Canadian Women And Pensions

Transcription

1 Myths About Canadian Women And Pensions Retirement income for women has improved over the last several decades. However, not all women working today will experience financial security in their senior years. Women have a presence in every sector of the labour market today. Despite commonly held beliefs about the promise of their self sufficiency over the lifespan, there are still many factors that will hamper large numbers of them from achieving comfort in their old age. Women Elders in Action (WE*ACT) has compiled this list of false assumptions made when projecting women s economic security into the future.

2 Myths About Canadian Women & Pensions: Myth 1 Women are in the workforce now as much as men (with breaks for maternity leave). Fifty eight per cent of women over 15 and 68% of men were in the workforce in (1) Women have waged work for only 75% of their potential years vs. 94% for men. (2) Nearly twice as many women as men are involved in caring for children AND elderly relatives. Many reduce work hours, refuse promotions or retire early in order to cope. (3) Myth 2 More women today are well-educated. This ensures high-paying, professional jobs. People with a post-secondary certificate, diploma or degree hold 38% cent of low-paid, dead-end jobs. Women hold 2/3 of these jobs. (4) A full 40% of jobs held by women are considered to be non-standard (parttime, contract, temporary) with few, if any, benefits. (5) Myth 3 Employed women contribute to Canada Pension Plan (CPP) so they will have comfortable retirement income. The average CPP pension for women in October of 2005 was ~$334. This is 63% of that received by the average male: $527. (6) As long as women work fewer hours and for less money, CPP payments, based on earnings, will be modest. Recent research shows that 2/3 of 40 year olds are not saving enough to re tire at 65. These computations are based on an annual income of $40,000. (7) The average wage for women in 2004 was $25,000. (8)

3 Myth 4 Women earn big bucks these days. On average for full time work over a full year, women earn only 71 cents for every $1 men earn. (9) Even professional women lag behind men in earnings. For example, in 2003, the average salary for female full-time, full-year teachers was $47,500 and for male teachers, $63,300. (10) In 2003, the average annual pre-tax income of women age 16 and over from all sources, including employment earnings, government transfer payments, investment income, and other money income, was $24,400. This was just 62% of the figure for men, who had an average income of $39,300 that year. (11) Myth 5 Employed women have workplace pensions to enrich their retirement. In 2001, over 60% of women in the workforce did not have access to work place pensions. (12) Fewer companies are offering pensions in Those who do are moving away from the traditional defined benefit plan where the employee was prom ised a set retirement income and the company assumed a large portion of the risk. Companies are now frequently offering defined contribution plans where only the amount paid by the employee is known for sure, the amount of the retirement income is not guaranteed and the individual assumes the risk. Companies are also changing terms of the plan for people already re tired, as they deem necessary. (13) Most pension funds are invested in the stock market where returns are vola tile. Pension funds own 30% of both the UK and US stock markets. Some economists believe that the only thing keeping the stock market buoyant is the investment of these pension dollars. This fact makes the entire founda tion for future retirement income seem shaky. (14) Myth 6 A husband s pension usually will be more than adequate for his wife, if she doesn t have one. It will be helpful while he s alive but statistically she has a very good chance of outliving him by several, if not many, years. The portion of his pension she will continue to receive after his death (Joint and Last Survivor rate)

4 is set at 60% unless they both sign a form consenting to more or less. Pen sion experts suggest this is 10 to 15% less than the amount that is needed for a wife to continue with the same standard of living shared by them when together. Many workplace pensions are not indexed (increased as the cost of living goes up) or only partially indexed to inflation. This means the survivor may lose an additional 2 or 3% per year. This will definitely add up over 10, 15 or 20 years. (15) Pension-splitting for workplace pensions or Registered Retirement Savings Plan (RRSP) holdings in divorce proceeding is not mandatory. One must ask to have these incomes, as well as CPP income, split upon dissolution of the marriage. Many women waive their rights to share these important joint assets as they misunderstand their long-term value. While it might seem vital to retain a family home in divorce settlements where pension assets are also on the table, home ownership almost never comes close in value to a monthly com pany pension issued over 20 or 30 years. Owning a home, while comforting, does not provide useful regular income for daily living. Myth 7 Tax deductions for RRSPs make them a vital part of retirement planning. People with low incomes actually derive no advantage from investing in RRSPs because they pay so little in taxes that their tax breaks are minimal. (16) If retired people receive Guaranteed Income Supplement (GIS), they will ac tually be penalized when they cash in their RRSPs, as these gains will inevi tably lead to a reduction in GIS and other income-related benefits. (17) Myth 8 Tax deductions make it easy for everyone to purchase RRSPs. Three out of 10 Canadian families have no private pension assets (work place pension or RRSPs). (18) People are finding it increasingly difficult to find the cash to make contribu tions. In 2005, less than 1/3 of all people with room in their plans made con tributions. (19) In 2005, contributors used up only 7% of their available room. (20)

5 Myth 9 The government pension at 65 is sufficient. Old Age Pension paid to those over 65 was approximately $492/month in early When combined with GIS given for those with no other income, the amount increases to approximately $1113. (21) When women s average CPP payment, or a similar amount of other income, is factored in, total income is approximately $1260/month or $15,120/year. (22) The After Tax Low Income Cut Off for a single in large urban centers is $17,219. (23) Many immigrants (from specific countries) who have not lived in Canada 40 years between the ages of 18 and 65 are not eligible for full OAP. After a minimum of 10 years in Canada before 65, they qualify to receive only 1/40th of OAP for each year of residency, even though they are Canadian citizens or Landed Immigrants. The age at which one can receive a pension is rising to 68 in Britain over the next couple of decades. (24) It is also rising in the US and several Eu rope an countries, while some sources recommend this adjustment for Can ada. (25) A national movement to eliminate mandatory retirement at 65 paves the way for just such an increase in pension age here. Myth 10 Seniors living in small BC towns need less income because the cost of living is cheaper where they can grow food and walk to shop. While Low Income Cut Off amounts drop considerably for small towns, se niors there face increased costs (fuel, hotels, food) when traveling to see health care professionals or to access health care or other facilities that are no longer available in their own community. As the population continues to migrate into urban centers, seniors are less able to meet their needs locally in some rural areas.

6 References 1 Statistics Canada, Women In Canada 5th ed: A gender-based statistical report, 2005, p Ministry of Industry: Ottawa, Wiggins, Cindy. Women s Work: Challenging and Changing the World. Research paper prepared for the 2003 Canadian Labour Congress Women s Conference, May, McDonald, Lynn. New Frontiers of Research on Retirement: Gendered Retirement: The welfare of women and the new retirement; p Statistics Canada, Editor in Chief, Leroy Stone: Ottawa, Saunders, Ron. Low Wage Work: Issues and policy options. Presentation to Opportunities Waterloo Re gion, Waterloo: Canadian Policy Research Networks, Townson, Monica, New Frontiers of Research on Retirement: New vulnerable groups; p Townson, Monica, New Frontiers of Research on Retirement: The impact of precarious employment on fi nancial security in retirement; p Andrews, Doug, Steve Bonnar and Robert L. Brown. Planning for Retirement: Are Canadians Saving Enough? Canadian Institute of Actuaries and the University of Waterloo: Ottawa, Statistics Canada, Women In Canada 5th ed: A gender-based statistical report, p Ibid; p Ibid 11 Ibid; p Townson; p Robson, William. Off the hook for now: Taxpayers should hope that talk of federal pension guarantees ends with the minority government; C. D. Howe Institute e brief, C. D. Howe Institute: Ottawa, Minns, Richard, and Sarah Sexton. The Corner House Briefing 35: Too many grannies? Private pensions, corporate welfare and growing insecurity, p. 5; The Corner House: Dorset, UK, Baldwin, Bob. New Frontiers of Research on Retirement: A shaky third pillar: The vulnerability of retirement incomes; p Statistics Canada, Editor in Chief, Leroy Stone: Ottawa, National Advisory Council on Aging, Seniors on the margins: Aging in poverty in Canada, p. 20. (H88-5/3-2005) Government of Canada: Ottawa, Ibid. 18 Ibid, p Statistics Canada, Registered retirement savings plan contributions 2005; CANSIM: tables to ; Ottawa, 2006

7 20 Ibid. 21 Government of Canada: Old Age Security Pension, Guaranteed Income Supplement, Allowance: Table of Rates in effect 2007 January March. Canada ISPB ; Ottawa, Ibid. 23 National Council of Welfare; Factsheet 2 After-tax low income cutoff (1992 Base) for 2005, from POVERTY PROFILE, 2002 AND 2003: Ottawa, Inman, Phillip. The message is: Work until 68 and save, or face poverty. Guardian Weekly. London, UK, June 2-8, Carrigg, David. More seniors toiling through golden years. Vancouver Courier, Nov. 10: Vancouver, 2004

8 Information compiled by Women Elders in Action (WE*ACT), Summer Dunsmuir Street Vancouver V6B 1X4 ph: (228) fax: