Old-age poverty is increasing in Canada, albeit slowly, and government money accounts for a small share of retirement incomes, according to newly released figures.
The OECD’s Pensions at a Glance 2013 report notes that Canada’s old-age poverty rates are among the 10 lowest observed in OECD countries—only 7.2% of people over 65 eke out an existence here, compared with an OECD average of 12.8%.
However, while old-age poverty declined in 20 OECD countries between 2007 and 2010, poverty among Canada’s seniors increased by about two percentage points over the same period, according to the OECD.
Women are the most vulnerable to poverty in old age, especially those who are divorced or separated, says the organization. “Higher poverty among older women reflects lower wages, more part-time work and career gaps during women’s working lives, as well as the effect of longer female life expectancy, for which many women have not been able to save enough,” notes the OECD.
Another reason for the rise of old-age poverty in Canada is that the elderly see slower income growth compared to the working-age population, according to the OECD.
The report also notes that public transfers make up a relatively small share of senior citizens’ income in Canada: less than 39%, compared with 59%, on average, in the OECD.
However, income from capital, including private pensions, accounts for a larger share: around 42%, well above the OECD average of 18%. But the OECD points out that as private pensions are mainly available to employees with higher earnings, higher income inequality among the elderly could become an issue for the country over the next decades. “Those facing job insecurity and interrupted careers are also more exposed to the risk of poverty because of the lower amounts they can devote to retirement savings,” according to the report.
Retirement living standards also depend on sources such as housing wealth. Around 70% of Canadians age 65 and over own their houses, compared with an OECD average of 76%. Some of these homeowners (about 6%) still have mortgage payments.
Strain on healthcare
The Canadian Medical Association (CMA) says the growth of old-age poverty is “alarming.” This trend will further strain Canada’s healthcare system, especially since patients who are 65 or older already account for almost half of the country’s healthcare spending, according to the CMA.
It is estimated that by 2036, one-quarter of Canadians will be over the age of 65. “That is why the CMA has called on the federal government to collaborate with provincial, territorial and municipal governments to establish and invest in a pan-Canadian strategy for seniors’ care,” said Dr. Louis Hugo Francescutti, president of the CMA, in a press release.
This senior care strategy should include adequate investment in long-term care and home care, as well as palliative and end-of-life care, according to the CMA. The association says Canada should also invest in programs that address age-related health problems such as dementia and injuries due to falls.
International outlook
Income inequality among retirees, with women being particularly vulnerable, is actually an issue for all countries covered by the report.
The study also predicts a rise in retirement age for both genders to at least 67 by 2050 in most OECD countries. This is an increase from current levels of about 3.5 years, on average, for men and 4.5 years for women.
Additionally, the report warns that, due to recent reforms, most workers in OECD countries who are entering the labour market today will receive lower pensions than previous generations and will, therefore, need to save more for retirement. “Working longer may compensate for some of these reductions, but, overall, each year of contribution will pay out less than today,” notes the report.
“Raising retirement ages and promoting private pensions are all steps in the right direction, but alone they are insufficient,” OECD Secretary-General Angel Gurría said in a press release. “Governments need to consider the long-term impact on social cohesion, inequality and poverty. Ensuring everyone has a decent standard of living after a life of work should be at the heart of policies.”
Specifically, the OECD says it’s crucial to keep down the costs of running personal and workplace pension plans.
Pensions at a Glance 2013 examines the pension systems of the 34 OECD countries, as well as those of Argentina, Brazil, China, India, Indonesia, Russian Federation, Saudi Arabia and South Africa.
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