Report of the National Seniors Council on Low Income Among Seniors

Overview of the Financial Situation of Canadian Seniors

In the fall of 2007, the Council examined the income, wealth and expenditure patterns of seniors, and reviewed the public pension system. This work provided members with a better understanding of the complexity of the issue of low income among seniors, identifying seniors most at risk as well as the financial pressures they face.

Overall, today’s seniors, while not affluent, are financially secure. The median after-tax income of senior couples was $41,400 in 2006, an increase of 18 percent since 1996. During the same period, median incomes for unattached seniorsFootnote 2 increased by 14 percent to $20,800.Footnote 3

Between 1980 and 2006, the incidence of low income among seniors decreased from 21.3 percent to 5.4 percent—a lower rate than most other industrialized countries. This dramatic decline is largely attributed to the effectiveness and sustainability of Canada’s retirement income system.Footnote 4

Incidence of Low-Income among seniors after-tax LICO, 1980-2006. Text description follows.
Text description: Incidence of Low-Income among seniors after-tax LICO, 1980-2006

This line graph identifies the incidence of low-income among seniors using the after-tax LICO for the period between 1980-1960. Four groups of seniors are identified: unattached males, unattached females, elderly families, and all seniors.

There is a significant decrease in the incidence of low-income for all four identified groups between 1980 and 2006.

The incidence of low-income among unattached females has decreased from about 58% in 1980, to about 43% in 1985, about 31% in 1990, about 27% in 1995, about 22% in 2000 and about 17% in 2006.

The incidence of low-income among unattached males has also decreased from about 48% in 1980, to about 30% in 1985, about 20% in 1990, and about 13% in 1995. It slightly rose to about 18 % in 2000 but dropped again to about 14% in 2006.

The incidence of low-income among elderly families has decreased from about 7% in 1980, to about 5% in 1985, about 3% in 1990, about 2% in 1995, about 2% in 2000 and about 1% in 2006.

The incidence of low-income among all seniors had decreased from about 21 % in 1980, to about 16 % in 1985, about 11 % in 1990, about 9 % in 1995, about 8 % in 2000 and about 6% in 2006.

Public pensions play a critical role in the income security of seniors, particularly women. Taken together, the Old Age Security (OAS) program and Canada Pension Plan (CPP) made up roughly 44 percent of seniors’ total incomes in 2005. The OAS and the GIS alone comprised 32 percentFootnote 5 of the total incomes of senior women, with an additional 20 percent earned through CPP benefits. Between 1980 and 2005, the share of senior women receiving income from the CPP rose from 34.8 percent to 82.7 percent due to their increased participation in the labour force.

Composition of seniors' income by gender as a percent of total income from each source. Text description follows.
Text description: Composition of seniors' income by gender as a percent of total income from each source

This bar graph identifies the composition of seniors’ income by gender for 1990 and 2005 and breaks it down into five sources: OAS/GIS and other transfers, C/QPP, workplace pensions and RRSP’s, investments, and earnings/other.

Data for male seniors is as follows:

In 1990, 22.9 % of total income was from OAS/GIS, 18.7 % was from CPP or QPP, 24.7% was from workplace pensions and RRSPs, 19.2% was from investments and 14.5% was from earnings/other.

In 2005, 18.4% of total income was from OAS/GIS, 19.3% was from CPP or QPP, 38.3% was from workplace pensions and RRSPs, 10.2% was from investments and 13.8% was from earnings/other.

Data for female seniors is as follows:

In 1990, 37.6% of income was from OAS/GIS, 13.7% was from CPP or QPP, 11.6% was from workplace pensions and RRSPs, 27.5% was from investments and 9.6 % was from earnings/other.

In 2005, 31.9 % of income was from OAS/GIS, 20.1% was from CPP or QPP, 27.3% was from workplace pensions and RRSPs, 11.7 % was from investments and 9.0 % was from earnings/other.

The importance of private pensions and Registered Retirement Savings Plans ( RRSPs) as sources of income, especially for women, has grown significantly between 1990 and 2005—by 135 percent for women and 55 percent for men. Private retirement savings now represent about 38 percent of men’s and 27 percent of women’s incomes.

Seniors and Low Income

Since most seniors live in urban areas, it is not surprising that most low-income seniors also live in cities. While low income among seniors is not limited to any one group, the following groups are most at risk: the unattached, those who have worked less than 10 years, recent immigrantsFootnote 6, and Aboriginal peoples.

The unattached

The unattached have the highest incidence of low income of any group, with 15.5 percent of unattached seniors living below LICO in 2006, a rate 11 times higher than that of senior couples (1.4 percent). Given their greater longevity, women are far more likely to be unattached in later life and at greater risk of experiencing low income. Indeed, women represented about three-quarters of the 179,000 unattached low-income seniors in 2006. The low-income rate for unattached senior men was 14.0 percent, compared to 16.1 percent for unattached senior women.

Work experience and gender

Generally, most people do not experience dramatic declines in income when they turn 65. Rather, low income as a senior is often the result of the inability to accumulate assets over time. More than 40 percent of seniors living in low income in 2005 had less than 10 years of work experience.

Many among the current cohort of senior women worked primarily in the home. As a result, they had less opportunity to accrue retirement savings and assets in their own right. Women’s participation in the paid labour force has increased dramatically over the past several decades. Nevertheless, women are still more likely to work part time or interrupt employment for reasons related to caregiving responsibilities than their male counterparts, which places them at greater risk of low income in later life.Footnote 7

Recent immigrants

Research has shown the greatest risk factor for recent immigrants (if they are not also part of a visible minority group) is the number of years they have lived and worked in Canada. Generally, recent arrivals have fewer years to prepare for retirement by accumulating wealth in the form of home ownership and savings; they may also be ineligible for or receive reduced public pension benefits.

Aboriginal Peoples

Although research on the financial situation of Aboriginal seniors has been limited, findings from the 2001 Census indicate that more than 13 percent of Aboriginal seniors were living in households with incomes below LICO, and that among Aboriginal seniors, women were at greatest risk of living in low income.Footnote 8

Income, Wealth and Expenditures of Low-Income Seniors

Greater access to CPP/QPP retirement income and private pension plans and investments has improved seniors’ finances, and reduced their reliance on OAS benefits. Still, unattached low-income seniors continue to rely on public pensions as their major income source. In 2005, public transfers (mainly OAS and GIS) constituted 77 percent of the total income of unattached low-income seniors, compared to only 36 percent among those above the aftertax low income cut-off. The GIS has been particularly important in raising the incomes of GIS recipients to levels above the LICO.

Composition of unattached seniors’ income as a percent of total income from each source, 2005. Text description follows.
Text description: Composition of unattached seniors’ income as a percent of total income from each source, 2005

This bar graph identifies the composition of unattached seniors’ income as a percentage of total income for 2005 and breaks it down into six sources: OAS/GIS and other transfers, C/QPP, private pensions, investments, earnings, and other. This breakdown is done for two categories: 1) below LICO and 2) above LICO.

The data for unattached seniors living below the LICO is as follows:

77 % of unattached seniors’ income was from OAS/GIS and other transfers, 17 % was from C/QPP, and the remaining 6 % came from private pensions, investments and earnings.

The data for unattached seniors living above the LICO is as follows:

36 % of unattached seniors’ income was from OAS/GIS and other transfers, 25 % from C/QPP, 26 % from private pensions, 9 % from investments, and the remaining 4% came from earnings and other sources.

Income, wealth and cost-of-living all help determine an individual’s standard of living. Low-income seniors tend to be not only “income poor” but also “asset poor.” In 1999, only 9 percent of those below the after-tax LICO had workplace pensions and only 17 percent had RRSPs. Income from other sources, including earnings, is negligible among unattached low-income seniors and comparatively few low-income seniors have home equity. Given the fixed nature of their earnings, seniors living below LICO are more likely than working age individuals (under age 65) to remain in low income.

Housing

Among seniors, home ownership is the single most important non-financial asset. Some 70 percent of all seniors are homeowners who live in housing that meets or exceeds standards of adequacy, suitability and affordability. Conversely, most low-income seniors (two of every three households) are renters, and only a minority have subsidized rent.

Although home ownership increases net worth, it does not appear to reduce housing costs. Shelter represents the largest expense for low-income seniors, particularly the unattached.Footnote 9 Unattached low-income seniors spend more than 40 percent of total annual expenditures on housing. Moreover, in 2004, 62 percent of unattached low-income seniors and 40 percent of low-income senior couples lived in unaffordable housing.

Both low-income homeowners and renters spent, on average, just over $5,000 annually on housing, which shows the significance of property tax, maintenance and fuel costs for senior homeowners. The situation appears to be most acute for those living in urban areas where housing costs are higher.

Food

Food is the second greatest expense for low-income seniors; it makes up 20 percent of their total costs. While low-income seniors spend close to 60 percent of their expenditures on food and housing, transportation and health-related costs also pose a challenge.

Share of total expenditures for selected categories, 2004. Text description follows.
Text description: Share of total expenditures for selected categories, 2004

This bar graph compares the expenditures for seniors and low-income seniors in the following categories: tobacco and alcohol; clothing; basic home operation; gifts and contributions; health care; transportation; food and shelter.

The data for low-income seniors is as follows:

About 37 % of total expenditures is spent on shelter, about 20 % on food, about 7 % on transportation, about 5 % on health care, about 4 % on gifts and contributions, about 5% on basic home operation, about 2.5 % on clothing and about 2 % on tobacco and alcohol.

The data for all seniors is as follows:

About 28% of expenditures is spent on shelter, about 15% on food, about 10% on transportation, about 5% on health care, about 7% on gifts and contributions, about 4% on basic home operation, about 3% on clothing and about 3% on tobacco and alcohol.

Transportation

Seniors spend a lot of money on getting around. Those living in rural areas pay even more for transportation, possibly due to limited public transit, and increased car maintenance and fuel costs associated with the need to travel greater distances.

Healthcare

While all Canadians have access to medically necessary healthcare, the Canada Health Act (1984) does not cover all health products and services. Non-insured services may include prescription and non-prescription medications, assistive devices, personal health supplies, professional services such as dental and eye care, continuing or long-term care services, physiotherapy, chiropractic and private duty nurses.

While most of seniors’ health-related spending is on medicine, low-income seniors spend significantly less on dental and eye care than seniors in higher-income groups. This does not necessarily mean that they receive dental and eye care at no cost. They may not be able to afford the services, or they may use their limited resources to meet other needs.

Summary

Canada’s retirement income system ( OAS, CPP/ QPP and private pension savings and investments) has helped reduce the incidence of low income among seniors and helped increase overall living standards. The OAS and GIS programs play a critical role in ensuring that seniors have a modest base of income. Still, a core group of seniors remains vulnerable: the unattached, recent immigrants, those with fewer than ten years in the labour force, and Aboriginal seniors. Low-income seniors spend most of their money on housing, food, transportation and health-related costs.

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