduced by up to 36% at the age of 65. This penalty has never carried over to the Canada Pension Plan, as the two plans are legally separate.

The CPP currently replaces 25 percent of average career earnings up to the Year’s Maximum Pensionable Earnings which is approximately the average wage and is set at $66,600 in 2023.

The CPP enhancement, which began in 2019, will increase income replacement from one-quarter to one-third of pensionable earnings over the next 40 years. The band of earnings on which contributions are made will maintain the same lower earnings limit of $3,500. The upper earnings limit will be increased by 14 percent, which is projected to be equal to roughly $81,100 upon full implementation in 2025.

The child-rearing provisions protect the CPP benefits of parents who reduce their earnings to provide care for young children, irrespective of family arrangements. Under the base CPP, the child-rearing drop-out provision allows periods in which a parent reduced their earnings to be the primary caregiver for a child or children under the age of seven to be excluded from their contributory period. This may help individuals qualify for benefits or increase the amount of the base component of their received benefit.

Under the enhanced component of the CPP, the child-rearing drop-in provision will provide (or “drop-in”) credits to the parents of young children who reduce their participation in the labour force to care for children under the age of seven. Specifically, a credit is dropped in for every year in which the parent provides care for a child under seven years of age, if this credit is higher than the parent’s actual earnings in that year.

The value of the credit is based on the parent’s earnings in the five years before the birth of the child. These dropped in credits will increase the parent’s average earnings, which will increase the value of the enhanced component of their CPP benefits.

Based on results of the CPP/OAS Monthly Statistical Bulletin for May 2023, in 2021-2022 CPP Retirement pension benefits amounts paid totaled approximately $41.9 billion (79.1% of all benefits paid under the CPP) while CPP Survivors pension benefits paid totaled approximately $4.9 billion (9.2% of all benefits paid under the CPP).

The significant majority of CPP benefits in pay go towards paying benefits owed to contributors including both single and partnered beneficiaries.

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